Tactical/Operational Decision Making for Designing Green Logistics Networks

Cap and trade regulations along with an increasing consumer and company demand for green products and services constitute two major drivers for motivating corporations to adopt green practices. However, the adoption of such practices usually increases their operational costs. Therefore, the trade-off between “green” and cost-optimal policies is a common challenge for most organizations, at least in developed countries. The purpose of this paper is to assess alternative logistic network design options (applicable in most supply chains) taking into account both their cost and CO2 emissions performance. The applicability of the proposed methodology is illustrated through the design of a major white good retailer’s logistics network in the region of Greece. The results indicate that a company optimizes its cost performance by serving all its retail stores directly by truck through one central distribution center. On the other hand, a CO2 emissions optimal performance includes additional distribution centers and the employment of rail instead of truck transportation. Moreover, longer review periods, despite the higher holding and backorder costs, result in lower transportation costs and CO2 emissions.