External Costs Evaluation for Sustainable Logistics

Transport is responsible for around a quarter of EU greenhouse gas emissions (EU, 2011). In a sustainable perspective, all external costs caused by freight transport have to be considered in the supply chain management. Traditional models, however, minimize logistics costs neglecting externalities. In this paper, the authors propose a Sustainable Order Quantity (SOQ) model allowing to identify (in case of a deterministic product demand) the optimal order size and the optimal means of transport which minimize logistic costs (holding, ordering, and transport), as well as external costs of transport. The 'loss factor' parameter is adopted to classify means of transport. External costs evaluation proposed is the result of a critical analysis of the most important researches on this issue. The lot size and the transport means selection are jointly solved by means of the SOQ model of (Digiesi et al., 2012a) in the hypothesis of a complete internalization of all external costs caused by freight transport. In the attempt to reduce the environmental costs of transport, EU public decision makers recognized the need to charge external costs according to a "user pays" and "polluter pays" principle to drive towards sustainable choices. In order to achieve EU targets, more severe public regulations will be adopted in the near future in EU Countries. The model proposed could help supply chain managers in identifying optimal strategies compliant with public regulations adopted. In order to evaluate the effectiveness of this strategy the analytical model proposed has been tested on a real case study.