Updated: 5th August 2021, Reading Time: 10 mins.
With the growing consumer demand for eco-friendly products and services, many businesses are facing challenges in ensuring every step in the supply chain from raw materials to last-mile-deliveries to be sustainable.
But at the same time, consumers also see Same-Day delivery and fast On-Demand delivery as the new normal. In addition, eCommerce opens the gate for online shoppers to buy any type of product regardless of which location the shipment is sent. In other words, single parcel shipments often travel long distances to arrive at a customer’s destination. A clear consequence of this: the amount of carbon emission produced to deliver parcels has only gone worse. Now, here comes the question: How can businesses satisfy customer expectations of fast deliveries, while also supporting eco-friendly product distribution at the same time?
In this article, you will learn what green logistics is. But more importantly, we showcase how to increase sales conversions by adopting our green logistics formula for a more sustainable distribution logistics. Here’s the overview of our Green Logistics Guide:
- 01: Definition of Green Logistics and the Impact of Going Green on Sales
- 02: Our Green Logistics Formula – Sustainable in every step:
- 03: Optimizing product distribution with green logistics
What’s Green Logistics?
Definition and Impact on Sales
Green logistics, also referred to as eco-logistics, indicate the efforts to reduce the environmental impact of logistics activities. Most green logistics activities often gravitate towards optimizing warehousing, packaging and transportation of shipments. The ultimate goal to achieve sustainability in logistics is to become more efficient in balancing between environmental impacts, economies of scale and social welfare.
Nowadays, businesses recognize sustainability as their top priority on operation and value creation. According to a recent survey, 40% of businesses expect the company’s programs for sustainability to generate value in the next 5 years; 45% of Travel, Transportation and Logistics industries mark this trend as modest or significant.
From a buyer’s perspective, consumers expect businesses to take action on adopting sustainable and environmentally friendly practices into their operations. Since the start of the COVID-19 pandemic, we see changes in consumer shopping habits in many ways. In fact, 45% of consumers increasingly look for more eco-friendly shopping options and are willing to continue the effort of going green.
Any business that proactively supports eco-friendly activities creates value. As a matter of fact, most commerce businesses state that there’s a 30% increase in conversion rate when products are marked as sustainable. But there’s more to going green than choosing the right product materials. Green logistics applied to warehousing, fulfillment and shipping activities are also ways to form a positive branding image.
Our Green Formula for
Sustainable Distribution Logistics
What Going Green Means
In the following part of our Green Logistics Guide, we break down the processes of how to win over your next customers by adopting a more sustainable supply chain when it comes to distribution logistics. We refer to all processes involved when it comes to warehousing, fulfillment and shipping.
To understand the pathway to success, we’ve created a green formula to identify the key areas for distribution logistics – following each variable will transform your product distribution into a more sustainable activity.
Decentralized Warehousing and
a Shorter Last-Mile-Delivery
Adopting Green Logistics: Variable 01
Let’s picture the following scenario, you sell products for both D2C and B2B segments over various sales channels:
The current sales volume of your business is 10,000 orders a month with an average shopping basket consisting of 2 products: 70% of your product distribution is generated by German customers and the remaining by customers from the UK (17%) and France (13%).
Now, whenever an order is placed, your sold products need to travel. From a green logistics perspective, we want to understand how many kilometers each order has to drive in order to arrive at your customers’ destinations. In general, there are two ways on how to structure your product distribution. We showcase these two options in Set-up 01 and Set-Up 02.
Set-Up 01: Centralized Warehousing and
International Single Parcel Shipping
- Set-up 01: A centralized warehouse location and fulfillment responsible for all 10,000 domestic and international orders
In this set-up, you have a centralized warehouse in Germany where you store, fulfill and ship your products to all national and international customers. There are two transportation routes involved: A national bulk shipment from your manufacturer to your warehouse in Germany and international single parcel shipments (also called last-mile deliveries) from your warehouse to all your consumers. This means, for example, when a UK customer places an order through your online shop, the order will be fulfilled in Germany and sent via single parcel shipment to the UK.
