Increases in internet shopping is having a significant impact on both long distance and last mile delivery and also on the built environment. Nicky Fairbairn, a real estate partner at international law firm DAC Beachcroft, and a Real Estate Logistics expert, interviews transport planning consultant Martin Wedderburn about the changes taking place in freight sector and the pressure this places on the net zero carbon agenda.
What efficiency improvements are you seeing in last- mile delivery?
It is estimated that last-mile delivery accounts for only 6% of total freight kilometres but around 30% of costs incurred. The impact of congestion on the expected growth in last mile delivery patterns, across several global cities,1 was recently estimated to most likely result in a 21% increase by 2030 in average commute times, equating to 11 minutes per person per day – unless changes are made to urban last mile supply chains.
New business models are emerging to increase efficiency. The solutions can vary in urban, suburban and rural settings, but increased automation and tracking of consignments throughout the supply chain allows for the consolidation of goods into the most suitable vehicles for last mile delivery.
Parcel delivery companies have traditionally adopted micro-consolidation in urban areas to deliver on their crucial B2B overnight service guarantees, and increasingly to meet the turnaround times demanded by premium B2C services.
What’s the role for new vehicle technology?
Drones have enjoyed a bit of a comeback, following the Gatwick incident, during the pandemic, with the high-profile pilot project to deliver PPE and medical supplies to the Isle of Wight grabbing the headlines. This demonstrates that they can play a role in delivering high value goods to more isolated destinations.
Several manufacturers are now cooperating in trials of lorry platooning on motorways. At a much more local level, autonomous pods running on pavements have been trialled for last mile deliveries. This solution may be scalable in suburban locations but will face operational challenges in the busiest urban streets and in low-density rural areas. They have been trialled with commodities ranging from parcel deliveries to takeaway pizzas, and it remains to be seen for what value of goods they are an economically viable proposition.
What other new approaches are you seeing?
Discussions of urban freight tunnels have re-surfaced in several countries, ironically just as London’s mail tunnel has been converted to a visitor attraction. While it requires huge investment, the concept is attractive as a reliable and clean way of bringing goods into urban areas at any time of the day or night. It could also contribute to the circular economy if used to bring goods into the city and carry waste out to be sorted.
How do you see the market responding to increased deliveries?
In the past, efficiency in different logistics markets has been achieved through standardisation? It seems inevitable that we will see physical standardisation in terms of mini-containerisation of deliveries and the design of zero emission vehicles to accommodate them. Greater digital standardisation in consignment tracking would enable companies to sub-contract last mile delivery and collection to multiple operators using vehicles appropriate to their local operating environments.
Cities can respond to the increased demand for on-street loading activity in several ways. They can provide more loading bays, potentially incentivising the use of greener vehicles at the same time, and use regulation to steer new practices or can manage demand through price. The digital tools and apps required to manage ultra-short-stay parking are in development and cities will very likely use a combination of all these tools to make themselves most efficient and effective.
What changes do you see on mixed-use sites, dealing with both in-coming and out-going deliveries?
Having a reliable point of delivery is increasingly important for businesses and consumers alike. Market demand and planning guidance will call for improved solutions for the drop off and pick up of goods in both new and existing developments. In some larger mixed-use developments this may include staffed mail rooms or concierge services. Private or shared secure boxes may become the norm to serve residential areas, and there will be pressure to provide dedicated loading bays in a wider variety of locations.
In mixed-use sites, there has always been a focus on accommodating incoming deliveries. In the last few years though we have witnessed the impact of services like Deliveroo generating large numbers of outbound deliveries from a range of F&B venues. During the pandemic the traditional view of the role of retail and F&B units has shifted further with the rapid expansion of Click and Collect. Any development can be thought of as a transactional space that needs to cater for flows of incoming and outgoing goods. A single retail unit can accommodate a combination of traditional retail, experience based elements, Click and Collect and/or dispatch for home deliveries.
How about converting vacant retail units into micro- consolidation sites?
Restaurants have created demand for dedicated dark kitchen units as they have shifted away from home delivery services being delivered out of their dine-in units. In a sign of what is achievable in the retail sector, one of the leading supermarkets rapidly converted one of its central London convenience stores, that normally caters to office workers, into a dark store to support its online delivery arm during the first lockdown. The start-ups in the sub-30-minute retail delivery market have also adapted vacant retail units to dark stores where goods are picked manually from shelves, although they are planning to invest heavily in automation of their urban warehouses.
