The Impact of Energy on Logistics Systems

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Table of Contents

Introduction
Why there is a need to focus on energy in logistics
Strategies to be used
Implementation of strategies
Conclusion
Works Cited

Introduction

Todays firms are struggling to maintain profitability in an ever competitive world. This is especially difficult owing to the increased costs of human resources, raw materials, production processes and energy. These rising costs have caused most firms to look for innovative ways of reducing costs in order to survive and one such area is the energy sector. There is no doubt that energy is crucial to logistics management and handling and this can translate into a more competitive way of doing business. The paper will look at the relationship between energy and logistical systems and hence offer an ample solution on how organisations can become more effective by better managing energy systems.

Why there is a need to focus on energy in logistics

When energy use is kept at a minimum in logistics handling through eradication, alteration or minimisation of activities in the systems then this can translate into cost savings. The major advantage with this is that it is likely to increase company profits since operating expenses will have gone down. Furthermore, efficient energy use in logistics eventually causes greater productivity and a high degree of competitiveness for the concerned firm (Tompkins & Jernigan, 56).

It also boosts conservation efforts and thus leads to an environmentally sustainable process. When a firm establishes itself as a force to reckon with in conservation then this may enhance its image and even increase profits even more (Patel & Gunasekaran, 20).

Energy prices in all sectors of the economy have gone down substantially because of the economic downturn. However, this is only for the short term. In the long term, it has been estimated that there will be continual increases in energy prices and this will directly correlate to increased energy costs within the supply chain (Izzo & Albino, 7), (Yergin, 85). It should be noted that logistic handlers have started appreciating the value of controlling energy costs in the supply chain and have done this through the help of automation, better equipment and instrumentation. However, being energy efficient is not enough in this dynamic market.

Since energy prices keep changing, then it can become increasingly difficult for companies to make predictions on how logistics systems will utilise energy (Spekman & Kamuff, 107). In this regard, organisations that do well are those ones that look at energy in relation to logistics holistically. In other words, they need to look at energy management from the point of input and output and they should also monitor this on a day to day basis. Inclusion of information technology and automation will also be vital parts of this process and will be fundamental in ensuring that everything falls in place as planned (Cheng & Zhou, 45).

In other words, it is only those organisations that are able to accurately deal with this problem that can effectively monitor, predict, measure and control their energy uses that can possess a competitive advantage over other industry players (Blank & Tarquin, 303). This is largely because when energy prices are out of control, then companies are likely to carry this onto their consumers by increasing prices of their commodities. The only problem is that not all competitors will keep increasing prices when energy costs go back because some use energy in a smart way. The overall result is loss of consumers owing to superior energy management in the supply chain (Banker, 11).

The green movement has taken shape in various industries in the global economy. Companies have now been challenged not just to create profitable low costs systems, but they are also required to reduce the amount of carbon based emissions to the atmosphere (Byme, 1). Furthermore, they have been challenged to be responsible in all sectors of product manufacture and delivery. This implies that even logistics handlers cannot be spared from this issue. Once consumers are aware that the concerned group cannot carry out their processes in a green way, then chances are that they may choose other competitors who do so.

Stakeholders within a company often ask questions like Tell us your sustainability goals, Do you know what your environmental is? Companies cannot afford to keep energy issues on the side because the environment is just like any other aspect of their production (Murphy & Poist, 4).

Strategies to be used

Traditional energy saving approaches

There are various parameters that are crucial indicators of energy efficiency strategies within logistics systems. First of all, the amount of man hours put into any system or the man hours per unit would be a good place to start (Russell, 310). Also, the break down time and the amount of energy still being used during such a time should also be assessed and monitored. The amount of time it takes to change over from one process to another also affects energy use in logistics. Lead times and inventory turnovers are good indicators of energy use and perhaps more directly are the issues of electricity and fuel consumption. These often denote how effective or ineffective energy use is and they always provide a good indication of the best way of moving forward (Tagami et al., 68).

During the procurement process, it is likely that the degree of logistical management will affect the amount of energy used. Consequently, if the raw materials used within a firm are not handled well then chances are that there could be extravagant energy costs from this. Inbound and outbound logistics play a critical role in affecting usage of energy so keen attention must be placed here (Blanchard, 235). All these areas need to be given due attention when curving out strategies for saving energy.

Studies illustrate that lighting expenses always play an important role in increasing energy costs. Here, warehouses or distribution centres that make inadequate use of natural light are the ones to bear the brunt of these decisions by having to contend with high energy costs (Fisher, 99).

