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Two Urban Logistics solutions for the last-mile delivery problem

Two Urban Logistics solutions for the last-mile delivery problem

By Anna Keim (Miebach Consulting), and Nacho Sarrió & Víctor Ferran (Bax & Company).

The rapid growth of e-commerce, the on-demand economy, and the associated surge in shipments, are escalating traffic and environmental pollution in cities. This reinforces the need for new and effective urban logistics concepts, not to mention ever-increasing customer demands, service improvements required to satisfy these demands, the desire for flexibility, and the growing importance of sustainability for companies and their value creation.

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ULaaDS partner Miebach Consulting, alongside JLL and the Research Lab Urban Transport (ReLUT) of Frankfurt University of Applied Sciences, conducted a study at the beginning of 2023 with the aim to identify and examine new trends in the field of urban logistics.

Two concepts were considered in the study: Urban Consolidation Centres and Micro Hubs.

As investigated in project deliverable 3.1 ‘Benchmarking business/operating models and best practices’, an Urban Consolidation Centre (UCC) refers to a logistics facility for the consolidation of urban freight flows, if necessary, across companies, to reduce freight traffic. A Micro Hub, on the other hand, is a logistics facility where goods are clustered within the city, in denser zones, to serve a limited geographic area and enable a shift to low-emission vehicles or innovative modes for last-mile delivery.

The focus of the conducted study was on the needs of the various players in urban logistics like manufacturers, retailers, and logistics service providers concerning the two aforementioned solutions.

As part of an empirical expert survey, managing directors, production and logistics managers from the above-mentioned groups were asked the following questions (among others):

Q: What significance do you see in the near future (the next 3 years) for the following “Urban Logistics” concepts?
Q: What use could you imagine for future city logistics concepts with the infrastructure you already have today?
Q: In your opinion, what are the reasons for urban logistics concepts?
Q: In your opinion, what are the risks for urban logistics concepts?
Q: What challenges do you see in implementing urban logistics strategies and why?

The survey received 284 responses from manufacturers, retailers, and logistics service providers and two key messages were taken from the survey.

1. Urban logistics concepts are on-trend

A large proportion (approximately 70%) of the companies participating in the survey can see themselves using urban logistics concepts like UCCs and Micro Hubs in the near future. Other concepts such as pick-up stations are seen as a future trend.

2. Urban logistics concepts provide a competitive advantage

A growing number of people live in metropolitan areas: 76% of the world’s population lives in urban areas, and one in eight people live in a city with over a million inhabitants (according to the European Commission’s Joint Research Centre’s (JRC’s) Atlas of the Human Planet 2019). In the wake of the e-commerce boom and with increasing delivery traffic, not only is the burden on the city intensifying, but citizens are facing the burden of increased health risks. As a result, the pressure on rethinking urban logistics is building. Municipalities are mainly reacting to increasing delivery traffic and concerns about air quality with driving bans and access restrictions. Accordingly, new concepts should not only be free of conflict with these regulations, but should coexist with and reinforce them.

The results of the study conducted by Miebach show that in order to be successful, new concepts should be applied to meet ever-changing cities and their related challenges. The competitiveness of companies will benefit if the supply chain is improved in terms of sustainability and meeting increasing customer demands to deal with the current trend in urban populations in a meaningful way.

Almost 72% of the companies that participated in this study anticipate using a UCC within the next 3 years.


URBAN CONSOLIDATION CENTRES (UCCs)

Urban Consolidation Centre (UCC) is the name given to a logistics facility for the consolidation of urban freight flows, possibly across companies, with the aim of reducing freight traffic. UCCs are thus transshipment points near (usually major) cities. Freight destined for the city is delivered, bundled according to the local delivery destination and characteristics, and then transported further into the city (as CO2-neutral as possible) for delivery. Therefore, UCCs are a suitable solution for reducing traffic congestion in cities, mostly due to large delivery vehicles and derived traffic issues. Depending on the location of the UCC, the large vehicles transporting larger volumes of freight can be removed completely from the city centre, as the final miles can be completed by smaller vehicles like LEVs, Vans or even bikes. As a result, the carbon footprint is decreased by reducing the distance of freight travel through route optimisation, as well as the use of e-mobility, LEVs and white label deliveries. Almost 72% of the companies that participated in this study anticipate using a UCC within the next 3 years.

MICRO HUBS

A Micro Hub is a logistics facility where goods are clustered within city limits to serve a limited geographic area around it and allow a smooth shift to low-emission vehicles and/or cycle and walking-based solutions for last-mile deliveries. Almost 70% of the companies surveyed can imagine using a micro hub sometime soon. The concept, which is intended to ensure low-emission inner-city logistics, is thus well received, but does not have only supporters due to the diversity of the companies’ needs.

The main risks and challenges of new urban logistics concepts

One of the major barriers to urban logistics concepts is the coordination effort. Any solution always implicit a huge variety of stakeholders involved, even sometimes with clashing objectives. Another risk for the successful implementation of these concepts is cost. A lack of standardisation and a high amount of manual handling tasks raise the costs per freight unit.

Other risks include the possible rapid change in consumers’ purchasing behaviour. In general, e-commerce is growing but there are also new trends like shopping locally, etc. There are also socio-political risks, as even more jobs will be created in the low-wage sector. Here, the support of government policy is questionable, and social conflicts could be the result. In general, the concepts have risks due to a possible lack of synergy across service providers as well as uncertainty about which player bears which costs. This is because, overall, the willingness to pay for higher costs is low among all stakeholders, including end customers.

Despite increasing shipment volumes and customers located in urban areas, as well as some innovative techniques and concepts, the economic viability of urban logistics concepts is not always a given. Cooperation between logistics players often remains wishful thinking and the legal framework is not so helpful.

The challenges of new urban logistics concepts are mainly related to legal aspects, profitability, cooperation between different stakeholders, and the availability of infrastructure and resources.

Legal framework
  • Official restrictions
  • Government regulations (too inflexible & not very innovative)
Profitability
  • There is uncertainty among companies as to whether the strategies will be (financially) worthwhile
  • High investments necessary
Cooperation between partners
  • Mostly seen as an expense and not as a benefit
  • Customer acceptance uncertain
Infrastructure and resources
  • Availability of spaces and buildings & labour
  • External conditions sometimes do not allow for technical solutions

The ULaaDS Connection

The aim of ULaaDS deliverables 5.4 ‘Economic impacts, user experience acceptance and awareness’ and 5.5 ‘Impacts on logistics and traffic efficiency, land use and the environment’ is to evaluate and detail the influence of different trials in the cities of Bremen, Groningen and Mechelen, by analysing the effects on logistics and traffic efficiency, land-use and the environment, as well as their economic impact. This last one will be especially important to mitigate the risk and challenges currently faced by urban logistics players.

One of the trials in Bremen demonstrates the scheme of containerised last-mile delivery, which is operated by the introduction of the micro hub concept. Three micro hubs in different locations receive parcels during the morning to be then further delivered during the day via electric cargo bike. The success of this solution is measured by the reduction from two trucks to one truck.

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