Urban Logistics: From Competition to Collaboration
Cities and businesses are searching for ways to make urban last mile delivery more efficient. In order to do this, urban logistics players are integrating new technologies such as e-bikes, delivery bots and electric delivery vehicles into their fleets, and testing them in cities. However, it is becoming increasingly clear that although new technologies have certain benefits, on their own they can not address all the challenges of last mile delivery at once. Each solution has its own regulatory and technological constraints and limitations. Logistics players, enabled by new technologies, realize the value of collaboration. Urban logistics is becoming a multiplayer ecosystem that is evolving towards collaboration. This means that urban logistics players are coming to the conclusion that the solution for making last mile delivery more efficient is to combine the capabilities of multiple players and technologies. This collaboration will require efficient methods of combining the capabilities of the new technologies as well as integrating new technologies into existing processes. Collaborative urban logistics is an efficient way to manage urban last mile delivery. Essentially, the framework of urban logistics is shifting from competitive to collaborative in order to expedite the widespread adoption of new technologies and innovations.
KEY DRIVERS
There are multiple key drivers pushing the shift to collaborative last mile delivery. Cities are demanding more collaboration among logistics players. Customers want more flexibility and visibility in the deliveries they make, which requires closer collaboration among logistics players. Lastly, logistics service providers understand that synergizing their operations will create more room for communication and collaboration in route planning, pick up and drop off, and the entire delivery process.
CITIES ARE DEMANDING COLLABORATION
Cities are becoming overwhelmed by the amount of both traditional and newer delivery technologies that are entering urban roads. As discussed in our first article, cities are greatly impacted by the surge in delivery vehicles on the streets. Similarly, cities are concerned about the unconstrained and uncoordinated deployment of new urban logistics technologies, which can create similar challenges as the surge in delivery trucks.
Though innovative solutions may improve certain aspects of the last mile, and help to offset the issues that cities are facing due to urban delivery, implementing new technologies into cities without the proper regulation or policies will only cause more problems. Cities do not want their streets to be flooded with even more vehicles for delivery. Rather than allowing new technologies to crowd urban streets without any coordination or networking between players, cities are demanding collaboration and better coordination among logistics service providers.
CUSTOMER EXPECTATIONS ARE GETTING HIGHER
Customer demand for urban delivery is increasing, as discussed in our first article. Customers are not only ordering more online, but they are also demanding increased flexibility and visibility of the delivery process. For example, customers want to be able to know where their parcel is just by checking online— they do not want to be left hanging to wonder where their order is. A survey done in France, UK, and the US indicates that 78% of customers expect full visibility in the delivery process. Customers want simplicity and transparency when it comes to updates on their parcel location, and they want to know that they can rely on delivery service providers to give them this information.
When it comes to flexibility, customers want to be able to choose from a range of delivery options, including different service levels, delivery speeds and drop off locations. However, delivery service providers may not be able to fulfill flexibility and visibility needs on their own. As a solution, providers can form partnerships with other providers to complement their services and integrate the technology and communication needed to address customer demands. Players also need to share information within their network regarding the location and tracking of a parcel, as well as who is responsible for the parcel at different times. This requires collaboration and a focus on interconnected communication and data sharing. If urban logistics players start using these collaborative practices, they will be able to supply what customers are demanding.
LOGISTICS PLAYERS: SYNERGY ACROSS OPERATIONS
New technologies are being developed and deployed for last mile delivery. This includes delivery bots, e-bikes, delivery drones, and electric delivery vehicles. While these technologies can certainly offer different benefits such as decreased congestion and quicker delivery speeds, each can only address a few aspects of making last mile delivery efficient, but not all of them. New technologies also have technological and regulatory constraints that make it more difficult to insert them into urban last mile delivery.
Market players are aware of these limits. They can mainly choose between two solutions— they can either attempt to address these constraints by themselves, or they can partner with other companies who can help them address these problems. So, rather than relying on one technology for the whole delivery process, multiple technologies could be used alongside each other. For example, a delivery bot could be a very effective mode of transportation for the last few hundred feet of the delivery, but it cannot be deployed for the whole delivery journey. However, a conventional delivery truck, which may not be as efficient for the last few hundred feet, could still be very efficient in taking a parcel from a warehouse outside of the city and transferring it to a delivery bot for drop off. This can be achieved through collaborative transportation.
For these reasons, individual players see the value in collaborating with each other during the delivery journey. This would benefit cities as well, as these different technologies would work together as a collective chain rather than crowding the cities by going on separate routes and managing completely different operations.
