New approach for sustainable distribution center selection

20 November, 2015 - 09:30 to 11:00

Deciding the location of distribution centre (DC) is a highly critical task as it is accompanied by important investments, characterized by a high degree of irreversibility, and determines the prerequisites for processes such as warehousing, transportation and handling for many years. These processes are also just major drivers for resource consumption and emissions. The social contribution is less obvious but not less important as the placement of DCs affects the employment, income, living standards, and quality of life of urban residents.

Therefore, decision-makers should simultaneously focus on economic, environmental and social effects of DC selection. Poor environmental and social performance may endanger the satisfaction of customers and has a negative influence on corporate image. Balancing economic, environmental, and social performance may not just prevent from negative consequences but also support the positive development of the environment and society by simultaneously supporting economic performance and competitive advantage of the firm.

In DC selection, traditionally, the aim is to identify the best location(s) with respect to cost and performance considerations. Traditional distribution location decisions are often based on quantitative models such as mathematical programming. Mathematical programming provides good results if economic and/or environmental objectives related to cost, customer service or greenhouse gas emissions are pursued. In contrast, they are less suitable if social criteria and intangible assets are considered as these are difficult to quantify. To minimize the risk of omitting important aspects and to integrate three-dimensional sustainability (economic, environmental, and social aspects) in decision making, approaches that also allow for the consideration of multiple intangible criteria are needed.

The developed methodology – called Process Analysis Method-based Analytic Network Process (PAM-based ANP) – enables for a comprehensive evaluation and selection of DCs from a sustainability point of view. Selecting DCs from a sustainability perspective may not just contribute to social and environmental sound development but may also lead to cost savings, profit increase, and competitive advantage. The validity and soundness of the proposed framework are demonstrated by means of a case study. The case-study results reveal that omitting aspects of sustainability can lead to unfortunate results.

Professor Rainer Lasch, TU Dresden