Urban Logistics (2): Delivery as a Service – a solution for urban logistics?

Delivery as a Service: a solution for urban logistics?

How can urban logistics be designed in an efficient and eco-friendly manner? A suitable approach could be Delivery as a Service (DaaS). Marcel Huschebeck, PTV, and Jacques Leonardi, Westminster University, UK, have examined this issue in detail.

E-commerce, sharing economy and on-demand economy, as well as connected transport and logistics and digitalisation – the logistics sector has changed radically in recent years. These changes have in turn led to new business models, such as Warehouse as a Service or Crowd Sourced Delivery. Driverless vehicles could save up to 50% of the costs, experts say.

“All these developments lead to massive structural changes. They will affect our consumption habits, but also many other areas, such as competitiveness, business investment, technology and regulation. Primarily two developments will trigger completely new delivery processes:  electric and self-driving delivery vehicles and the ongoing digitalisation of delivery processes. In fact, a great challenge – not only for automobile manufacturers, distributors and logistics companies, but also for cities,” says Huschebeck.

A culture of service

More and more services are offered on an ‘as a service’ basis. According to Huschebeck and Leonardi, the difference between today’s delivery logistics and DaaS lies mainly in delivery flow bundling and the definition of a pricing model for different service levels. Integrated delivery scenarios (e.g. where cargo bikes are used for deliveries in cities) have already been implemented. However, these transports are usually carried out by the same service provider and delivery is ‘free’ as the sender bears the costs. What would happen if the shipping fees were reduced and the recipients could opt for the services and conditions of their choice?

“City logistics is facing a shift from manufacturer- and logistics-based push concepts to customer-oriented pull concepts. In order to remain competitive, logistics service providers must therefore develop logistics systems that are more flexible and efficient,” explains Huschebeck. And customers are not shying away from the costs: Studies conducted by PWC in 2018 show that customers would be willing to pay an average of EUR2.40 for on-time delivery. 66% of all respondents want to able to select the time and point of delivery. In order to deliver the goods as quickly as possible and to have cargo available at short notice, micro warehouses or depots and the logistical structures of the Physical Internet (which combines supply chain and transport infrastructure) could be part of the solution. “The study also suggests that urban transport and delivery services will form a single unit. This new ecosystem, which might consist of autonomous vehicles, public transport and cargo bikes, for example, will be controlled by the digitised supply chain,” says Huschebeck.

Marcel Huschebeck, Logistics Research Portfolio Manager at PTV Group

Networking and collaboration are vital for the success of DaaS. Inventories need to be coordinated, freight operations must be optimised, and processes need to be configured in an integrated manner. At the same time, it is important to stay neutral, fair and open despite the competitive situation. Many logistics service providers are already converting their fleets, making them ready for city deliveries. As a result, many different vehicle types – from trucks to small cargo bikes – are used for freight distribution. Urban transhipment points are thus becoming of strategic importance, contributing to the creation of an urban supply network. Efficient, network-based route planning, targeted consolidation and deliveries that integrate low-emission vehicles or the public infrastructure are key elements of the DaaS framework. “DaaS could be used to consolidate parcels from different logistics service providers at a transhipment point in the city for further delivery,” says Huschebeck. These days, each player implements its own optimisation strategy – in a completely isolated manner. However, collaboration would allow more cargo to be handled via a single consolidation point, reducing the number of fleet vehicles required and thus the amount of traffic.

DaaS cannot be implemented without support from the cities. It will be necessary to define the framework conditions for an urban supply infrastructure, to finance it and attach value to urban mobility. A nationwide fee for all parcels no longer meets the requirements of urban development and mobility in many cities. The delivery of goods should rather be handled via a city network in order to be able to meet the various customer requirements, while ensuring a smooth flow of traffic. Another possible scenario would be to integrate route planning data into the city’s traffic planning systems, which, in turn, would influence traffic management. “Urban freight transport would thus become an integral part of urban mobility,” explains Huschebeck. Or maybe one day the city will plan their own routes for deliveries and pick-ups.

Joining forces to improve transport logistics

Many of the research projects that the PTV Group is involved in have already adopted the DaaS approach. For example, community strategies based on collaborative processes are being developed and successfully implemented as part of the CLUSTERS 2.0 project. And at Heathrow and Brussels airports, cargo handlers have partnered with road carriers to optimise cargo handling at the freight terminals via a slot booking app. “This helps cut the time for the clearance of goods and reduce the number of queuing vehicles, a true win-win,” says Huschebeck. At the Interporto Bologna, the project partners are currently investigating how companies can better connect and coordinate their activities via cooperation platforms. The project shows that the solutions are successful if there is a community leadership that can control or influence the interplay of all actors. However, the main DaaS driver is a business model that integrates all major freight transport operators and actors that are part of a city community. This model must be scalable to reach the critical mass of volumes and users, to reduce costs and improve last-mile logistics.

“Our experience shows that IT platforms with a high degree of connectivity are vital for the success of cooperative freight transport in cities. The aim of the AEOLIX research project is to create a collaborative platform where everything is interconnected: route and transport planning, an app that informs about the delivery status, driver apps and much more. Traffic management can use data analysis and forecasting for vehicle deployment and trigger an optimisation scenario through vehicle recognition and context information. “We see great potential in the integration of logistics planning and traffic management in cities,” says Huschebeck. “Especially in view of the growing pressure to act sustainably.”

DaaS brings about many new things accompanied by radical change in existing delivery structures. However, many of these new approaches are already part of existing concepts developed by logistics service providers and cities. The key idea of implementing an infrastructure for the mobility of goods and people is a visionary but realistic scenario.

Urban Logistics (1): A way out