Black Friday & Cyber Monday: A challenge for logistics?

Not only on Black Friday and Cyber Monday  – the increasing demand for e-commerce challenges logistics and cities (photo: iStock).

They count among the most profitable shopping event days of the world: On Black Friday (this year on 24.11.) and Cyber Monday (27.11.) numerous online businesses strive to attract customers by offering special deals and incredible discounts. In 2016, the sales generated in Germany alone was EUR1.1 billion. We asked our colleagues Matthias Hormuth, PTV Solution Director Logistics Concepts and Volker Möller, PTV Director Sales & Marketing DACH, about the impact of increasing demand for e-commerce on our cities.

Compass: Are shopping peaks such as Black Friday and Cyber Monday really that noticeable in our cities?

Matthias: Logistics companies definitely notice a difference on these types of days. A typical example would also be the Christmas season. Each year companies are desperately looking for additional staff for parcel delivery. In terms of traffic, however, the impact is rather low.

Volker: I agree. The additional traffic generated in cities during shopping peaks is hardly noticeable. During these peak shopping times the challenge lies in the general increase in traffic and freight transport – which is mostly due to the increase in e-commerce sales.

Compass: According to a recent study by the German Federal Association of Parcel and Express Logistics (BIEK), courier, express and parcel service providers (CEP) made over three billion deliveries in 2016 …

Matthias: E-commerce is definitely the biggest driver. When you wanted to fix your bike, you used to go to the hardware store to buy a patch kit or whatever you needed. A 40-ton truck delivers to the hardware store. Today you order your patch kit via the Internet and a separate logistics chain is triggered for your order. The parcel is delivered individually, and if you’re not at home, the parcel service will try to deliver to your address a second or even a third time. Of course, this means that single trip traffic and thus the overall traffic volume increases.

Volker Möller, PTV Director Sales & Marketing DACH (photo: PTV).

Volker: The problem is that most city centres aren’t designed for that. Parking space is scarce and since the parcel delivery staff is always under time pressure, they often park on pavements or bicycle paths. And this leads to new types of traffic obstruction.

Compass: So that means the cities need to prepare better for these situations?

Matthias: The interplay between the public sector (which represents the interests of the citizens), the logistics service providers (who are in charge of transporting the goods) and the representatives of the retail industry, hotel industry, restaurants and construction (who also need their goods to be at the right place at the right time), is extremely complex. So far, only few cities have dealt with the issue of commercial transport and thus the transport of goods in a focussed manner. There are a few pioneers, such as London, where a congestion charge, a kind of city toll, was introduced. In addition to implementing regulations, there are various measures that can help improve the management of urban freight transport.

Volker: If today’s cities want to actively shape their future, they need to start laying the necessary groundwork. For companies, cost-effectiveness is of utmost importance and they will deliver goods within the framework provided to them. Only if the framework changes will they adapt accordingly. Many logistics companies still don’t see the necessity for collaboration.

Compass: Collaborative approaches and logistic platforms would be a way to bundle the increasing number of single trips …

Matthias: Yes, that’s for sure. In practice, however, direct cooperation between the companies is rather difficult to implement. Generally, logistics companies prefer to play their cards close to their chests. New platforms could provide a suitable, neutral approach to combine deliveries.

Compass: What are the right concepts for bundling these single trips?

Matthias Hormuth, PTV Solution Director Logistics Concepts (photo: PTV).

Volker: There are a lot of different approaches. For years, research projects have been dealing with this issue and more and more concepts are being tested in real life scenarios. The most widely used method is the micro depots approach (small interim storage points), combined with an optimized delivery, using smaller transport units, such as cars, cargo bikes, drones, and robots.

Matthias: Another concept is based on mobile hubs, where 12- or 40-ton trucks carry the goods to a certain point. From there, mini vehicles, e-bikes and standard bicycles pick up the parcels. This is usually more efficient than driving around the area with a large vehicle carrying less and less freight. The aim is to bundle as many goods as possible in order to provide transport that is environmentally friendly and helps ensure smooth traffic flow.

Compass: Today’s customers expect more and better, faster deliveries. For example, Amazon is testing the Amazon Key in the United States, a service that lets its delivery staff drop off packages inside a customer’s home while they are out. Is the logistics provider increasingly becoming a service provider, especially over the last mile?

Matthias: In some cases, it’s an accurate picture. I can, for example, order a bathtub online, which will be delivered by a cargo carrier that normally serves business customers. So usually he drops off 20 bathtubs at the hardware store where they are lifted and handled by a forklift truck. The customer, who asked for a home delivery, of course expects his bath tub to be delivered to his flat on the 7th floor, including removal of the packaging and easy return of goods. This is a truly comprehensive service. Amazon Key is not just all about great service, but also about reducing costs as the driver can immediately drop off the packages inside the shopper’s home.

Volker: Individualized service is becoming increasingly important and most of the logistics service providers are aware of this trend, with customer expectations ever increasing. Next-day delivery is almost taken for granted.  Today’s customers are requesting specialized solutions, such as delivery at 6.00 pm tomorrow evening. Drone delivery is another hot topic in this field. For instance, the City of Hamburg is currently testing delivery robots.  At the beginning, there are a few people setting things in motion and after a while these things are common practice. Same Day Delivery is another good example. Currently, there are not many people using this kind of service as the cost-benefit factor is not yet high enough. However, this will definitely change in the near future. For me, this isn’t a reason to call a logistics service provider a service provider. I’d say there are more service activities becoming part of the logistics business.

Compass: Then let’s take a glimpse into the future. What lies ahead of us?

Matthias: A much-discussed topic is for example the combination of private transport and parcel delivery services, especially with regard to autonomous vehicles. It is of course tempting to think: “Why not loading something extra onto a vehicle that, in any case, is going from A to B. This will certainly open up a lot of opportunities. However, a couple of operational, practical issues need to be addressed prior to area-wide implementation of this concept.

Volker: I’m convinced that autonomous vehicles, robots, and similar systems are becoming increasingly important to the last mile delivery business. Once they are ready for mass production, the future is closer than we might think.