Urban logistics in the Netherlands is facing a perfect storm: a projected 19% increase in city logistics kilometers by 2035, which will increase pressure on scarce urban space and growing ambitions for more sustainable, livable, and safe cities. Amid these challenges, Urban Consolidation Centers (UCCs) are often proposed as a strategic solution. But despite their potential—reducing emissions and freight traffic by up to 70%—UCCs remain underutilized, frequently dependent on subsidies, and disconnected from the operational realities of logistics networks.
A recent paper, drawing from TNO research for the Dutch Top Sector Logistics, presents a new strategic framework to understand how stakeholders—shippers, logistics service providers, receivers, and governments—make decisions about the structure of city logistics networks. Central to this framework is the idea that the viability and effectiveness of UCCs depend on the internal logic of decision-making within organizations, particularly through what is known as Decision Making Units (DMUs).
Urban Consolidation Centers: Promise vs. Practice
UCCs consolidate freight flows outside city centers and efficiently redistribute them to urban areas. The concept promises environmental and operational benefits, including reduced emissions, fewer vehicle movements, and improved public space utilization. However, many UCCs have failed to scale. Research consistently shows that they struggle with long-term financial sustainability and face limited engagement from logistics providers.
The core challenge is strategic alignment. Carriers already run optimized, proprietary networks and see limited value in sharing infrastructure unless the incentives are clear. In contrast, public authorities promote shared UCCs to meet planning goals—reducing congestion and pollution—often without sufficiently considering the operational logic of market players.
Strategic Design of City Logistics Networks
Designing a city logistics network involves several interrelated strategic decisions. Research indicates that the strategic configuration of physical distribution networks is influenced by the need to balance four primary objectives: maintaining high service standards, achieving economic efficiency, optimizing network design, and responding effectively to market conditions.
- Service-Level Requirements
Service expectations—such as fast and reliable delivery—are a major driver of network design. Studies highlight the importance of designing networks that can maintain high fill rates and meet tight delivery windows. - Economic Factors
Cost and investment considerations are crucial. Optimized networks can significantly reduce logistics expenses—from as high as 12% to as low as 3% of net sales. Logistics costs, operational expenses, and even tax structures all influence decisions about warehouse locations and network layout. - Network Configuration
The structure of a network—specifically, the number and size of facilities, the selection of distribution channels, and transportation flexibility—has a significant impact on performance. Studies emphasize strategic choices, such as determining the number of warehouses to build, selecting the most suitable channels (e.g., e-commerce vs. hyperlocal), and allocating demand across the network effectively. - Market and Environmental Factors
Demand uncertainty, urban density, and geographic diversity also shape strategic choices. Research emphasizes the importance of adaptable networks that can respond to regional and national variations. For products with predictable, high-volume demand, cross-docking can be an effective strategy.
In short, effective distribution network design is multi-dimensional, requiring a dynamic response to service needs, cost pressures, infrastructure options, and environmental contexts. These dimensions are not only technical or economic—they are shaped by organizational roles, priorities, and power structures within and between firms and public authorities.
Understanding Decision-Making Units (DMUs)
The DMU concept helps explain who makes what decision in an organization. Using purchasing theory, the DMU includes roles such as:
- Initiator: Recognizes the need for a logistics solution
- Influencer: Provides technical expertise
- Decider: Has the formal authority to make the choice
- Buyer: Executes the purchase or contract
- User: Interacts with the system or service
- Gatekeeper: Controls access to information or people
In practice, decisions regarding city logistics infrastructure, such as UCCs, often involve multiple departments, including procurement, logistics, operations, finance, and sustainability. Without alignment across the DMU, the adoption of new logistics concepts, such as UCCs, is unlikely.
Applying the Kraljic Portfolio Matrix to Urban Logistics
The paper applies the well-known Kraljic Portfolio Matrix (KPM) to categorize logistics flows by procurement value and supply risk, resulting in four strategic quadrants:
- Strategic Products: High value, high risk (e.g., food for retail, hospital linens, construction deliveries). UCCs can create value here through close partnerships and supply chain integration.