Set-Up 02: Decentralized Warehousing and Local Fulfillment
- Set-up 02: Decentralized warehouse locations to store, fulfill and ship customer orders locally
In this set-up, you have extra warehouses near your target markets e.g. one in the UK and one in France. This set-up follows a flexible decentralized warehousing strategy. The two transportation routes now include: An international bulk shipment from your manufacturers to all your local warehouses with national single parcel shipments from your warehouse to your consumers. In this case, the order that has been placed by your UK customer is now being fulfilled and shipped by your local fulfillment teams.
As indicated before, there are two transport routes involved in both scenarios:
- Transport Route #1: Bulk shipments consisting of large boxes sent on pallets from your German manufacturer to your warehouse(s).
- Transport Route #2: Single parcel shipments from your warehouse to your end-consumer – also known as the last-mile-delivery.
It’s now time to understand which set-up makes an impact on how many kilometers need to be travelled for your orders. Ideally, we want to reduce these driven kilometers in order to adopt a more sustainable logistics approach. But first, we have to understand the nature of each transport route and put a green logistics lense on.
During Transport Route #1, the kilometers travelled in Set-up 02 are more than in Set-up 01. However, all parcels are handled as bulk shipments in this route for both set-ups.
Comparing Density of Single Parcel vs Bulk Shipment
Although a decentralized warehousing set-up requires more kilometers driven in Transport Route #1, the way how your products are being packed during bulk shipments is done more efficiently since you can fully control what item is being packed in what box and therefore optimize the packaging process: Bulk shipments usually consist of large boxes placed on pallets. In these large boxes, one would normally place items of the same product type and dimensions leading to a more consolidated and densely packed shipment. Overall, this leads to less empty space within each large box.
In contrast, single parcel shipments and last-mile deliveries face the complexities that naturally come along the packaging and shipment of direct-to-consumer orders: Small product quantities consisting of differing product dimensions being delivered to various end destinations.
When putting all sold products together into the shipping packaging, single parcel shipments usually contain at least 25% of empty space inside the package. This is often caused by standardized packaging materials, the time pressure to ensure fast fulfillment, and also ensuring that each order is packed in a transport safe way. Ask yourself, how many times did you unpack a parcel from your online shopping that’s been almost empty?
From a green logistics point of view, last-mile-deliveries are also inefficient when it comes to truck loading. On average, around 20-30% of truck space is not fully loaded. Even though this situation differs from selected logistics partners or special circumstances, the rate can even go to 50% or higher if parcels travel outside of the domestic markets. This is often caused because carriers need to drive to various end destinations and cannot always guarantee a perfectly loaded truck due to time constraints and the high amount of varying shipping addresses.
To reflect this problem, we include an inefficiency penalty in our calculation for single parcel shipments during Transport Route #2 for both set-ups: additional 25% are added due to shipping air within the package, along with 25% (national delivery) or 50% (international delivery) because of not always fully loaded trucks. The use of the penalty is to amplify how much more unsustainable last-mile deliveries are. In our case, this is measured and results in longer distances traveled. Let’s check out the traveled distances in each set-up for last-mile deliveries.
Now, the real difference between our two set-ups is the exposure of inefficiently driven kilometers, or in other words, the length of last-mile deliveries during Transport Route #2. In Set-up 02, all trips for single parcel shipments are shorter leading to around 4.3 million kilometers less in travel distance. For instance, the the distance between your customers in London, UK from your local warehouse is now 18.6 kilometers instead of 897 kilometers per order.
Green Logistics Done Right when
Choosing Warehouses: CO2 Emissions
When summarising all driven kilometers, Set-up 02 might have had a longer bulk shipment during Transport Route #1, but saves in total around 3.3 million kilometers of distance travelled. The main reason for this is a significant shorter last-mile delivery for all order destinations.
But, what really needs to be understood in our green logistics comparison of Set-up 01 and 02 is the amount of CO2 emissions caused in both cases. The mode of transportation, vehicle type chosen, the distance traveled and many more factors influence the amount of emissions produced. But there’s orientation from reports like GHG’s guidance or DHL’s Carbon Calculator for calculating CO2 emissions caused by product distribution and transportation.