CHALLENGES OF IMPLEMENTING COLLABORATIVE URBAN LOGISTICS
There are a few challenges that will need to be addressed if logistics service providers want to make urban delivery collaborative. Such challenges include collecting data among different service providers, handling security issues, financial concerns, and implementing collaborative transportation into existing business models.
CONNECTIVITY
Connecting data between different logistics providers that use different systems in order to manage operations and fleets can be difficult. There should be a way to connect these systems to each other. Logistics service providers will need to be able to communicate and connect reliably across platforms and players. This sort of connectivity in communication allows information to flow across multiple players, giving the shipper and the customer the visibility they want. However, connectivity can be slow to optimize because of the different operating systems amongst players and complex integrations.
SECURITY RISKS
Security risks also increase when we are dealing with multiple interconnected systems; there is more attack surface. More connection between systems means there are more possible entry points for unauthorized access into the system. More networks being connected to each other create doors for security penetration.
MANAGING PHYSICAL FLOW OF PARCELS
Another challenge for implementing collaborative transportation systems is managing the physical flow of parcels across multiple players efficiently. Physical flow should be safe, reliable, and secure. If players want to collaborate within the space, they need to ensure reliable operations within last mile routes, and keep track of parcels.
More specifically, parcels will need to be transferred from one player to another all within the last mile, so there should be locations and cross-player coordinations for the handoffs to take place. Additionally, players will need to establish efficient communication systems and methods of monitoring the visibility of parcels. This can be referred to as monitoring the chain of custody. Within urban last mile delivery, the chain of custody is a process that allows the movement of parcels to be safeguarded and analyzed by documenting and tracking each person who handled and/or transferred the parcel. Keeping track of the chain of custody also makes it possible for customers to feel like they can rely on estimated delivery times and the location of their parcel.
ensuring service Quality and SLA Compliance
Another similar challenge that logistics players have to consider is enforcing service level agreements (SLAs). Delivery service providers agree to fulfill the needs of their customers, according to an agreed SLA. However, dealing with more players in the last mile makes it more difficult to enforce SLAs.
financial challenges and existing business models
Lastly, another challenge with implementing last mile delivery is the fact that some logistics players might find that shifting to collaboration conflicts with their existing business models. This is usually due to concerns about losing markets, generating higher costs in collaboration, and having to make significant changes in their operations. Existing business models used by logistics service providers may not be fully compatible with the increased level of collaboration. Financially, companies may believe that shifting to collaboration would cause them to lose part of their revenue— players might be worried that collaboration will create additional costs for their operations. Nuances such as these can discourage players from becoming collaborative.
TECHNOLOGIES ADDRESSING CHALLENGES
Recent technology and innovation has enabled solutions for these challenges. For example, blockchain technology can help decentralize control of the collaborative system and make it more accessible, secure and equitable.
blockchain
Blockchain ledgers facilitate the process of recording and tracking transactions in a business network, which provides a reliable mechanism to enforce SLA as well as a secure channel for sharing data.
COLLABORATIVE TRANSPORTATION PLATFORMS
A collaborative transportation platform provides a secure, low-cost, reliable way to enable delivery service providers to collaborate with each other. Collaborative transportation platforms provide mechanisms to integrate new technologies, such as delivery bots, drones, e-bikes and more into existing delivery operations. Additionally, it creates an integrated network of local delivery service providers, which each handle a certain segment of the delivery journey that they are best equipped for. Collaborative transportation platforms can help alleviate some of the pressure on cities, who are overwhelmed by the amount of delivery vehicles in the streets. In future articles, we will further discuss features of collaborative transportation platforms.
SMART LOAD BOARDS AND SHIPPING AGGREGATORS
In terms of connecting data across multiple players, smart load boards and shipping aggregators are both effective technologies that can be used as models within collaborative transportation. A smart load board is an online marketplace or matching system that allows shippers and freight brokers to find carriers for their loads. Providers collaborate on how they can consolidate their loads for different destinations. This way, shippers can keep their trucks full, maximizing the efficiency of each delivery route as well as their earnings.
Shipping aggregators are a similar technology that helps aggregate volume across multiple shippers so they can save on shipping rates from carriers. This helps reduce shipping costs, providing a solution to financial issues and to some extent, data connectivity issues.
Smart load boards and shipping aggregators are technologies that help share this data across delivery service providers efficiently/seamlessly. They also save costs and address the difficulties of implementing collaboration, making it easier.
For the reasons we discussed, logistics players are beginning to realize the value in shifting from competition to collaboration. Newer technologies on the scene may have some benefits, but collaboration can tie them all together and also implement them into existing operations so that they can reach their full potential. In a collaborative transportation ecosystem, pressure can be lifted off of overwhelmed cities and logistics players will be able to more quickly adopt new technologies and integrate them into their existing operations.