Micro-fulfilment centres and cooperation can transform urban logistics

Logistics and Supply Chain News

Urban centres are transforming with the rise in e-commerce and many stores are closing down. Sandra Rothbard from Freight Matters, one of our speakers at ‘Micro-fulfilment: The New Era in Urban Logistics’ conference, gave an interview for The Logistics Point in December. She believes the time for smaller businesses to act is now by consolidating and working together to create a powerful economy of scale.

How will urban infrastructure evolve to accommodate the growth of e-commerce?
It’s important to note that how urban infrastructure will evolve and how it should evolve aren’t necessarily the same. I’ll focus on what should happen. Three areas of last-mile deliveries that are ripe for innovation are 1. distribution centers, 2. the curb and 3. the last 50 feet. New consolidation and fulfilment facilities will need to be built as close to the urban core
as possible (and/or several in many parts of a city).

Urban Consolidation Centers and Micro-fulfilment Centers already exist around the world but not in abundance. By being as close to the receiver as possible, this setup allows for the use of smaller and greener vehicles. While it may add to overall vehicle miles travelled by increasing the number of vehicles (due to smaller payloads), smaller and cleaner modes are better for the health and safety of our communities. In addition, smaller vehicles can more easily navigate city streets compared to standard delivery trucks and vans and it is often easier for them to get to the curb due to their size.

Everyone wants better access to the curb and there is a great deal of competition: transit, for hire vehicles, bike lanes, street furniture and more. Better curb regulations and physical design are needed to manage all of these uses. Without this, delivery vehicles will continue to double park or circle the block to find parking, creating more congestion and conflicts with other road users. Finally, the last 50 feet. Failed first attempts are a pain for everyone. When someone isn’t available to accept a delivery, the carrier-
must return for a second and possibly third trip.

The receiver might ultimately have to pick up their item at a warehouse or worst case, items are left unattended and can then be stolen. Municipalities should create more opportunities for package infrastructure in public spaces including parcel lockers which can be located on sidewalks, in transit centers and even in place of on street parking. Since sidewalks are already cluttered with a lot of street furniture, it would be ideal for this type of infrastructure to be colocated with other needs such as waste receptacles. Receivers can open their goods and immediately discard the cardboard packaging without having to take a single step (though much more needs to be done to reduce packaging). And there’s more than enough on-street parking spaces that can and should be converted to other uses.

What barriers are there that need to be overcome so we make that growth sustainable?
A few key barriers include: Ease of shopping online and quick delivery. Having items delivered within an hour or same day has completely changed customer expectations. Even if customers don’t need an item as fast as possible, they often choose same day because it’s offered. This reduces opportunities to consolidate packages and because receivers expect fast delivery, it encourages double parking for quick drop offs. There is a real disconnect that consumers have between their shopping habits and the effect it has on the environment, road safety and impacts to local businesses.

Costs and regulations for greening delivery fleets. Governments already provide incentives to switch from dirty engines to cleaner ones and even from large or standard sized vehicles to smaller ones but much more needs to be done and as fast as possible. There is a big push for conversion to EVs, not just for delivery vehicles but passenger as well. In order to get buy in from the industry and consumers, a sizable network of charging infrastructure is critical. And of course, we must ensure that the power generation itself is sustainable. Better packaging. Just because cardboard is recyclable doesn’t mean it’s good for the environment. Recycled goods still require a truck for pick up and energy to process. This is why “recycle” is the last of “The Three Rs” in Reduce, Reuse, Recycle. Some companies are already using reusable packaging that is swapped out during the next recurring delivery drop off but again, more needs to be done.

People are moving away from cities because of Covid. What would that mean for the last mile which relies on people being close to one another?
I don’t believe all the fear around the decline of cities due to COVID and I don’t think that the population shift will be very significant. Yes, there are people moving away from urban areas because they no longer have to commute and they can get more space for their money but there’s also evidence of buyer’s remorse. Some of those that fled are actually coming back because they miss the energy, diversity and cultural attractions, even when those key elements of cities are limited during lockdown. The bigger concern I have is that many more people have shifted their purchasing to online instead of in person (in both suburban and urban areas) and that may continue post pandemic. This is the issue we need to focus on.

Do you think brick-and-mortar stores will close down and we will see a reshape of the shopping street?
Brick-and-mortar stores were already struggling long before COVID due to the rise in ecommerce, particularly impacting smaller stores that don’t necessarily have the option for omnichannel shopping. For larger chains, it is different but even they have been hurt. Government needs to provide more support (including programs like affordable rents) to help these businesses because they are integral to the fabric of city life.

Will only large players like Amazon benefit from the new normal in urban fulfilment?
Not if small businesses take advantage of new strategies and innovation.
Micro-fulfilment centers in urban areas provide new opportunities for smaller businesses to finally compete with Amazon by sharing storage and fulfillment space, labor and even last mile vehicles for transport to the store or directly to the customer. These are things a small business wouldn’t be able to afford to do on it’s own. The concept is similar to LTL consolidation but for warehousing/consolidation/fulfillment. In addition, businesses that are on the same street or part of a business improvement district can participate in group purchasing. For example, they can consolidate orders for generic and commonly used items like office supplies and buy in bulk. This will reduce cost and also the number of delivery vehicles as there can be a single drop off point. When small businesses come together they have a very powerful economy of scale.

Is the last mile becoming a territory only for the large companies?
It depends on where you look. Urban, Suburban and Rural areas all have different needs and the big players don’t necessarily have equal interest in all three. Plus there are key differences across urban landscapes around the world when it comes to street networks and government regulations. Generally speaking, there is a great deal of innovation going on around vehicles, parcel lockers and more and much of that is being done by smaller logistics and tech companies.

If you would like to hear more from Sandra and meet her, you can now register for ‘Micro-fulfilment: The New Era in Urban Logistics’ Conference on 9th March 2021 with Gold Sponsor AutoStore System!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.