Unilever Logistic Case Study
Unilever Logistic Case Study
Unilever Logistic Case Study
Visiting address
Den Dolech 2
5612 AZ Eindhoven
The Netherlands
Postal address
P.O.Box 513
5600 MB Eindhoven
The Netherlands
Tel. +31 40 247 39 83
[email protected]
http://escf.ieis.tue.nl
Please note that Unilever took an organizational focus. One can also start with a product or product
life-cycle focus, resulting in a complete different approach to quantifying emissions.
Accuracy
Demonstration,
ready for
expansion
Worthless
Valuable
but
complex
Reliability
moderate
Accurateness
reasonable
Completeness
figure 1
Unilever Europe defined the research scope in such a way that a large fraction of the carbon
emissions were taken into account, reducing the complexity but ensuring accuracy.
figure 2
Sourcing
Unit
Primary
logistics
Retailer
Distribution Center
Secondary
logistics
Retailer
standard (yet), upon which companies can build2. Instead, the choice is numerous
and confusing. The differences between these standards are stunning, and one of
the major complains about CO2 emissions calculation standards is that two
accepted standards will calculate different amounts of emissions.
To overcome this challenge, the TU/e developed a comprehensive carbon
calculation tool together with Cargill, Bausch & Lomb, Unilever Europe and DOW
(see also the text box on the eSCF project Carbon Regulated Supply Chains).
Basically, the TU/e project built a variant of the NTM calculation method and
included additional parameters, assumptions and information from different
sources (see Table 1). The NTM3 was used as the primary source of information for
three reasons. Firstly, NTM is primarily developed for buyers and sellers of
transport services that seek to quantify emissions from transport activities.
Moreover, NTM is known for its high level of detail, which enables a reliable
estimation of CO2 emissions. Furthermore, NTM (being a non-profit, governmental
organization) is committed to use both the most credible and publicly available
sources of data, which makes it likely that NTM will remain a valid source in the
future, when CO2 estimations have to be legally justified. An extended description
of the developed calculation method can be found in the CRSC report (2009).
Parameter
table 1
Sources parameters
Source assumptions
Cleaning
CRSC project
CRSC project
Electricity generation
NTM
NTM
NTM
NTM
Empty returns
NTM
CRSC project
Load factor
NTM
Positioning
NTM
Road type
NTM
NTM
Temperature control
CRSC project
CRSC project
Terrain factor
NTM
NTM
NTM
Eurostat (2009)
Train size
NTM
NTM
Vertical handling
CRSC project
CRSC project
The parameters and the assumptions of the developed tool come from different sources,
selected during the eSCF project Carbon Regulated Supply Chains.
2
For the time being, companies have to choose between a large number of standards, including but not
limited to: ARTEMIS, EcoTransIT, GHG Protocol, Infras/IWW, Dings and Dijkstra, IFEU 2005 and NTM.
The NTM (Network for Transport and Environment) is a Swedish non-profit organization.
Develop a methodology
The methodology, developed by the TU/e, describes how all the different sources
of information are gathered, maintained and used to calculate the CO2 emissions.
The difficulty in developing a methodology lies in deciding on the future level of
automation, accuracy and maintainability. Considering the data, the researchers
involved aimed to obtain a high level of automation without harming the reliability.
What must be included to obtain reliable measures, and what can be assumed
without harming the reliability of our results? Which are the most important
factors to take into account? What can be assumed, and what needs to be
measured? How can we decrease the complexity? The answers to these questions,
and more, are gathered in the methodology.
This methodology brings together different sources of information (see Figure 3).
The external information is gathered from the different business partners that
transport goods for Unilever Europe. The computations itself, mainly consisting of
multiplications and summations, are rather straightforward, but the number of
equations and parameters can be confusing. There is a large amount of transport
options, each requiring their own equations and estimation parameters. The
guidelines on the correct usage of the equations are also translated into the
methodology. Nowadays, the developed methodology allows a simple, quick and
robust estimation, which provides a solid analysis of CO2 emissions from
transport.
CRSC tool
Internal data
Number of loads
Information per load
Pure road lanes
Transport condition
Equations
Definitions
Emission factors
Common values
External data
Type of carriers
Intermodal information
Unilevers share
Load factors
CO2
emissions
estimation
methodology
Output
figure 3
KPI 1
KPI 2
The developed methodology describes how all the different sources of information are gathered,
maintained and used to calculate the CO2 emissions.
Much of the relevant data had already been collected in the form of transport data
from Unilever Europes Transport Management System. Since Unilever Europe
outsources its transportation, detailed and reliable information on the actual
shipments is used for transactional purposes. Internal information can be
integrated with very little effort (since this is taken into account in the
development of the methodology).
As opposed to the information on pure road-lanes, the available information
concerning intermodal transportation was limited. Therefore, a questionnaire was
developed and sent out to all carriers running intermodal lanes. Carriers were
asked to specify used transport routes of each individual lane, including the exact
road and non-road distances, and the types of transport and equipment. The
obtained information on the intermodal transport was combined with the internal
data. Hereafter, all required information was available.
The CO2 awareness of large Western European logistics service providers is
generally rather high, and 94% of the required information was gathered. For the
larger logistics providers, providing these kinds of information is becoming part of
their business. Most of their clients are aware that CO2 regulations will impact
their business, so the larger providers are helping their customers and are able to
deliver the information in other occasions. Logistics providers with a smaller fleet
may have more difficulty in obtaining and providing the required information, and
in most cases they do not have the information at hand.
Nowadays, the carriers are expected to keep Unilever informed on any changes in
the transport modes, which is essential to keep the data up-to-date. So for the
carriers, providing the relevant information has now become a standard
procedure.
