Off-Hours Delivery: Right-Sizing Policies When One-Size-Fits-All Just Won’t Do
This month Meeting of the Minds’ Senior Writer Kate O’Brien sat down for a phone conversation with Dr. Hugo Yoshizaki, Associate Professor in the Department of Industrial Engineering at Polytechnic School at the University of São Paulo (USP). Dr. Yoshizaki also serves at USP as Director of the Center for Innovation in Logistic Systems (CISLOG).
Thank you for sharing your time with me today. I’ve been reading about your off-hours delivery (OHD) research in São Paulo with great interest. Describe for our readers the focus of your research, and why it’s important.
So, my research is concerned with taking care of the mobility of both people and freight in the urban realm. Given that most people today live in cities, it’s important to think about how those people get food and clothing, and how the industries get raw materials to produce goods for consumers. My work gets at creating efficient delivery mechanisms to help fulfill those needs. A guiding question in my work is: how can we maintain high quality of life in cities while accommodating the mobility needs of city-based dwellers and industries? This is where off-hours delivery comes in.
I understand that your research in São Paulo has benefitted from your collaboration with the research team doing similar work in New York City. Tell me about that.
Right. My OHD research in São Paulo is a continuation of the work on urban and city logistics. I’d been working on OHD with fellow academics like Dr. José Holguín-Veras, who’d been leading OHD research globally. His research in New York City was a jumping-off point for our São Paulo work– in fact, I visited New York City twice before we began piloting OHD in São Paulo so we could learn from what they were doing. Jose arranged meetings for the USP team with the state, municipal, and corporate leaders who were involved in that OHD pilot. José and his team were very helpful to us. Talking with those involved first-hand helped us better understand and anticipate what was to come with implementing an OHD pilot.
So you’re networked with academics who are kindred spirits working on similar issues.
Exactly! One of my favorite things about my involvement with the Volvo Research and Education Foundation (VREF) is the fact that I can be a part of this huge network of academics working on city logistics. These are researchers who interact with the real world, engage with city government, and connect with companies working on urban mobility. We get to know each other, compare notes, and support one another’s work. I actually got to know José during VREF-related activities. It was a natural progression to continue working with him as the USP team developed complementary research here in São Paulo.
Very inspiring. Let’s dig into your pilot project in São Paulo now. You said the New York City OHD pilot project was a “jumping-off point” for your project. How so?
Well, the OHD pilot project came about because the new Mayor of São Paulo at the time was quite intent on shifting deliveries within the urban core to off-hours, and wanted to know what that would take. At about the same time, São Paulo hosted the first VREF Urban Freight meeting. City officials and the business community participated, and listened to José and other academics talk about OHD and other city logistics initiatives from around the world. We were able to use those insights to convince São Paulo’s local government leaders to test it in our city. The Mayor was very vocal about his intentions, so that cultivated willingness to participate in the pilot.
But, there was a major difference between our pilot and the NYC pilot: funding for the NYC project from U.S. Department of Transportation supported $1,500 payments to each participating receiver in the project. That incentivized companies to participate, and was especially helpful to those for whom staffing and procedural shifts were required. That did not happened in São Paulo, as the Brazilian government didn’t provide our project with cash, so participating companies were volunteers. However, the São Paulo prefecture did offer us in-kind support by allowing us to use their assets– their drivers, cars, office space, and part of their technical staff — in support of our pilot, which helped immensely.
Wow, so the São Paulo pilot required volunteer participation. But from my understanding of your research, it’s almost as though the stipend didn’t really matter at the end of the day.
Right! Like anything else, participation in the pilot was a business decision. Several who opted to volunteer right away were leaders of big companies, so they could better afford to view the pilot project as an opportunity. These leaders said: “if we distance ourselves from this pilot, then policymakers will create policies that aren’t informed of our needs or our experiences in the marketplace,” so they took a longer view regarding the benefits of participation.
