Business and Operating Models for Sustainable Urban Freight Transport
Business and Operating Models for Sustainable Urban Freight Transport
By Paul Buijs (University of Groningen), and Lorena Axinte & Nacho Sarrió (Bax & Company).
Research and development in urban freight transport is generating vast amounts of new on-demand and sustainable solutions. These include new types of urban freight facilities, vehicle technology, and ICT. Without sound operating and business models, however, such innovations are short-lived in the hyper-competitive urban freight transport market.
Urban freight transport practices
As part of ULaaDS, we have developed an overview of recent practices in urban freight transport that purposefully contribute to the transition towards carbon-neutral cities. Generally, such practices either focus on introducing sustainable vehicle technology and/or on utilising existing transport resources more efficiently. Sustainable vehicles can replace polluting transport resources, thereby reducing greenhouse gas emissions. Given the sheer number of urban freight vehicles and current production rates, replacing every polluting vehicle with a sustainable one seems impossible in the short to medium term. Therefore, using existing transport resources more efficiently deserves attention too. Doing so would curb the need for more vehicles as urban freight flows increase. Indeed, improved resource utilisation can help justify investments in sustainable vehicle technology—developments in sustainable vehicle technology and improved resource utilisation are inextricably linked.
Innovations in Sustainable Vehicle Technology
Slowly but steadily, polluting urban freight transport vehicles give way to more sustainable variants. Nevertheless, not all current vehicle types have a direct sustainable alternative—or at least not one with a similar operating profile or cost of ownership. Technology advances quickly, however, for some vehicles, the total cost of ownership of an electric variant will break even with its polluting counterpart shortly, if it hasn’t already. This does not hold true for all vehicle types though. Further technological improvements are especially needed for larger vehicles. A shift to smaller vehicles for use in urban freight transport seems logical—both for economic reasons and because smaller vehicles better fit the urban space, especially in European cities with historic city centres with narrow and busy streets. Enter the cargo bike. Cargo bikes appear in many shapes and sizes, from regular bicycles to cargo bikes and/or trailers with a capacity of 2 m3 and over 200 kg loading capacity. Larger ones are often equipped with electric assistance too. Additionally, light commercial freight vehicles are increasingly electric too.
Innovations in Logistics Facilities and Networks
Urban freight transport networks are changing, both in response to the operating restrictions of sustainable vehicle technology and because of ambitions for more efficient use of existing vehicle capacity. For the better part of the 20th century, logistics facilities in urban areas have increased in size and moved away from the city centres to suburban or peri-urban areas, a concept known as logistics sprawl. This enabled increased efficiency due to economies of scale for material handling and made land available for residential areas and commercial activities closer to the city centres. The resulting logistics network structure is rather unsuitable for the use of sustainable vehicles—considering their operating restrictions—and urban consolidation schemes that are often highly localised. Hence, we observe a trend where companies search for logistics facilities closer to the city centre again. The available space is scarce, however, and often also heavily used by other stakeholders. Innovative solutions include smaller facilities, automatic lockers, and crowd-sourced neighbourhood hubs. To curtail material handling costs, urban freight facilities are often combined with the introduction of standardised and modular load carriers that enable a seamless handover of freight at the facility (i.e., containerisation).
Innovation in Information Technology
The last type of innovation identified as part of the ULaaDS project can be categorised as information and communication technology (ICT). Partly, this involves novel hardware and algorithms needed to enable autonomous vehicles. In the domain of freight transport, there are developments in indoor applications (e.g., drones for counting stock or moving parts), aerial carriers (e.g., drones for transporting blood between hospitals), and autonomous road-based vehicles. The latter are especially interesting from the perspective of urban freight transport, as they could potentially enable the removal or reduction of an expensive element in last-mile transport: labour cost for couriers. Equally interesting are developments in digital platforms. Some platform developments are pushed by local authorities, for example with the aim to collect, bundle, and/or publish data on all sorts of processes in the city. But most platforms are commercially driven—often by start-ups aiming to create a platform economy for various aspects of the logistics sector. Such platforms hold the promise of more efficient use of transport resources, and they too are often deployed in an attempt to curb labour costs.
ECONOMIC, SOCIETAL, AND ENVIRONMENTAL VALUE
Business models are commonly discussed in the context of ways to capture revenue and profits from an innovative solution. Yet, they can equally focus on capturing value from an innovative solution more broadly—that is, value for the broader society and/or the environment. Even when adopting this more holistic view on business models, however, any innovative solution should still be economically viable for its success and uptake. Either the solution has an economically viable business and operating model on its own, or could be supported with subsidy or operated as a governmental service (provided sufficient societal and/or environmental value is generated to justify the public funding).
Reflecting on Business and Operating Models
The focus of research and development in urban freight transport is often on the technological aspects of novel solutions. Whether they are focused on novel vehicle technology, facilities, or ICT, most resources are consumed by technological developments and deployment. Business and operating models are often an afterthought. In the context of ULaaDS, we integrate business and operating model considerations from the outset. This includes designing research trials in which the solution can be tested and engaging the relevant stakeholders to ensure (public) acceptance of the solution. Figuring out what could be successful business models, and fine-tuning business models that already exist, are explicit parts of all ULaaDS trials.
The ULaaDS connection
Business and Operating models are a central part of the ULaaDS project. In fact, a full work package is devoted to studying the role of business and operating models in sustainable urban freight transport. An overview of best practices was developed at the beginning of the project and is publicly available in Deliverable 3.1. So too is Deliverable 3.3, which maps insights on the business and operating models of the identified practices to the ULaaDS trials. Developments in the business and operating models of the ULaaDS solutions trialled in Bremen, Mechelen, and Groningen will be closely monitored and analysed, with the aim to publish relevant insights in Deliverable 3.5.
