How will digital, connected technologies address the challenges posed by urban freight in an e-commerce world?
* By Sara Pearson Specter *
Four years ago, the 2016 MHI Annual Industry Report explored the emergence of Smart City Logistics and the potential for digital, connected technologies to address the significant challenges posed by urban freight in an e-commerce world. Fast forward to 2020 and the impact of this issue has only intensified, specifically,
- Increasingly dense urban populations, with the United Nations’ latest projections finding that 55% of the world’s population currently lives in urban areas, a number expected to increase to 68% by 2050; and
- Continued growth of online sales, which increased 10.4% in 2018 to $682.8 billion over the previous year—and were forecast by the National Retail Federation to repeat that growth pattern in the same 10-12% range in 2019.
Thanks to the precedent set by Amazon for free next-day or same-day deliveries, retailers—whether e-commerce or omnichannel— have been compelled to absorb those costs. Plus, the dramatic uptick in single-item deliveries to multiple addresses contributes to increased urban congestion from trucks making more last mile (and last 50 feet) deliveries to residences and businesses within city limits. This also leads to additional noise, pollution, parking and safety issues.
With Pitney Bowes’ annual Parcel Shipping Index finding that an average of 38 parcels were shipped per person in the U.S. in 2018, an 8% increase over 2017, these two mega-trends are on a collision course, said Alan Amling, fellow at the University of Tennessee’s Supply Chain Institute. Prior to his recent retirement, Amling served as vice president of corporate strategy for UPS, where Smart City Logistics initiatives fell under his purview.
“The urban freight challenge for retailers and carriers is that consumers’ same-day or next-day expectations leave less time to consolidate deliveries. But consolidation is what drives down costs,” he explained. Indeed, Business Insider research found that last mile delivery costs represent 53% of the total cost of shipping a parcel.
Four years ago, the MHI Annual Industry Report predicted that urban delivery costs and city lifestyle challenges—and the desire to reduce them—would compel businesses, municipalities and academia to form partnerships dedicated to the development of Smart City Logistics solutions. Also anticipated was increased investment in the Next-Gen technologies that enable those solutions. Here, an evaluation of where urban freight is today, the digital innovations behind those trends, and what the future of Smart City Logistics might hold.