Other potential locations for urban micro-consolidation include the conversion of car parks, smaller industrial units and railway arches. A recent report by the Cross River Partnership2 identified a model specification for urban logistics hubs in central London, which is transferable to other urban centres in the UK. Larger operators are actively seeking sites of 5,000– 10,000 sq ft from which to operate fleets of electric vans and cargo bikes. Height restrictions can be a barrier to the conversion of some sites, with a height of 4 metres preferred to allow flexibility in the types of large vehicles that can offload into the site. Smaller last-mile specialists, operating predominantly cargo bikes, favour sites of around 2,000 sq ft for micro-logistics hubs, with a minimum height in excess of 2m but preferably 3m.
What other activities do we need to take into account on these sites?
Many of the commercial vehicles on our roads are not actually delivering goods but are undertaking a range of activities that we collectively refer to as servicing, whereby the vehicle may be required to carry staff and/or equipment. Some organisations, including Business Improvement Districts (BIDs), have sought to reduce the volume of servicing vehicle movements with a view to addressing congestion, air quality and carbon emissions, to manage the demand for loading bays, to reallocate public space back to customers and to improve the quality of the public realm. For example, one trial project in a street in Mayfair3 was able to reduce the number of daily waste collection vehicle movements from 144 to nine, with a 67% reduction in waste bags on the footways during shopping hours.
Developers and property managers can promote the consolidation of servicing as well as goods. Strategies can include preferred suppliers for waste collection and standard business supplies, waste reduction measures, storage of equipment on site (for cleaning, maintenance, events), standardisation of high-maintenance elements within the site, a preventive maintenance regime to reduce callouts, and bringing out-sourced servicing activities in-house. Some of these consolidation strategies will only be cost-efficient for very large sites or would require cooperation with neighbouring sites to achieve the necessary critical mass.
How can this growth be supported without detracting from the net zero carbon agenda?
Transport has been the largest emitting sector of greenhouse gas emissions since 2016 as the energy sector has become progressively cleaner. Achieving net zero carbon in the transport sector will be a hugely ambitious undertaking. The UK government set out the scale of this challenge in its Decarbonising Transport4 paper in March 2020.
Long distance freight networks are the greatest single challenge in the decarbonisation strategy for the UK transport sector. The National Infrastructure Strategy5 states that “unlike lighter goods vehicles, such as passenger cars and vans, there is currently not a commercially viable path to decarbonise heavy goods vehicles (HGVs) which contribute 17% of UK transport emissions”.
Yet despite this, the National Infrastructure Commission’s Better Delivery report6 on freight concludes that “through the adoption of new technologies and the recognition of freight’s needs in the planning system, it is possible to decarbonise road and rail freight by 2050 and manage its contribution to congestion”. Its roadmap includes key recommendations to achieve the 2050 target:
- Acceleration of the uptake of zero emission vans
- Preparation for the transition to zero emission HGVs (with either battery electric or hydrogen fuel cells seen as the most viable technologies)
- Decarbonisation of rail freight
- Regulatory incentives to reduce the congestion impacts of urban freight
- Planning guidance to protect space for urban freight consolidation, support supply chain clustering, enable off-peak deliveries and provide appropriate point of delivery facilities
- Better data on freight and servicing activities
- Strategic coordination between government and industry
Does road charging have a role to play?
The Treasury is also facing important decisions on replacing fuel duty as electrification of the vehicle fleet accelerates. While traditionally seen as politically toxic, distance-based road user charging is an option that could deliver a fiscally neutral solution. It would be politically tempting to be seen to penalise freight harder than motorists, yet a smarter charging framework could instead be used to incentivise higher capacity utilisation and low emission logistics activities. The idea of a carbon tax across all sectors has also recently been floated as a potential fiscal response. This would almost certainly have a disproportionate impact on long distance freight resulting in a slower trajectory to zero emission technologies.
References
1 World Economic Forum (2020) The Future of the Last-Mile Ecosystem
2 Cross River Partnership (2020) The Potential for Urban Logistics Hubs in Central London 3New West End Company (2019) East Mayfair Commercial Vehicle Reduction Programme Evaluation Report
4 Department for Transport (March 2020) Decarbonising Transport: Setting the Challenge
5 HM Treasury (November 2020) National Infrastructure Strategy
6 National Infrastructure Commission (April 2019) Better Delivery: The Challenge for Freight
