08/29/2019 – Samuel Krist
The so-called last mile: When you consider the distances and logistical masterpieces that some shipments have to travel from production on another continent to your front door, you would most likely never assume that this last part of the supply chain is the heaviest and most expensive. Package into the car, dashed through the city, delivered, finished. Sounds easy. But anyone who has ever sent or ordered a parcel in the past ten years and lives in a big city knows the reality: chaos!
Why that is, the way forward and what you should do now – that's what you can find out here.
The Last Mile today
The fact that the logistics sector is currently reaching the limits of its capacity is primarily due to its enormous growth. This is strongly linked to the development of B2C online commerce, i.e. direct shipment to the end consumer. Internationally, the parcel delivery market is worth 240 billion euros, with over 103 billion of this figure accounted for by the last mile. In Germany, it now has a market share of 56 percent of all online commerce and is growing steadily. Overall, the preference to buy products online has reached 45 percent, it is quite clear where the journey will take us: More and more small parcels will be delivered directly to consumers via the last mile, instead of in large shipments to stationary shops and classic retailers.
This will drastically increase the total number of all parcels: In 2016 there were 3.16 billion parcels in Germany alone, and an increase to 4.15 billion is expected by 2021. Many product categories such as furniture or food, which were previously almost exclusively reserved for stationary trade due to difficult logistics, are also increasingly being offered online and are also in demand. These product categories bring new problems – very narrow delivery windows or the need for two or more suppliers – but they are by no means the only ones.
Where is the problem?
Packages are becoming more and more expensive, the infrastructure of city centres is under increasing strain, and customer expectations are rising. At the same time, increasing complexity and the sheer mass of deliveries are undermining overall efficiency. In other words, more drivers and vehicles are needed than would actually be necessary, and this in times of severe worker shortages. The large logistics service providers and a number of start ups are working on their own solutions and innovations, which are sometimes not bad, but only address part of the problem, be it minimizing emissions or automating the last mile with autonomous vehicles, drones and robots. E-cars will not solve the problem of crowded city centres, and drones, delivery robots and e-bikes will not be able to cope with the sheer mass of parcels in the near future.
The Big Picture is Missing
But what happens next? Let us first look at the actors involved and their needs:
- Online retailers:
Want above all a safe, cheap and fast delivery. 50 percent and 40 percent respectively see delivery accuracy and speed of delivery as the most important requirements for logistics over the next five years. At the same time, only just over 20 percent expect further developments in the last mile and city logistics to become important in the same period – there is still plenty of potential here!
- Logistics companies:
They also want to offer the cheapest possible delivery and be profitable. A high level of customer satisfaction on both the retailer and consumer side is essential for survival in the long term. They are also interested in planning reliability in order to use their capacities as efficiently as possible.
- The public sector:
Works, even if this is sometimes forgotten, on behalf of citizens. Wants to keep the balance between a well-organized, liveable city and a functioning economy. Applied to the last mile, this means: Delivery with as few emissions as possible and a relieved infrastructure, while at the same time as few restrictions as possible on logistics.
Are becoming more and more demanding and want ever more accurate, reliable and affordable delivery that is also as environmentally friendly as possible. Above all, however, they are interested in the end result: As long as an order finds its way to them smoothly, the how is secondary.
Everyone wants one thing: More efficiency
Now it is often claimed that these wishes and requirements are contradictory and that all actors have different goals. This is nonsense. In the end, they all want the same thing: more efficiency. Greater efficiency tackles all problems and at least improves the situation, even if it is not completely solved. After all, fewer empty runs, fewer delivery vans on the roads and fewer unsuccessful delivery attempts mean fewer emissions, lower costs and greater satisfaction for residents and customers.
However, since large logistics companies have all been doing their own thing, a rethink is needed towards a centralised solution that benefits everyone involved. So much so that even competing companies are willing to work together and share their data, for example. This requires the early involvement of all stakeholders and the creation of incentives. If the tills of logistics companies are ringing because efficiency is skyrocketing and consumers are getting greener, faster, more reliable and cheaper delivery at the same time, concentrated planning has a high chance of success.
Local solutions – City Logistics
So the ball is now in the court of the municipal administrations, because without movement in politics and bureaucracy there will be no far-reaching solutions. Since every city has countless local peculiarities and unique infrastructure, these will never be captured and optimally used by every globally operating logistics service provider on its own. To be considered here are alternative transport routes such as waterways and the like, possible locations for micro-hubs and charging stations for fleets of electronic vans on unused land, time-sensitive delivery concepts for optimal road use and knowledge about restrictions in densely built-up old cities and the like. Comprehensive last mile concepts for districts or entire city centres in this sense are called 'City Logistics' and have so far usually been initiated from the urban side, but this does not mean that this has to remain the case. The concept of City Logistics is defined by Eiichi Taniguchi in this way:
“the process for totally optimising the logistics and transport activities by private companies with support of advanced information systems in urban areas considering the traffic environment, the traffic congestion, the traffic safety and the energy savings within the framework of a market economy.”
Ideally, this means: Fully utilized tours without multiple delivery attempts, the whole thing organized locally, the data evaluated by an independent authority and used optimally. Less delivery traffic, no empty runs. Fewer traffic jams, accidents and congested roads. More available parking spaces, less fuel consumption. Better air, faster delivery, more attractive cities. Ultimately, lower costs, higher profits and more satisfaction on all sides.
To achieve this, there are a few promising starting points.
A promising approach: Joint Delivery Systems
Joint Delivery Systems (JDS) are a good example. Here, the deliveries are delivered to a goods distribution centre located on the outskirts of the city, from where they can be dispatched to the shops and end consumers by a municipally contracted delivery company, which is proportionally bundled by the city and the logistics companies that use the service, on optimal routes, ideally CO2-neutral through electric vehicles or electric load bikes. This delivery company is also conceivable as a local joint venture between competing logistics companies. The result remains the same: the bulky delivery vans remain outside the city limits, with all the associated advantages for cleanliness and infrastructure. The Japanese city of Fukuoka, whose Tenjin shopping district has had a JDS since 1978 and uses it to constructively manage the last mile, has successfully demonstrated this model. In the future, autonomously driving trucks can also be optimally integrated into this model if the JDS is located on the outskirts of the city and can therefore be more easily controlled than inner-city distribution centers.
On the last mile of logistics, ever higher demands and more complex conditions meet an immensely growing market. A rethinking of logistics service providers away from the classic competitive thinking towards cooperation and a far-sighted planning of municipal administrations could bring all stakeholders together. Far-reaching cooperation between the various players can ultimately bring immense benefits for all those involved, all based on one simple principle: more efficiency! If you're smart, you can now form alliances and get a bigger piece of the pie.
One cannot eat it alone, after all.