Five ways we can systemically transform last-mile logistics
This post was originally written by Bax & Company consultant David Fernández for Parcel and Postal Technology magazine.
COVID-19 has caused short-term disruptions and long-term structural changes in many sectors, and urban logistics is no exception. E-commerce has experienced soaring growth, particularly for groceries and home care, as a result of people buying significantly more online. In fact, companies like DHL claim that parcel shipment numbers now match those of Christmas peak times1. This trend was already growing before the pandemic hit, but COVID-19 has amplified and accelerated the effects; creating more deliveries, putting more vehicles into already clogged streets and increasing polluting emissions.
This exponential growth is predominantly down to urbanisation, a widening range of products available online, and new digital business models and technologies that shorten delivery times. Consumers are ordering more online and also expecting faster deliveries. In fact, same-day and on-demand delivery are the fastest-growing segments in the last mile. Demand for last-mile delivery is soaring; it is set to grow by 80% globally by 2030, according to the World Economic Forum2. The downside is, cities are struggling with traffic congestion and air pollution due to the increasing number of delivery vehicles, their noise, and second-lane parking. Some cities predict that, if no interventions are made, inner-city traffic will turn to chaos in the next three years. Although both the public and private sectors have launched various local initiatives, there has been no scaling so far. Urban logistics today pretty much functions in the same way it did decades ago. Systemic change and harmonised regulatory frameworks have yet to arrive.
To find a solution to this chronic inefficiency, we must think of urban logistics as a whole. Pooling the innovation capacity of all urban logistics players would allow the sector to tap into the potential for better efficiency. For this to work, a city must actively build and shape an ecosystem in which the various logistics players are all interconnected. On top of this, certain boundaries need to exist: a central IT platform where all market participants record their delivery capacities; which establishes digital, physical, and operational connectivity between all players; and all involved parties agree on common IT standards and shipment sizes to enable interconnection3.
A central platform of this kind, inspired by the open physical internal framework4, may sound utopian. Yet, there are already real-life success cases of such interconnected logistics ecosystems via platforms, one of them being the well-known giant Amazon. The company has built up an infrastructure that forecasts logistics demand and monitors its entire supply chain capacity in real-time. Starting in the UK, they are now stretching its limits incorporating external volumes for third parties. Although tempting, there are still doubts about whether such an integrated system would lead to the creation of monopolies or an imbalance of interests.
That’s why we are suggesting five business models, combining innovative tech, new schemes for horizontal collaboration, and policy measures and interventions, that cities can use to pave the way for a systemic transformation of last-mile logistics.
1. CONTAINERISED URBAN LAST-MILE DELIVERY
Instead of vans collecting parcels from a remote sorting terminal, driving to the city centre and spending the day delivering, containerisation introduces standardised and modular load units, such as specific trolley-containers for the last mile. Multiple parcels can be placed inside these containers at the sorting terminal, then transported to city hubs, where the containers are transferred to last-mile delivery vehicles. The upsides of this optimised process include: fast and secure transfer of goods from the feeder vehicle to the last-mile delivery vehicle; the possibility to mix goods from different carriers in the same feeder vehicle, and in the same city hub, and compatibility and interoperability among different transportation systems and modes. Two pioneering companies are Rytle and Velove. Both have created innovative concepts, integrating e-cargo bikes with modular and exchangeable containers, operating under app-based IoT platforms. These platforms create a digital network of all components and actors of multimodal systems, where shippers and customers, and hubs and transportation means, are all interconnected.