Even the choice of lighting devices matters a great deal because some may not be energy conserving. The market is filled with lots of choices for indoor lighting so only those organisations that take the time to select the right ones will truly be in a position to reap the rewards by having the right kind of parameters for this. Companies that fail to change with the times are the biggest problem here because most will be unaware of superior technology needed to boost their systems and may cling to old technologies that appear to be going nowhere. They may also be using the wrong power sources that cause excessive consumption of energy in logistics handling (Delgosha, 21).

Logistics handlers can also employ a series of common energy saving approaches that are applicable to other areas of production. For instance, they have the option of installing luminaries sensors in warehouses which automatically go off after a certain period of inactivity. These sensors also detect when ambient light alters and they immediately respond to the amount of light. In other words, they can become dim or bright depending on outside light. This will ensure that warehouses and other logistical areas are always utilising lighting energy in a cost effective manner. Furthermore, it will reduce energy bills by huge amounts.

Estimates show that such sensors can make energy expenditure go down by up to six point five percent in logistics alone (Sarkis, 82). On top of that, organisations have the option of directing those extra savings in other technologies and innovation that can make the logistics process much more efficient. It should be noted that sometimes minor changes are better than big changes because they always translate into huge cost savings. Unnecessary energy use in logistical systems is the biggest challenge to efficiency and cost savings so utmost attention should be given to this particular area (Tsay & Lovejoy, 50).

Logistics handlers also have the option of minimising the kind of voltage that they employ in distribution centres (Hewitt, 64). Here, instead of utilising a normal transformer. They can replace it with a more cost effective one that has been known to reduce energy utilisation by about nine percent. Usually, the transformer selected for such a job is one that will match the electrical equipment installed within a warehouse or any such premises.

All equipments have a certain rating that can be used to determine what kind of voltage will be suitable for it. In essence, such a method will minimise the loss of electricity and will also make the transformers more efficient. If a company was used to about 125 KW of electricity with old transformers, use may be reduced to about 101kw. Not only will this company save on costs but it will be more environmentally friendly and will therefore be carrying out business in a sustainable manner (Zhu, 67).

Loading and offloading

Instead of simply employing methods that have been applied in other areas of business or production, organisations may also need to focus on logistically based energy saving innovations (Cooper et al, 134). Time and time again, research has shown that loading bays are a very tricky issue. If docks are left unsealed then chances are that a lot of energy can be lost in such a manner. Alternatively, if insulation of a loading bay is done poorly, then chances are that energy bills will go up because logistics handlers need to keep increasing the amount of heat in order to maintain products at desired temperatures (Thomas, 48).

If a building is temperature controlled, then a lot of energy loss can occur during the loading and offloading phase as the internal and external environments must be balanced. Such problems may occur within the warehouse or even at the distribution centres. In the end, a company may have to part with a lot of money in order to replace that lost energy. One such device is the dock seal which can be inflatable.

This seal is fitted around a loading bay and works by first getting inflated and fitting around the loading bay. Therefore the seals ensure that when the door is open, only minimal heat will get out as most of it will be retained within the refrigerator (Lichty, 263). The company will be in a position to avoid having to boost efforts in order to make up for energy loss. In fact, this is the solution to the problem of energy increments brought on by compromises in energy insulations within a building. Most temperature controlled areas will possess a certain degree of investment in the fabric of the buildings but very little will be done when openings to the external environment are made. These dock seals are normally adjustable depending on the size of the door under consideration or the vehicle size that will be the point of loading (Carter & Rogers, 6).

Trucks need not touch the dock seals unless its time for inflating them and this ensures that they can last long. Furthermore, when inflation occurs using air from the external environment this will not compromise on the warm or cool air in the premises. It should be noted that this method works by dramatically reducing the amount of loading time. Studies illustrate that most energy losses occurring during the actual process of loading or offloading. Many companies are unaware of this and may keep doors open for a longer period than is necessary. The overall result is that their energy costs go down and the overall efficiency of production also goes up (Pagh, 57).

Alternatively, some companies face the problem of energy costs owing to unexplained departure of trucks from loading bays. It has been shown that excessive travel within logistical operations is one of the leading causes of high energy prices (Fawcett, 32). In fact, this is especially dangerous because it contributes to the use of carbon based commodities which are also environmentally dangerous. If an organisation does not have an efficient logistics system for monitoring when trucks leave the loading bay, then chances are that some may do so even when this is not required. In the end, firms may end up spending more than they needed to (in the energy sector) and this could be destructive to them (Beamon (a), 72).

It is therefore crucial for them to establish some type of logistical monitoring system that they can always report when a vehicle is due for departure and when it actually leaves. This will ensure that distribution centres do not unnecessarily send vehicles from loadings bays and it will definitely reduce energy costs. In fact, information technology provides a unique platform in logistics management for monitoring these systems and actually ensuring that they do not lead to unnecessary expenditure (Jayaraman et al., 33).

