Environmental Assessment of Logistics Outsourcing

Abstract

Environmental awareness is increasingly important to society, government, and industry, and there is a strong demand for sustainable development practices. The importance of supply chain management is critical, as it characterizes and influences the life cycles of all products. Within the major logistics trends, outsourcing has a significant potential to increase sustainability in the supply chain as third-party logistics providers (3PLs) focus on improving resource utilization and making processes more efficient. However, their motivation is largely economic, and an environmental perspective is rarely seen in 3PLs. As consumers demand greener alternatives and, subsequently, environmental regulatory measures are implemented, 3PLs will have to become more environmentally and socially aware in order to develop sustainability goals. This study compares two scenarios using life-cycle assessment (LCA): one where logistics functions are handled in-house, and an alternative scenario where such functions are outsourced to a 3PL. The impacts of logistics outsourcing on energy utilization, global warming potential, and fatalities are first quantified in the supply chain of an automobile. Even though vehicle operation, responsible for most of the impacts considered, is outside the domain of logistics functions, logistics outsourcing nonetheless has the potential to reduce energy use and global warming potential by 0.4–2% and fatalities by 0.8–3.3% throughout the entire life cycle of a typical automobile. Road and air transportation are found to account for most of the impacts in all selected metrics. Analyzing logistics outsourcing in the other sectors of the U.S. economy revealed the same trend as observed in the supply chain of an automobile.