Innovation in last-mile freight and parcel delivery solutions could yield significant benefits for cities by reducing traffic congestion in urban centers, improving public health by lessening greenhouse gas emissions (GHG) and contributing to the success of sustainable urban economies.
What is Last Mile Delivery?
From a manufacturer's plant or warehouse or a supplier or retailer location, the last mile of delivery is the final stage in the shipping process, culminating with the arrival of a package or goods at a customer's destination.
Last-mile delivery and associated services are provided by established freight transport companies, courier firms, independent drivers and couriers, click-and-collect retailers, self-service parcel lockers, and postal service destination hubs. Delivery vehicles in the last mile include diesel and gas-powered trucks and vans, electric trucks, pushcarts, pedal carts, bicycles and robotic vehicles (in pilot projects). Due to the steady growth of e-commerce, the number of delivery vehicles and the volume of deliveries and locations has dramatically increased. In addition, the market for urban delivery services is undergoing an evolution with independent drivers and new entrants competing with traditional courier firms.
Last-Mile Problems
Although last-mile deliveries are an essential part of a city's business ecosystem, this final leg of the shipping process is strained by the tension resulting from delivery vehicles crowding streets, polluting the environment and affecting public safety. Last-mile delivery is often blamed for urban problems and negative impacts on quality of life. In congested urban areas, public health is impaired by greenhouse gases (GHGs) when streets are filled with gas-powered and diesel-powered vehicles searching for delivery addresses or parking spaces. In Europe, more than 50 percent of road transport fuel is combusted in urban areas. Last-mile delivery is also the most time-consuming and costly part of the shipping process, according to a study by Business Insider, which states that last-mile delivery costs comprise 53 percent of the total cost of shipping.
In small towns and villages, delivery trucks may occupy a narrow street during business hours, leaving only a constricted passage on either side for pedestrians, cyclists, people carrying groceries and others pushing wheelchairs and baby carriages in single file. This is an unhealthy and hazardous situation for citizens and exasperating for truck drivers who must navigate the tight street to find a space where they can legally park and deliver goods.
Based on a study from Tufts University, Urban and Environmental Policy, urban planners and policymakers—in cooperation with delivery companies—can pursue urban freight and delivery improvements by:
- Loading more goods and parcels into each truck
- Developing freight corridors to concentrate shipments
- Consolidating loads in specialized urban distribution centers
- Locating shared distribution centers near business districts
"With the participation and input of freight actors, policymakers can string together some of these varied solutions to make their cities more livable."
Last-Mile Delivery and Local Governance
City governments are attempting to mitigate the problems of last-mile deliveries, but this is a complex situation involving the conflicting interests of diverse stakeholders. A basic urban policy action is to regulate how motorized freight vehicles are allowed to operate in cities. Local governments may choose to regulate last-mile delivery vehicles through restrictions on vehicle size, fuel type and emission factor and allowing deliveries only in stipulated zones and time frames. As an example, Boston regulates delivery vehicles according to commercial permits, specific streets and hours of operation. Los Angeles and Long Beach encourage urban-friendly delivery times with a PierPASS OffPeak program which establishes time frames when deliveries are allowed. To discourage deliveries at other times, the program imposes a delivery fee.
In Europe, the C-LIEGE initiative, a showcase for good practices in urban freight transport (UFT), was established to address many aspects of last-mile challenges faced by cities and to identify how local authorities can influence UFT planning towards a more sustainable governance model. C-LIEGE delivered practices and guidance on UFT energy efficiency, use of renewable energy sources for delivering goods and innovative measures for reducing pollutants. Other EU-sponsored programs to support last-mile delivery practices include CIVITAS, BESTFACT, ENCLOSE and FREVUE.
Whether we're looking at last-mile deliveries through the lens of urban planners, citizens, local businesses, freight transport companies or entrepreneurs, it is a world on the threshold of disruptive innovation and changes in local governance which should deliver benefits in:
- Reduced traffic congestion
- Public health improvements (through the reduction in GHG emissions)
- More attractive and safer cities for pedestrians, cyclists and public transport passengers
- Improved quality of service, lower costs and efficiency for delivery service providers (facilitating business growth and economic development)
Last-Mile Solutions: Examples and Opportunities
Innovation in short-distance deliveries represents a major opportunity for smart cities. With conventional delivery systems, numerous small and lightweight goods are transported over short distances by heavy-duty vehicles. According to research from Técnico Lisboa, many deliveries in urban areas are less than five kilometers and at least 25 percent of such deliveries could be accomplished via bicycle or other non-motorized vehicles. Human-powered, robotic and semi-autonomous vehicles should therefore have an important role in the parcel delivery world. "They relieve business districts of at least some disruptive truck activity and provide an environmentally friendly option for transporting small shipments over short distances."