Implementation of strategies

Companies need to start with procurement volumes. This strategy will work well for multinationals which have a better chance of coordinating their processes. They need to take on large volumes during procurement in order to avoid some excessive energy use (Gong, 44). In other words, instead of procuring materials for individual units, firms can develop a policy that will ensure coordination of these units preferably at a central time in the year. It can be done three times or four times in the year. Consequently, this requires a central purchasing policy by such multinationals. Such kinds of approach will lead to substantial reduction in energy use because firms will not have a haphazard system of procurement (Krikke & Ruwaard, 100).

Reduction of heating and cooling should be the next item on the agenda. As stated earlier, dock seals and poor insulation are always the major challengers and they can be sufficiently dealt with through the use of better insulation, adequate airflow and well maintained HVAC equipment. Distribution centres for major corporations can benefit tremendously from such initiatives because they have always been associated with these innovations (Walton, 62).

Additionally, even the roofs and the walls of those docks need to be made energy efficient by using superior material for insulation. This needs to be done by first reviewing the entire facility or its layout. Its efficiency levels ought to be determined and this should then be followed by installation of the right materials and technologies.

Lighting systems need to be altered as well. Many distribution centres are always unoccupied for very long periods of time (Blinge, 18). Unless there is an automated system to detect the level of occupancy in the centre, then chances are that a lot of energy will go to waste. A firm must have lighting fixtures that will prevent excessive lighting or low efficiency lighting. This process should start with an energy audit of lighting expenditure and then should be followed by a quantification of the opportunities for lighting cost reduction. Thereafter, the former mentioned actions should be implemented one after another.

In distribution facilities, some of the equipments used may be taking up too much power. For instance, the conveyers and the equipment for material handling would be a great place to start (Angeles, 68). A company should change its equipments if the kinds of motors that they use are inefficient. However, the most important aspect here is the introduction of energy management systems as well as motors that will contribute to efficient energy systems.

This implies installation of a maintenance systems and adequate inculcation of maintenance practices. In other words, the use of better controls can in fact contribute to a reduction of energy use of ten to fifty percent in the distribution centre or the respective warehouse (Spreng, 72). It should be noted that prior to alteration of equipments in the distribution centre, a thorough examination needs to be done to establish whether they need an upgrade. If it has been found necessary then a review of the various technologies out there needs to be done. Afterwards, an actual quantification of the energy savings needs to be done (Buckley, 45).

This should then be followed by an installation of the right technology that would minimise operating times. Also, the alteration of energy management costs needs to be such that it is done systematically. Here, firms need to start with key metrics that have been increasing energy costs. Thereafter, they should try and identify suppliers who would assist in energy reduction. This should be backed by an audit of their energy bills so as to reduce the ones that are not related to their respective needs. The analysis process should be done through an examination of the data available in the facility on energy use (Hendrickson & Matthews, 6).

Budgets should be altered so as to respond to this issue. Management of the risk in price increments should be done and so should negotiation of supply side and demand side of energy use. These are all long term strategies that will contribute towards substantial efficiency in logistics systems because they will identify hidden costs that would never have been found if one never went out of their way to plan it (PPRC, 88).

Companies need to streamline their operational processes. At this point, a company must thoroughly analyse all its information systems because some of them contribute towards longer operating days and this means that the process may use more energy (Heitsch, 52). In this regard, logistic handlers need to implement workload balancing and process optimisation. These strategies will contribute towards lower indirect costs such that it will take less time to complete a days work and hence better results.

A firm should also look at its inbound and outbound logistics. This can be done effectively by starting with packaging material and usage of scrap (Berg & Kopicki, 48). The way the organisation uses its materials will play an important role in reducing travelling costs (Suurs, 3). For instance, if a firm does not monitor its waste usage then it will need to remove them and will have to purchase more material for production. In this regard, logistics handlers will have more to do in terms of transportation and this will definitely increase energy use (Beamon (b), 93). Companies that recycle will not just be meeting their environmental goals but will be minimising their productivity costs as well.

Conclusion

Energy management is intertwined with logistics systems because the latter can never be efficiently handled without the former. Distribution centres or warehouses can be much more effective if they had better energy use through efficient lighting and employment of innovations in loading docks. Also, power usage by equipments can affect the logistics efficiency. Even excessive travel has been identified as another method of eliminating these costs that come with increased usage of energy in procurement. Most importantly, the implementation of effective controls will contribute to sufficient energy use. If energy management is carried out well then logistics systems will be efficient and costs associated with this part of production will be substantially reduced.

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