Road Transportation : Environmental sustainability vs. lead time and costs

Abstract: The recession of the early 1990’s marked the starting point for a transformation of the Swedish transportation industry. Cost oriented production techniques by the industry’s customer increased demand on swiftness, reliability and flexibility in transportation services. This development has continued ever since which in turn has continuously increased the rates of harmful discharges of emissions. The research is performed on the Swedish plastic industry and examines the relationship between environmental sustainability, lead time and cost when selecting road carrier for transportations. The main purpose is to examine to what extent environmental concerns are taken into account when deciding over distribution and furthermore, whether there exist potential and ambitions for improvements. Out of theories concerning transportation modal choice, four points of interest constitutes the basis for the empirical gathering; prioritization of selection determinants, environmental requirements in procurement of transportation services, use of rail freight and acceptable cost levels for implementing environmental sustainability. The study shows that the market of the Swedish plastic industry is driven by price competition and constant pressure from international trade. Naturally, cost is considered to be the foremost selection determinant in terms of transportation modal choice, followed by reliability and lead time. Furthermore, the study shows that environment is of low priority in respect to the other selection determinants. Although the current market condition diminishes the possibilities for changes, there exists a general ambition to become more environmental within the distribution activities. A majority of the respondent firms could potentially accept levels of increased transportation costs which balance with the costs of guaranteeing environmental sustainability in road transportations. In reference to increased environmental ambitions, three conclusions can be drawn. The relationship between environmental sustainability, lead time and cost allow for environmental improvements if lead time can be extended to the maximum conceivable limit of the market. Furthermore, the price competition of the market makes own initiatives impossible in terms of raising price for transportations; environmental sustainability in road transportation must therefore be preceded by demand for such. Finally, it can be concluded that environmental improvements cannot be achieved single handedly; costs must be evenly distributed among the suppliers, customers and haulers.