The Urban logistics challenge
Urban logistics challenges arise from the complexities of operating within densely populated environments and the problems that brings. Here we investigate what urban logistics means and some of the possible solutions.
The Urban Logistics Challenge
What is urban logistics?
Urban logistics refers to the management and flow of goods and services within urban areas, i.e. towns and cities. As e-commerce continues to grow it becomes more imperative to optimise the flow of goods and services from warehouses or distribution centres to the final customer and to do so in an efficient and sustainable way.
The aim is to optimise deliveries, transport, storage, and distribution operations in order to meet the growing needs of city and town dwellers.
In the past, the focus was on just the transportation of goods. Today, the challenge includes; storage options, cross-docking, grouping and real estate, the last mile of delivery and route optimisation, government restriction on vehicles or emissions, and the integration of various technologies in order to bring this all together.
Relationship to the last-mile
While the first mile encompasses everything that happens between the manufacturer or supplier and the distributor, followed by the transportation to the warehouse – either by HGV, by boat, or by plane. The last mile of delivery encompasses everything between the last warehouse and the final recipient.
The last mile of delivery and the challenges that includes are synonymous with urban logistics; the difficulties experienced in urban logistics, while the same as for any last-mile delivery, are magnified within an urban environment.
Examples of urban logistics deliveries
Urban logistics takes many forms:
- Home delivery of general goods and appliances
- Distribution of goods and appliances to stores
- Delivery of food and beverages to restaurants and stores
- Home delivery of groceries and meals
- Waste collection and reverse logistics
- Transportation of construction material and personnel
Why is urban logistics so expensive?
Paradoxically, it’s often less complex and less costly to transport goods from the other side of the world than to move them around within a city. In fact, the last mile has been shown to account for 41% of total logistics costs.
Here are the elements that contribute to urban logistics costs:
Individualised delivery
The expense in last-mile is largely due to the number of unique recipients, and the nature of the urban environment. This often means smaller more specialised vehicles, more drivers, and more stops per route.
B2C customer expectations
In addition, our consumption practices have changed. Consumers expect flexible home deliveries with short lead times and precise delivery windows, which further complicates processes. Companies must rely on an extensive network of staff and contractors to keep delivery promises. With the added complication of keeping the customer informed and up to date on details for their delivery.
Read about Descartes' customer engagement platform.
B2B customer expectations
In terms of B2B delivery, companies have also changed their practices. To cope with rising rents in the city, retailers are devoting fewer square metres to storage, in order to reserve more space for the sale of products. As a result, they need to receive smaller deliveries more frequently. This results in a higher volume of shipments, which can be difficult and expensive to organise. Business customer also expect the same kinds of notifications they have experienced with their own consumer deliveries with shorter delivery windows and automated delivery order tracking with ETA notifications.
Personnel costs
76% of supply chain leaders are facing significant labour shortages. Companies are being driven to invest in new recruitment and retention strategies, as well as automation solutions. The UK is short of HGV drivers by 60,000 and this has a knock-on effect on van drivers where there is also a shortage. Consequently, wages for all professional drivers have risen much faster than inflation in recent years.
The importance of sustainable urban logistics
The COVID-19 pandemic highlighted the importance of the supply chain in our everyday lives. It also accelerated the rise of online shopping, further increasing congestion in cities.
It has been estimated that without intervention, CO2 emissions from urban deliveries will increase by 32% by 2030. Already, the well-being of residents is threatened by air pollution, noise and congestion.
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This is the paradox within urban logistics. On the one hand, consumers are demanding more and more home deliveries, while on the other hand, city dwellers are also demanding a cleaner, greener, and quieter city.
Furthermore, consumers' stance on environmental issues is increasingly influencing their buying decisions. Descartes’ latest home delivery study found that 83% of 18–24-year-olds and 71% of 25–30-year-olds will consider their environmental impact when buying online. This should encourage retailers and logistics companies to offer “green”, environmentally friendly delivery slots.
