City logistics is more dynamic than ever before. Every month, a new startup surprises the market with innovative solutions for delivering, collecting, or storing goods. In short, city logistics is increasingly influencing the evolution of the modern city. Experts from Roland Berger and RWTH Aachen present their vision of designing city logistics for the future.
Is efficiency going down due to complexity?
One of the experts finds that goods deliveries are growing increasingly complex while the logistics network’s efficiency is declining: “Established and up-and-coming providers alike are increasingly making direct deliveries, and average vehicle loads, as well as consignment sizes, are falling as a result. In three out of ten cases, direct delivery to consumers is unsuccessful at the first attempt, and the number of complex and expensive returns is steadily growing. This ultimately leads to larger vehicle fleets and a bigger environmental impact”.
At the same time, sensor technology or dynamic route optimization is not used enough to enable transport companies to switch from delivering along fixed routes to flexibly making the necessary trips. Cooperation is a crucial driver of innovation. What the experts find in reality is that ambitious projects involving numerous participants too often fail to get beyond the test stages. City logistics today functions the same way as it did decades ago. Only the volumes are significantly more significant now and steadily growing.
Thinking of urban logistics as a whole
The experts propose cities build ecosystems in which the various logistics players are all interconnected with one another. Three things are necessary for that to happen:
- All relevant market participants – large carriers and bicycle couriers – record their delivery capacities in a central IT platform.
- This platform allows it to establish digital, physical, and operational connectivity between the players and control their actions.
- All of the involved parties agree on specific data and IT standards, and ideally on modular shipment sizes so that they can be flexibly combined to enable the interconnection of the different parties to run smoothly.
Therefore, a platform of this kind would know all of the transport capacities available in the city in real-time and, what’s more, in advance. The ideal transport capacity would be assigned to each consignment. Established parcel delivery companies would be just as much a part of this system as taxis doing courier trips or trucks delivering to retailers, which, instead of returning empty, could collect cardboard packaging for recycling. With actual traffic planned in real-time, it becomes possible to manage daily flows and react to additional volumes or disruptions.
Lessons learned from Amazon
Utopian? The real-life success of this approach involving an intricately interconnected logistics ecosystem is demonstrated not just by the numerous startups operating through platforms but even more so by the behemoth that is Amazon, say the experts. Amazon has built an infrastructure that enables it to determine and accurately forecast all of its logistics demand in real-time. Amazon always has an exact overview of its value chain and builds its own urban supply chains wherever it can’t rely on partners to meet the standard it requires.
City logistics should offer more than just efficiency. It must be available at the same high quality even in less densely populated areas, be low-emission, offer fair labor conditions, and more. Ongoing investments are necessary to ensure that the market retains its power to innovate and that new technologies can be used quickly. The experts: “That is exactly what’s wrong with any system solution provided from a single source. Either we’d have a monopoly created by the sheer superiority of a single company. Or we’d have the state regulate the system by awarding regional monopolies on a contract basis, which means that the only investment that would go into the system is what was agreed upon at the contract’s start. Innovation grinds to a halt”. The questions today are: Is there still a way to facilitate the creation of deep system integration that will permanently increase the efficiency of urban networks? And how can requirements beyond profitability be taken into account while at the same time maintaining competition within the system?
The role of cities
The complexity and importance of urban logistics will only continue to grow. Actively designing city logistics for the future seems to the experts precisely what’s needed right now. They are convinced that if it were possible to pool the innovation capacity of all city logistics players, the sector would be able to tap a huge amount of efficiency potential. The genuine integration of the system initiated and controlled by a city is critical. The city authorities create space for city logistics and grant access to this space to selected companies that meet specific requirements.