10
11
figure 4
90%
85%
80%
75%
70%
65%
60%
55%
50%
45%
40%
35%
160
150
140
130
120
110
100
90
80
70
60
50
30%
Load Factor
12
Cost Savings
0%
-5%
0%
20%
40%
60%
80%
100%
-10%
-15%
-20%
-25%
figure 5
In 72% of the cases, CO2 savings go hand in hand with costs savings. Further decreasing the CO2
emissions via modal change will lead to an explosion of costs.
13
be found in 72% of the potentially improved lanes (19% of all lanes of Unilever
Europe). The crucial conclusion is that by changing the transportation modal 14%
reduction of CO2 emissions can be achieved without increasing the cost level!
Furthermore, it can also be concluded that in 33% of the cases, the CO2 reductions
go hand-in-hand with cost reductions.
In the next and final assessment, the variable service will also be taken into
account. Alternative transportation modes are interesting options, as long as
customer requirements (such as a certain lead-time) are satisfied. The responsible
transport manager of Unilever Europe has asked to analyze all 937 bids. Based on
the usual costs and service evaluations, only 187 bids were accepted. Out of these
187 bids, approximately two-third of these bids had a positive effect on the
emissions. In total, these options lead to 8% reductions of CO2 emissions, instead
of expected 14%. This difference is due to the service terms agreed with the
customers, so it can be concluded that 40% of the potential reductions cannot be
achieved due to service restrictions!
This leads us to the next challenge: how do we have to deal with these new
opportunities and restrictions?
The Carbon Regulated Supply Chains project
This project at Unilever was part of the Carbon Regulated Supply Chains (CRSC) project
of the European Supply Chain Forum (eSCF). In 2007, the participants of the eSCF
concluded that there was limited knowledge on carbon dioxide emission in supply
chains. Limited academic research had been conducted and there was uncertainty on
how new regulations would influence the supply chains of companies. Because of this
lack of academic research and because of their expertise on the subject of supply chains,
the European Supply Chain Forum (eSCF) decided to start the Carbon Regulated Supply
Chains project (CRSC project).
The first phase of the project, literature research was done to determine a method for
calculating emissions from transport. In this period, the objectives of the project were
formulated as follows:
To understand the impact of the various regulation alternatives on the design and
operation of supply chains;
To assist decision makers in industry by preparing strategies for coping with the
upcoming regulations;
To impact policy makers and the public opinion on the effectiveness and problems of
new regulations.
In the second phase of the project, four simultaneous master thesis projects were
executed at four members of the eSCF:
Bausch & Lomb; an eye-health company
Cargill; a food manufacturing company
Dow; a chemical company
Unilever; a food manufacturing company
During these four projects, the students of the Technical University of Eindhoven worked
closely together. Their bundled findings can be found in Akker et al. (2009).
14
figure 6
Costs
Carbon
In transportation decisions will now be based on i) customer requirements, ii) transportation costs
and iii) carbon emissions.
15
16
Conclusions
The simplicity of the developed methodology allows the company to regularly
track and monitor the CO2 emissions, due to the clear visibility that the
methodology offers. Nowadays, Unilever Europe makes monthly reports.
Moreover, the methodology also allows comparing different sub-contractors in
terms of carbon efficiency, so Unilever Europe can continuously decrease their
emissions. In conclusion, this research at Ultralogistik has shown that by
switching transport modes, raising load factors and improving fuel efficiency the
goal of 25% emission reductions can be obtained (see also table 2). This research
and subsequent actions by management enables decoupling of CO2 emissions
from the growth of freight transport. That makes this applied research an
intriguing ESCF best practice.
table 2
Potential reduction
Network redesign
Using double-deckers
An overview of the reduction opportunities for Unilever, found during this project of zsalih
(2009).
References
Akker, Inge van den, Roel te Loo, Hakki Ozsalih, and Robbie Scheers (2009)
Carbon Regulated Supply Chains Project, Eindhoven University of Technology.
EU Emissions regulations: Current Situation, Scenarios and Impacts on Supply
Chain, A white paper of the European Supply Chain Forum, 2008.
Friedman, T.L., (2008) Hot, flat and crowded, Farrar, Straus and Giroux,
ISBN 0374166854
Lash, J., and F. Wellington. Competitive advantage on a warming. Harward
Business Review, 2007: 94-102.
McKinnon, A., (2008) The Potential of Economic Incentives to Reduce CO2
Emissions from Goods Transport, Edinburgh.
Mintzer, R., (2008) 101 ways to turn your business green, Entrepreneur Press,
ISBN 1599182637
NTMs website
zsalih, H., (2009) A methodology for transport buying companies to estimate
CO2 emissions in transport: application in Unilever European logistics, MSc
Thesis at the Technical University of Eindhoven
Colofon
The eSCF (European Supply Chain Forum) Operations Practices: Insights from Science are
published to inform members of the eSCF about the best practices, key managerial insights
and scientific principles of Operations Management and Supply Chain Execution.
Editorial
Author: Walter Stein (www.walterstein.nl and [email protected])
Editors: prof.dr. A. van Weele and prof.dr.ir. G.J. van Houtum, prof.dr. A.G. de Kok, Eindhoven
University of Technology, European Supply Chain Forum.
Additional copies of this book can be ordered by e-mail: [email protected]
ISBN: 978-90-386-2517-1
Photo cover: www.morguefile.com
It is prohibited to this publication, or parts of this to be reproduced in any manner
whatsoever without written permission from the publishers.
Visiting address
Den Dolech 2
5612 AZ Eindhoven
The Netherlands
Postal address
P.O.Box 513
5600 MB Eindhoven
The Netherlands
Tel. +31 40 247 39 83
[email protected]
http://escf.ieis.tue.nl