2. MARKETPLACES FOR CITY LOGISTICS
More and more startups (Deliveroo) and larger companies (Amazon Prime Now) are offering on-demand delivery (ODD). While ODD is creating new categories of urban employment, it has led to many unresolved legal issues and, in some instances, poor working conditions. Additionally, many local businesses have had to close due to COVID-19. This has encouraged restaurants and small retailers to find alternative ways of serving their regular consumers, like opening e-commerce channels or setting up home delivery services. Fair and transparent online marketplaces or local platforms aggregating stores’ offerings have popped up to give visibility and operational backing to these enterprises during and after the crisis, mitigating the impact on the local economy. That is the case with startups such as Zupr and Dropper in Groningen, the Netherlands, and Zerca! in Zaragoza, Spain. Their concepts involve the setting up of a local web-based department store for SMEs, connected to zero-emissions delivery services, enabling local shop owners to compete with big players in online marketing.
3. PLATFORMS FOR THE INTEGRATED MANAGEMENT OF DELIVERY TIMES AND SPACE
For delivery vehicles, double-parking or parking at intersections is seen by many road users as unavoidable, but it is against traffic regulations in most countries. There are some exceptions, however. In Spain for instance, parking is usually not punished if the hazard lights are on. City authorities are designating parking spaces and time windows for delivery vehicles and imposing stricter sanctions for double-parking. Barcelona has experimented with new consolidation models, where micro-platforms are located in public spaces and leased to private operators in exchange for data. Using its own app (spro), the city manages loading and unloading spaces in public streets. Through this system, authorities can attach a number of conditions, such as service level, the use of environmentally-friendly vehicles, or pricing and quality standards for customers; for companies to be granted access to this new infrastructure. From a legal point of view, this could also be a more practical way for cities to actively shape the system without the burden of setting up a licensing system, like that for taxi-drivers and pharmacists.
4. CITY HUBS: SHARED USE OF SMALL-SCALE DISTRIBUTION CENTRES
Large courier companies are struggling to be more flexible and sustainable. Existing infrastructure is mainly on the outskirts of cities, but these companies need local distribution centres (city hubs) suited for smaller and more sustainable delivery vehicles; such as cargo bikes and trikes. However, in densely populated inner cities, public spaces are a scarce commodity. That’s why initiatives are popping up, like KoMoDo in Berlin, fostering the cooperative use of micro-depots. Within this model, cities purchase or lend public space to set up a neutral city hub for all sustainable logistics companies, facilitating the very last-mile delivery with zero-emission vehicles. These hubs are becoming central nodes in multimodal passenger transport networks, seamlessly integrating different means of transport. The combination of freight and passenger transportation resources can be used as a strategic planning principle to optimise existing urban transportation capacity and create viable business opportunities for Urban logistics as-a-Service for commuters. The integration of automated parcel lockers, where customers can pick up or drop off parcels themselves, increases planning reliability and reduces transport costs for parcel delivery firms, due to an increase in successful first-time deliveries.
5. TRANSPORT VEHICLE CAPACITY SHARING
In many cities, vehicles that deliver parcels during the day are left unused at night or early in the morning, when they could be used for nightly security patrols or transporting recyclable materials at the end of a delivery route. One way cities can make use of these available transportation vehicles is through ‘cargo hitching’: pooling and optimising the entire capacity of the transport network. There are already examples of mixed fleets of demand-responsive shared passenger transportation providers that integrate their services with the ODD of small goods using the spare capacity of transportation vehicles. For instance, in response to the pandemic, ViaVan – a provider of on-demand shared transit services – together with Sutton Council, launched an intelligent delivery platform for emergency goods in the London Borough of Sutton, UK. There are many pilots set to make freight transportation and logistics safer, more efficient, or flexible through automation. In the ALEES project, VIL, in collaboration with logistics companies such as DHL and bpost, is testing autonomous urban logistics vehicles to distribute parcels throughout the dense urban area of Mechelen, Belgium.
We are exploring all of these business models within the new EU initiative ULaaDS – Urban Logistics as an on-Demand Service, which aims to accelerate the deployment of innovative, shared, zero-emission logistics while addressing the impact of the on-demand economy. If you’d like to know more about the project, or how your city can transform its urban logistics infrastructure, get in touch with a member of our team!