Businesses will be pushed to innovate further in the area of ethical deliveries but will need to do so without sacrificing profitability. Advanced technologies and new distribution methods are essential in making this happen. Discover more here.
The challenges of urban logistics
Urban logistics presents many challenges for businesses and authorities to address.
The explosion of e-commerce
The volume of online purchases, both by consumers and business has exploded in recent years driving a big increase in deliveries. Online retail is no longer limited to consumers and just the largest online marketplaces, many small businesses, builders merchants, craftspeople, and restaurants are all part of the last-mile market.
14 million parcels were shipped in the UK per day in 2022 (that’s around 162 parcels per second). While growth has slowed since the pandemic, the volume remains high enough to put a strain on urban infrastructure.
In addition to congested roads, delivery drivers have to deal with:
- Insufficient delivery parking areas
- A lack of cycling infrastructure
- A lack of logistics real estate (e.g. warehouses and storage locations) in the city
3pl’s and carriers are being forced to deliver more and more parcels in a limited space, while also trying to reduce their environmental impact.
Environmental issues
To tackle pollution, many UK Cities are adopting measures to encourage the transition to quieter and less polluting vehicles – for example, the introduction of the ULEZ charging scheme in London and clean air zones in many other cities, while some urban authorities are also introducing low traffic neighbourhoods.
To try and comply with these urban regulations, delivery companies are increasingly turning to electric vehicles (EVs), hybrid vehicles and alternative fuels. While trying to meet these regulations and to avoid congestion, some businesses are now choosing to deliver by cargo bike, or even on foot in urban areas.
Fleet managers will have to plan delivery routes and select their vehicles according to these constraints and types of delivery solution. Deciding on the correct mix of vehicles for a delivery fleet can be a minefield.
HGV global driver shortage
In the latest study by Descartes Systems Group, supply chain managers confirmed that they are facing significant workforce shortages. Managers will therefore need to find new ways of improving the driver experience by providing them with in-depth training, greater stability, and financial incentives.
Modern distributors are turning to technology and software solutions to better calculate their delivery schedules and optimising the vehicles and routes used for their deliveries to make more deliveries with the drivers they already have.
Solutions to improve urban logistics
New delivery methods and modes of transport
Different modes of transport such as cycling, electric vehicles, and even riverboat deliveries should be investigated to meet the challenges of urban deliveries. Being able to experiment with different mixes of fleet vehicles is important so that expensive mistakes aren’t made by purchasing the wrong vehicles.
Businesses are also turning to alternative delivery solutions such as delivery lockers. These allow for a deliver to a convenient location rather than to individual homes and businesses. The growth in these out of the home delivery options is being fuelled by consumer-to-consumer purchases of second-hand items but is now becoming a standard option for many retailers on their websites, especially for returns.
Improving delivery infrastructure
In many cities, authorities are looking to create new urban shared distribution centres, improve parking opportunities and develop more cycling infrastructure. While some logistics companies are placing more distribution centres on the outskirts of a town or city where goods are transferred to appropriate vehicles or delivery solutions for the urban centre it is next to.
Shared storage spaces can be used by multiple distributors at the same time, reducing real-estate costs and bringing goods closer to consumers in the city.
Calculating where to place these new micro distribution centres can be difficult. With the help of delivery scheduling and route optimisation software, possible locations can be trialled in a virtual situation before land is even purchased or warehouses rented.
Technology solutions
Businesses of all sizes can benefit from software that optimises and automates the delivery process.
Route planning and optimisation software makes it easy to:
- Select the right vehicle for each delivery
- Optimise delivery routes to increase productivity, reduce kilometrage and avoid unnecessary braking
- Promote sustainable delivery options to customers
- Increase visibility and reduce missed deliveries
- Improve the driver experience
- Make strategic decisions about distribution centre locations, or the mix of vehicles in a fleet
Contact us to speak to an expert about urban delivery planning.
