City logistics – the struggle to complete the last mile

Freight delivery in cities is estimated to grow by 40% between now and 2050. While increase in freight volume is always good news for logistics providers, in the context of inner cities such growth is likely to increase the magnitude of their logistic challenges. The rise of urbanisation brings along many challenges, urging logistics companies to adapt their strategies to overcome the issues arising from urban density and complexity.

A variety of factors and stakeholders account for the increasingly limited scope of logistics flows in inner cities. The growth in population and economic activity has generated competing demand for transport space in urban areas, giving rise to increasing congestion, air pollution and noise, issues which are being increasingly addressed through governments’ and city administrators’ policies. As stressed in Ti’s Contract Logistics Report 2017, if urban supply chains become further burdened with regulation and delays, transport operations of companies will be disrupted and logistics costs will rise significantly.

Adding a further layer of complexity to logistics operations in cities, e-commerce has become the fastest growing driver of urban deliveries. The passion for online shopping shows no signs of slowing down, with online consumers developing even greater delivery expectations. With next day, same day and even one-hour deliveries becoming the norm, the key challenge for logistics providers is to keep pace with these evolving customer expectations while at the same time taking actions to reduce road congestion, pollution and noise.

Indeed, cities present many challenges for urban logistics, increasingly constraining logistics providers’ mobility and operations. However, they also present significant opportunities to re-invent and transform the logistics operations in urban areas. For instance, the huge pressure on industrial land to be released for residential development might give rise to the emergence of urban consolidation centres, multi-storey buildings or underground facilities. Multi-storey warehouses, for instance, are gaining traction in high-density markets such as Asia, but a breakthrough of this type of facilities in Europe is also possible.

Furthermore, the policies to reduce or eliminate diesel vehicles and reduce noise are likely to support the growth of alternative low emission vehicles. The impact of these environmental policies on logistics operators’ motivation for innovation is already visible. A case in point is DHL’s City Hub concept that enables increased use of cargo bicycles for inner city deliveries in selected cities throughout Europe. Similarly, reflecting their efforts to provide a sustainable delivery system for the urban courier logistics, UPS will start trials of electric bikes and walker trailers in London later this year. Moving forward, electric vehicles are considered to become much more important in city logistics, though their proliferation will depend on the availability of the appropriate charging infrastructure.

In conclusion, to be able to embrace the anticipated freight volume growth in cities, urban logistics operators will need to come up will innovative delivery strategies and property solutions, enabling them to address urban density and complexity. It is likely that the greater the institutional pressures on logistics service providers, the sooner these alternative, innovative solutions will materialise.

Finally, it is important to note that despite the different and often contrasting objectives of the key stakeholders in the urban logistics ecosystem, an increasing collaboration between them is more likely to improve the logistics efficiency in inner cities. The reliance of electric vehicle proliferation on public charging infrastructure underlines this interdependency and need for collaboration. Or, to put it in the words of the COO of the property developer SEGRO, while logistics operators recognise the needs of the city, there needs to be a balance, suggesting that city authorities will also have to recognise the requirements of urban logistics operators.

Ti’s latest report, Global Contract Logistics 2017, analyses the contract logistics sector from a public policy and environmental perspective. For more information regarding the report, please register your interest below or contact Michael Clover on +44 (0)1666 519907.

Source: Transport Intelligence, April 27, 2017

Author: Violeta Keckarovska