Omni-channel retail in harmony with green city logistics

City logistics is currently undergoing a radical transformation at the same time as improvements in the urban environment, including air quality and streetscape, are gaining a higher public profile. Fortunately, these two developments can support each other, so cities seeking to improve their environments can do so by facilitating changes in city logistics, and conversely cities seeking to improve their logistics, can simultaneously achieve significant environmental benefits. For example, Sydney, which is actively looking at ways to improve its city centre logistics, is presented with an opportunity to simultaneously improve air quality and reduce noise in the central business district.    

Significant progress is being made in some cities, notably the UK and mainland Europe, on measures to clean the urban air. In April 2019, London’s Ultra Low Emission Zone (ULEZ) went live. Heavy Goods Vehicles (HGVs) not meeting the Euro 6 standard for NOx and particulates have to pay GBP100 (about AUD180) per day to operate in the ULEZ[1]. Vans and other smaller vehicles not complying with the Euro 6 standard will pay GBP12.50 (about AUD23) per day. The ULEZ is the first step in an ambitious strategy for London to become a ‘zero carbon city’ with energy efficient buildings, clean transport and clean energy by 2050[2].

While adopting the Euro 6 emission standard will undoubtedly improve urban air quality, further improvements to the urban environment will necessitate a switch to electric vans and trucks. Not only do they eliminate air pollution at the point of use, they are also quieter and therefore better suited to the overnight replenishment of stores in residential areas. Although battery and recharging technology continue to improve, measures like ULEZ in London are already driving the introduction of electric vans and trucks. One interesting example is the DPD parcel service in London. A depot on the periphery of the city is connected by 7.5 tonne electric trucks to a satellite in Westminster, from where smaller electric vehicles pickup and deliver parcels from/to central London locations[3]. The limited range of electric vehicles and the desire to restrict recharging to overnight at the depot or satellite necessitate the use of this two-echelon operation, where before with diesel trucks a single echelon operation might have sufficed.

Retail in urban areas is undergoing a dramatic transformation, starting with the rapid growth of e-commerce. Initially e-commerce operated in parallel to conventional retail. Order picking centres, sometimes referred to as ‘dark stores’[4], arose to connect product suppliers to customers, deploying vans for home deliveries from order picking centres. Then retailers began to use conventional ‘bricks and mortar stores’ to offer ‘click and collect’ services[5], improving the productivity of parking spaces, which can be in short supply in urban areas. The next logical step is for retailers to offer same-day home delivery from conventional stores. Convenience stores, like restaurants, have been forming links with third party delivery operations to offer on-demand services[6]. Alternatively, the convenience store could conceivably come to the consumer on demand, preferably in the form of an autonomous vehicle[7]. Areas where there are no stores or where the cost of one could not be justified could particularly benefit from such a solution. Concerned by the impact of e-commerce on local shops and fears of the ‘death of the high street’[8], one German startup is forming cooperatives of local businesses to provide on-demand and same-day delivery to local customers[9].

One obstacle to same-day home delivery has been the requirement that someone should be home to receive the goods. To avoid this constraint and to decouple the delivery from the pickup by the customer, lockers of various kinds have been installed or proposed. For example, Australia Post is operating lockers at some Woolworths stores[10]. Other possibilities include the use of car boots for pickups and deliveries, facilitated by a system developed by DHL and VW[11], or secure in-home delivery, as offered by a smart key system marketed by Amazon[12]. Other uses of lockers in city logistics include as micro-hubs for last-mile delivery on foot or by cargo bike[13].

The result of all these developments in retail is that the consumer is enjoying an increasing range of delivery options, including more same-day deliveries. However, this comes at the cost of increased channel complexity. The widespread use of bar codes and RFID tags is increasing the transparency of inventory. E-commerce, reward schemes and store cards are providing retailers with extensive data on their customers, their shopping behaviour and their preferences.  The huge increase in data is enabling retailers to better position inventory and move it between channels, so that the increase in channel complexity need not result in a corresponding increase in inventory in the supply chain[14], which would increase costs.

The move to omni-channel retail fits well with moves to improve the urban environment. Same-day delivery of shopping can displace some car trips to edge-of-town supermarkets, and home deliveries can be made by electric cargo bikes. Nearby lockers, for example at commuter rail stations, can reduce the frequency of failed delivery trips. The electrification of omni-channel retail is proceeding incrementally but inescapably, improving air quality and facilitating night-time replenishment of stores without the disruption of noisy diesel trucks. Smaller electric vehicles are less intrusive in city centres than larger diesel trucks, help to conserve historic streetscapes, and can take the pressure off on-street loading zones. The introduction of a tram line down Sydney’s historic George Street, combined with resurfacing and refurbishment, sits harmoniously with developments in omni-channel retail, indeed they support each other.    

[1] Source: https://motortransport.co.uk/blog/2019/02/12/locity-fuels-in-action-event-to-take-freight-operators-beyond-ulez/, 7/4/19

[2] Source: https://www.london.gov.uk/sites/default/files/osd21_es_executive_summary.pdf, 2/7/19

[3] Source: https://motortransport.co.uk/blog/2018/10/17/dpd-opens-its-first-all-electric-last-mile-delivery-site/, 30/1/19

[4] Source: https://www.commercialrealestate.com.au/news/prices-surge-on-shortage-of-undeveloped-industrial-land-in-sydneys-inner-south, 10/2/19

[5] Source: https://www.woolworths.com.au/shop/discover/shopping-online/pickup, 8/7/19

[6] Source: https://csnews.com/should-c-stores-dive-delivery, 8/7/19

[7] Source: https://www.retaildetail.eu/en/news/food/self-driving-convenience-store-brings-fresh-food-your-door-step, 8/7/19

[8] Source: https://www.forbes.com/sites/cherryreynard/2018/04/26/death-of-the-high-street/#6067cbf45cf5, 8/7/19

[9] Source: https://www.fastcompany.com/3045525/who-needs-amazon-support-local-businesses-and-then-get-same-day-delivery-by-bike, 28/3/19

[10] Source: https://www.woolworths.com.au/shop/discover/shopping-online/auspost, 9/7/19

[11] Source: https://theloadstar.com/dhl-thinks-outside-box-inside-car-boot/, 9/7/19

[12] Source: https://images-na.ssl-images-amazon.com/images/I/D1GdfdfMVmS.mp4, 9/7/19

[13] Source: https://civitas.eu/sites/default/files/documents/cyclelogistics-civitas_final.pdf, 9/7/19

[14] Source: https://www.dhl.com/content/dam/downloads/g0/about_us/logistics_insights/dhl_trendreport_omnichannel.pdf, 9/7/19