Developing an effecient transportation (logistics) system for an organization

 Introduction

Reducing the operation costs of any given product is important because it does influence the market price of the product positively. This simply implies that the lower the operations cost, the better positioned a company is to charge lower than competitors, increase sales and consumers’ loyalty, and effectively increase its performance. Energy is one of the operations carried out by businesses in the production and distribution of goods.This paper presents an analysis of how companies can make decisions on transportation mode by comparing the energy efficiency of available transportation modes.

Evaluating transportation modes by utilizing energy efficiency models

As a term, "energy efficiency" does have differing meanings in different contexts. As such, there seems to be no unambiguous quantitative measure that can be used to measure energy efficiency in all cases. In conversion, the efficiency of energy is normally measured as the ratio of energy output to input in the conversion process:

Energy output versus energy input

In the process, output is, however, not measured as energy, which makes the issue more complicated. Thus, there is a need to devise measures for the output that properly describe the service, process, good, need, or consumption that resulted in the demand for the energy. Such a measure has been called by USDOE (1995) a "demand indicator." In practice, energy efficiency indicators typically use the following form of energy intensity:

Energy input/ddemand indicator.

In comparison, it can be seen that intensity has an inverse relationship with energy efficiency, implying that the more efficient a process is, the less energy is required to complete it.It does answer the basic question of how much energy must be consumed in order to achieve the desired outcome. Thus, it leads to this equation:

Q = I × S

where q = amount of energy consumed, s = desired outcome, and I = intensity of energy used. However, in the case of this paper, we are determined to evaluate energy efficiency as a measure for the price of commodities. Thus, it will adopt the equation below:

S = Q / S:

This implies that the transportation mode can be adopted if the intensity of energy utilized (I) to achieve the desired outcome (S) is at its lowest. The transportation mode with the lowest level will be used because it has the lowest cost.

For instance, assuming that an electronic company wants to ship its products from Beijing to Berlin and it has the option of using air freight or sea freight, the choice of freight should be based on the one that has the lower energy efficiency level. Assuming that available energy expenses (Q) are set at $1,000 for the transportation and that sea freight utilizes $500 while air freight is at $900, the choice should be sea freight because the energy used to produce the desired outcome (S = ship the product from Beijing to Berlin) is cheaper with sea freight than air freight in terms of incurred expenses.

Conclusion

From the above analysis, it is clear that measuring the energy efficiency of transportation modes is very important because it can be used to determine the cheapest mode of transportation that should be adopted in order to reduce overall production costs, allow companies to adopt a low price advantage, and increase their overall process through a subsequent increase in sales turnover volume.

References

Juha, F., Pekka, L., Esa, P., Miika, R., Jari, S., Kari, S., Pekka, T., and Irmeli, W., (2011). Measuring energy efficiency: Indicators and potentials in buildings, communities and energy systems. Available at: http://www.vtt.fi/inf/pdf/tiedotteet/2011/T2581.pdf [Accessed on: 23-10-2014].

USDOE (1995). Measuring Energy Efficiency in the United States’ Economy: A Beginning. Energy Consumption Series DOE/EIA-0555(95)/2, US Department of Energy, Washington, DC.