In our comparison, all factors for product distribution stay the same except the amount of kilometers traveled in each set-up. In Set-up 02, we save up to 653,121 kg CO2e per tonne-km. This amount of CO2 emissions being saved is equivalent to 53,997 tree seedlings grown for 10 years. Or, the electricity consumption of 593 households for 1 full year.
Now, the right warehousing set-up and a resulting shorter last-mile delivery do not only reduce carbon emissions. Let’s also not forget that local fulfillment decreases cross-border shipping costs and speeds up delivery times. It’s a win-win situation for both your business, your customers and the planet.
Sustainable Fulfillment Processes
Adopting Green Logistics: Variable 02
Besides choosing the right warehousing locations, one also needs to review the fulfillment process as such in order to follow our green logistics formula. There are two main components that make an impact on getting your fulfillment more sustainable: Choosing the right packaging materials and working with reliable information.
Reduce Landfill Waste with Sustainable Packaging
Packaging and shipping materials are a crucial part of the fulfillment process. The concept of “reduce, reuse and recycle” has often stood in the way for companies to choose more sustainable packaging because of higher material costs in the past. Cheaper plastic alternatives have been predominantly the first choice for companies producing and shipping consumer goods. But now, governments also start to push brands and product selling businesses onto a more sustainable path: Starting from 2021, EU member states will have to pay the so-called “Plastic Tax” for plastic waste.
Given the new regulation enforcement, companies would need to find alternative packaging materials to avoid the taxation if they use non-recyclable materials and plastics. In order to support your business in finding more green options, we’ve picked out a range of biodegradable and compostable materials to minimize the impact on the environment and avoid waste production. Here’s a short overview of innovative materials and providers that sparked our interest:
Algae-based agar (sourced from seaweed) can replace single-use plastics for dry food packaging; whereas polylactic acid (PLA), also known as corn plastics, is made from fermented plant starch and can be used for mailing bags or soft items. Surprisingly, the root part of mushrooms (mycelium) is also an eco-friendly option which can be molded into different shapes. Fragile items like wine bottles, lighting fixtures and cosmetic products can now be packed with sustainable material rather than non-recyclable styrofoam.
Packaging manufacturers like PAPACKS replace single-use plastics with natural fibers for transportation trays and load carriers. It helps reduce CO2 emissions, landfill wastes and allows companies to decrease annual costs by 25%. Packhelp offers certified eco-friendly packaging for eCommerce. The selection of green packaging contains options from kraft mailer boxes to glue-free delivery boxes that are fully biodegradable and customizable.
There’s also packVerde who offers sustainable packaging made from bagasse / sugar cane, hemp & cellulose materials. Their eco-friendly packaging can satisfy companies’ fair trade needs. For companies that distribute their products between warehouses, and send shipments for B2B and Retail customers, Yamaton’s paper honeycomb pallets seem best and even help your business save up to 75% of weight compared to traditional wooden pallets.
Choosing sustainable packaging materials is not only highly favored by consumers, it also complements the governmental efforts on going green. All that remains for your business to ensure going green when it comes to packaging, is to also employ the right fulfillment providers that already work with sustainable packaging and shipping materials.
Working with Reliable Information Matters
Previously, we discussed why businesses need to choose decentralized warehousing and the right packaging materials to reduce carbon footprints of parcel shipments. This strategy needs to go hand-in-hand with how you process data and make the right decisions from it; or else your sustainable actions for distribution logistics must be done in vain.
Working with reliable information is crucial when adopting a green logistics strategy. It so often starts with planning your inventory based on accurate stock levels and reliable demand forecasting. Because working with unreliable information on stock levels can lead to overproduction and overstocking. As a result, this means more capital being locked away in your warehouses and with it, a higher warehousing spend for storing more products. For some durable products this might be forgivable, but not for products that are bound to best-before-dates. Picture this: An eCommerce brand that specializes in sustainable food products needs to throw away an entire product batch since the demand forecasting has been done on inaccurate stock levels.
This is why working with reliable data and real-time monitoring is particularly important for optimal inventory planning and management across all warehouses. The first step to ensure working with reliable data is to work with data-driven warehousing and fulfillment operations for all locations. Next, your operations managers need to have a smart distribution logistics tool in place that enables inventory management with demand forecasting for all target markets.