- Leverage Products: High value, low risk (e.g., bulk construction materials). Here, UCCs can enable cost-efficient competition through coordination and modal shift.
- Bottleneck Products: Low value, high risk (e.g., time-sensitive deliveries, spare parts). The focus is on reliability; UCCs may play a backup or support role.
- Routine Products: Low value, low risk (e.g., catering, office supplies). UCCs help reduce transaction and coordination costs—think “one-stop shopping.”
This procurement-driven perspective helps identify when and where UCCs add the most value—and for whom.
Strategic products
These involve high supply risk and significant financial impact. In city logistics, this includes tank beer, deliveries to food retailers, the use of construction logistics hubs, linens for hospitals and hotels, and online groceries. The procurement strategy for these products focuses on long-term collaboration and partnerships, with an emphasis on managing total chain margin and total end-to-end distribution costs. The chosen approach strongly depends on the power balance between parties.
Value and role of UCCs: reducing chain costs through intensive, strategic cooperation between buyers and logistics service providers. There must be a careful strategic consideration of who takes the lead in planning and control of the last mile.
Leverage products
Characterized by low supply risk but high financial impact. These products and services are widely available but financially essential. An example is construction logistics flows to building sites (sand, gravel, gypsum, insulation, concrete, bricks). The procurement strategy focuses on maximizing financial value through competitive methods, including tactical tenders, online auctions, and negotiations.
Value and role of UCCs: optimizing transport costs in the first, middle, and last mile, primarily through good coordination of transport flows at operational and tactical levels. Using alternative modalities is an option. Either the supplier (with logistics service providers) or the receiver can take the lead—depending on who can best organize the cost advantages.
Bottleneck products
These have limited profit impact but high supply risk. This risk often stems from scarcity or dependence on specialized suppliers with innovative technologies. Here, the procurement policy is mainly aimed at ensuring delivery reliability and speed, including by seeking alternatives and reducing dependency on specific suppliers. Examples include: night distribution, service parts distribution, logistics for large events, parcel delivery during the busy Christmas season, and healthcare logistics.
Value and role of UCCs: ensuring delivery reliability and speed. Costs are not the primary concern. The supplier has strategic control over the distribution network.
Routine products
These involve low supply risk and low financial impact. These products and services are widely available and essential for day-to-day operational efficiency. Examples include the procurement of parcel services, facility products, and catering supplies. Because processing costs often exceed the product’s value, the procurement strategy focuses on minimizing administrative and logistical burdens. In this case, the supplier is tactically and strategically “in the lead.” Wholesalers often take the lead in bundling—not only logistics but also purchasing, assortment, inventory management, information provision, and financing.
Value and role of UCCs: bundling of assortments (“one-stop shopping”) to control administrative, information and logistical burdens.
Strategic Lessons and Future Research
The key insight of this paper is that UCCs are not a one-size-fits-all solution. Their success depends on a clear fit with the distribution strategy of stakeholders and a realistic understanding of how decisions are made across DMUs. Cities cannot simply “build and hope they will come.” Public support should be targeted, strategic, and co-developed with business partners.
Strategies to boost adoption include:
- Early engagement of carriers and shippers in hub planning
- Offering value-added services (e.g., cross-docking, packaging)
- Transparent, fair cost allocation among users
- Embedding UCCs in broader procurement strategies based on Kraljic logic
Further research should examine real-world case studies where UCCs have been successfully integrated—such as in construction logistics (Knauf), retail logistics (Sligro/Heineken), or e-commerce (Ampère, Tielbeke, CityHub). Understanding these (Dutch) examples can help refine the theoretical framework and support practical implementation.
Conclusion
Urban Consolidation Centers are not inherently effective or ineffective—they are strategic tools that require the right context, incentives, and governance to thrive. Analyzing stakeholder decision-making through DMUs and procurement logic will guide future city logistics strategies. The goal is not to impose a solution but to co-create it—tailored to the actual structure of urban freight networks and the realities of those who manage them.
Walther Ploos van Amstel.