Research: the fragmented last mile to nanostores in cities

An underexposed, but highly fragmented urban freight flow is the delivery to small, independent retailers, or ‘nanostores’, of which there are an estimated 50 million globally. Bram Kin, in his dissertation, investigates supply models for nanostores and ways to improve their efficiency.

Supply models
Two supply models for deliveries to nanostores in cities are studied in Bram Kin’s Ph.D. research: the use of exclusive distributors in cities where a major share of sales for manufacturers is reached through nanostores and own account pickups by store owners in areas where modern retail is predominant. In the case of the former, multiple suppliers deliver to single stores at a high frequency, whereas the latter is characterized by a vehicle trip for a single replenishment.

The purpose of the research was to identify the potential of various bundling alternatives to reduce fragmentation in these supply models in different urban areas, considering stakeholder acceptance and feasibility. Five bundling possibilities are studied: bundling shipments, ordering/delivering less frequently, the use of an urban consolidation center (UCC), a cross-dock with a modal shift and utilizing spare transportation capacity.

Research approach
A threefold, holistic approach, was adopted. First, the way deliveries are organized is decomposed by looking at the preferences of manufacturers and store owners who primarily control nanostore supply. Second, a certain alternative might be accepted by stakeholders in a certain context, eventually, it must also be feasible from a transportation perspective. Third, the role of the local context is considered. To take the latter into account, case studies in various cities are conducted, including cities in emerging economies.

Change behavior
Based on empirical research with manufacturers store owners in different cities, it can be concluded that manufacturers (because of commercial interests) and store owners (because of convenience) largely contribute to fragmentation. Preferences of both stakeholder groups are currently served in both supply models. There is no direct incentive to change behavior. However, trends in retailing and urban freight transport might slowly change this. The real-life implementations, the development of a cost-model and simulations show the operational and financial feasibility of bundling alternatives. Eventually, most gains for store deliveries can be reached by bundling shipments of various suppliers.

With regard to both supply models, a solution would be the use of non-exclusive distributors conducting store deliveries with multiple drop roundtrips. Logistics sprawl, congestion, traffic-limited areas and small drop sizes increasingly necessitate the use of cross-docks to tranship goods to smaller vehicles for the last mile. Ordering less frequently has a lower probability as an alternative because most nanostores lack a storage room. The use of spare capacity affects service level and is therefore rather a complementary replenishment source than a full-fledged alternative. More segmentation in supply models, tailored to the local situation, would be beneficial for all actors within cities.

Source: VUB

Leave a Reply

Your email address will not be published. Required fields are marked *