But working with accurate data during distribution logistics activities does not stop at your inventory planning. Dealing with wrong order information and human error during fulfillment processes can also harm the customer experience and result in higher return rates. In fact, 71% of businesses recognize that inaccurate order information like shipping addresses or wrongly packed items are the main reasons why deliveries fail. By reducing return rates caused by inaccurate data, businesses not only save extra shipping costs from reverse logistics but also reduce the carbon footprint of additional kilometers travelled.
Keep in mind that nearly all consumers read reviews before making purchases and more than 10% of customers are ready to leave a bad online review if they encounter a poor shopping experience – and the shopping experience does not stop once the purchase is made, it stops when a parcel is delivered. So make sure you can work with a digital logistics tool which allows you to edit and update order information during the fulfillment process. In this case, your 3PL team gets informed before it’s too late.
Shipping: Comparing Carriers
Adopting Green logistics: Variable 03
The last variable in our green logistics formula consists of the actual shipping services chosen during last-mile-deliveries. In our calculation we already understood that last-mile deliveries are by nature inefficient, especially when selecting a centralized fulfillment set-up. But besides reducing last-mile delivery distances, choosing the right CEP shipping providers and carriers can also help businesses achieve your green goals faster. So, let’s have a look at which shipping service providers offer what type of green shipping services.
Most of the shipping providers and carriers have already committed themselves of supporting sustainable and green logistics measures from a corporate level. DPD announced that their parcel deliveries across Europe are 100% carbon neutral all at no extra cost. GLS KlimaProtect programme fulfills climate neutral delivery to both parcels shipped in Germany and across Europe.
Other shipping service providers like Hermes, Go! Express & Logistics, and FedEx International also have similar strategies on how to decrease carbon footprint in parcel delivering. Corporate efforts for sustainability in last-mile-deliveries contain investments in renewable energy, vehicle electrification, and climate-protection projects etc.
There’s one shipping service giant, however, that enables your business to actively choose a green shipping service. DHL provides business clients with GoGreen shipping service – an environmentally responsible shipping option, which can be applied to the export and import Time Definite International and Day Definite International shipments. Their services include calculating CO2 emissions level based on shipment’s weight and distance travelled, investing in carbon protection projects and providing annual certification. In addition, the company states that all national and international letters will be sent CO2 compensated with no additional charge starting from 2022.
It is never too late to convert your last-mile-deliveries with a greener alternative. We offer our customers to choose their preferred shipping service providers from our European 3PL network to better align with their sustainability strategies.
Make a Difference in Sustainability
by working with everstox
Like many other businesses, we place sustainability as one of our top priorities for our Logistics-as-a-Services (LaaS) solution. We work with more than 35 distribution and fulfillment centers across Europe to support businesses with their commitments for green logistics. If you decide to expand your product distribution, make sure to work with a decentralized warehousing set-up to fully unlock the benefits of shorter last-mile deliveries during single parcel shipments. Besides, we ensure you have the flexibility to partner with sustainable logistics teams to fulfill your sustainability goals such as cutting down carbon footprint and other ways to mitigate ecological impacts. From selecting packaging materials to choosing your ideal carriers and CEP shipping providers, our team will accommodate your preferred method to achieve the optimal green logistics set-up.
What’s more, our cloud platform offers visibility and accessibility of inventory data across all channels and warehouse locations with one single source of truth. That means you can avoid excess processes and manual work, so less mistakes are made for optimal logistics efficiency.
With our logistics network and cloud software, businesses no longer need to trade off environmental efforts from being cost-effective. Contact our team to find the right 3PLs from our Europe-wide network and continue to grow your distribution logistics more sustainable.
If you like this Green Logistics Guide, you may be interested in other logistics topics such as logistics costs breakdown or shipping bulky goods across Europe:
- [3PL Guide] How to find the Best Fulfillment Providers?
- [Bulky Goods] What to consider when shipping Bulky Products?
- [Cost Analysis] Logistics Costs: The 5 Main Cost Drivers
Max and the marketing team at everstox take care of researching, evaluating and writing all logistics insights that we gather from our day-to-day operations. If you have any questions on our thought-led articles, guide’s or any other blog-related topic, feel free to get in touch with our team.
Head of Marketing