In addition to innovation in delivery vehicles, last-mile improvements are also empowered by the design of advanced algorithms and analytics such as integrated inventory management, dynamic routing, courier collaboration and proof-of-delivery tools.
Innovative approaches being introduced in the last mile include new logistics models, flexible delivery offers, social delivery services and parcel lockers. Below are examples of last-mile solutions:
Innovative Logistics Models
ImagineCargo is a startup (founded in Zurich) with a vision and goal of establishing a Sustainable Logistics Network with bicycles, tricycles and electric-powered vans to tackle environmental and urban planning issues.
Cargohopper (based in Utrecht) produces electric vehicles designed to deliver parcels in urban areas while reducing noise and pollution. To enable zero-emission urban delivery services, two versions of Cargohopper vehicles are produced. Cargohopper I is a small vehicle, capable of speeds up to 20 km/h with a maximum range of 30 km. Cargohopper II, with an attached trailer, is designed to deliver pallets and containers. The company operates distribution centers that assign packages to Cargohopper vehicles for direct delivery to customers.
Flexible Delivery
In Ireland, GLS offers the FlexDeliveryService for online retailers and shoppers. After a retailer arranges for the service, GLS informs the customer via email about the planned delivery and estimated time of delivery. If the customer prefers a different time or location, then several options are provided such as delivery on another day, collection from a GLS ParcelShop or depot or approval of authorization to deliver the parcel to a safe location.
Social Delivery Services
Social delivery services offer potential solutions for the last-mile B2C challenge. In the Netherlands, ViaTim sends, receives and delivers parcels for neighbors. Products ordered online are delivered to a neighbor who serves as a Viapoint. The consumer who ordered the product can pick it up at the Viapoint or have it delivered to their home for a small fee. In Norway, Nimber uses a location-based algorithm to match deliveries with people heading toward the delivery address. This allows the sender to save on delivery costs, while deliverers earn extra money and reduce the cost of their journey.
Parcel Lockers
Parcel locker services are provided by installing groups of locked boxes in convenient locations used as collection points. Each locker has an electronic lock with a variable security code and can be used by different customers at different times. An objective of parcel lockers—important to city governments, retailers and delivery companies—is to reduce the number of urban deliveries, failed deliveries and return of goods by the courier. Parcel lockers and associated services also reduce vehicle mileage, congestion and energy usage. Research from the Department of Robotics and Mechatronics at the AGH University of Science and Technology in Krakow, reveals that a courier servicing parcel lockers in Poland can deliver 600 parcels in a single day, with a travel distance of about 70 kilometers, in comparison to 60 parcels and 150 kilometers in a conventional delivery system. A success factor for parcel locker services is the willingness of consumers to complete the final leg of the last-mile journey.
The Future of Last-Mile Delivery
Looking to the future, last-mile delivery should undergo further disruption and change emanating from commercial enterprises and urban innovators. In the commercial sector, it is expected that some delivery services performed by established companies and new entrants will be integrated with disruptive technologies such as drones and autonomous vehicles. Based on a McKinsey study, autonomous ground vehicles (AGVs) "with parcel lockers will replace current forms of regular parcel delivery." However, country-specific transport regulations and safety concerns represent a potential barrier to the acceptance of AGV innovation.
A study from Accenture predicts that a new delivery paradigm, based on a data-driven, personalized customer experience, is emerging. Retailers and startups believe this approach will have more impact in terms of market differentiation and customer satisfaction than free or same-day delivery services. To make this paradigm a reality, they must create sophisticated data management tools enabling them to build profiles of customer needs, preferences and behaviors, anticipate problems that might delay delivery and generate a response based on knowledge of the customer.
In parallel with commercial sector innovation, urban innovators have opportunities to integrate last-mile logistics with environmental and socioeconomic initiatives, improve knowledge-sharing with the commercial sector, facilitate cooperative transport infrastructure and consolidation centers, transform governance models and build trust in new last-mile delivery solutions.
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