There were three company typologies involved in this pilot: 1) the carriers, that is, transport and logistics companies; 2) the shippers, those companies that need to ship the goods they are producing; and 3) the receivers, those companies that rely on supply shipments to do their business– think restaurants needing produce, or a manufacturer needing raw materials.
At the same time, a major influencer helped along our efforts: the IDV (Brazilian Retail Development Institute), whose representatives communicated the benefits of OHD to its membership, which is comprised primarily of Brazil’s retail companies, including large and influential retail banks, grocery stores, and mobile phone companies. IDV helped the larger companies talk to the others. They said, “It’s only a matter of time before we’re all required to align with OHD. We might as well embrace it now, and lend our perspectives to the development of future OHD policy”.
So the Mayor was saying, “we need to figure out how to make OHD happen”. What did your research show about what it would take to implement that policy shift?
The São Paulo pilot taught us a couple of key things. In terms of challenges in implementing OHD, the pilot study identified three things that would need to be addressed proactively:
- Accounting for the extra costs to receivers in making the shift to OHD
- Avoiding noise violations during evening deliveries, especially in residential-adjacent areas, where regulations are quite strict (companies violating noise regulations incur fines upwards of $8,000 per occurrence)
- Addressing issues of security given the statistics on armed robberies in São Paulo
We gained deeper insights about the dynamics of OHD policy, too, which are illuminating the possible strategies we’ll need to address these issues more efficiently beyond the pilot project:
- Implementing OHD across a region can be particularly advantageous. In São Paulo, shifting inner urban core deliveries to off-hours means carriers can use their trucks by day to do suburban or rural deliveries, and by night to complete inner city deliveries. This complementary pattern means carriers’ assets are in productive use around the clock, thereby lowering their costs overall. In fact, a major driver of this policy shift has been the carrier companies’ syndicate. They have been pressuring government and receivers to use OHD because it’s in their financial best interest, as our pilot has confirmed.
- Accounting for receivers bearing extra costs in the shift to OHD is necessary. For businesses who run 24-hour operations, the adjustment might be easier, as workers already on hand can simply shift attention from other tasks to receive nighttime shipments. But for businesses operating 9 to 5, moving to OHD will require analysis of staffing decisions, timing of shifts, and other processes. Staffing at night can cost upwards of 20% more in extra wages. These potential cost increases may push some companies to consider whether off-hours staffing is even required at all, especially in cases where less valuable merchandise is being delivered. The heightened costs may mean some companies opt out altogether.
- Implementing proactive strategies for addressing noise and security issues is critical. In our pilot, researchers collected data during off-hours deliveries to help identify the factors that most frequently led to noise violations. The São Paulo prefecture was involved in order to problem-solve noise-related issues. We identified that trainings for drivers could be an important way to minimize or eliminate OHD noise (for instance, an oft-cited noise was the slamming of truck doors). We also identified the need for specialized equipment that’s optimized for making quieter deliveries. Given rates of theft in São Paulo, delivery of higher-end goods (cell phones, TVs, other digital devices) was not allowed in the pilot.
- OHD works better for some than others. Many large supply chains are better equipped for off-hours deliveries because they are vertically integrated; theyhave logistics operations in-house, and they own their stores. Where they might pay a little more in wages for receiving evening deliveries, they make up in lower logistics costs, and on balance they might even save money. The São Paulo pilot helped two of Brazil’s largest drugstore chains move more than 40% of their deliveries to off-hours as a result of the savings they identified through participation in this pilot project.
Wow, that’s a lot of insight gained. How have your findings shaped implementation of OHD in São Paulo in the months since your pilot ended?
In reviewing our pilot’s findings, the Mayor at the time came to understand that OHD does not lend itself to a “one size fits all” policy solution, and that different supply chains can have divergent experiences implementing OHD. To his credit, the previous mayor and his administration put together a number of policies designed to proactively address the challenges and dynamics I mentioned earlier. The mayor wanted to advance OHD where it was most straightforward to implement. The prefecture recognized it would need to be involved in a more hands-on way to assist companies navigating the challenges. So that’s been really important. The mayor’s successor has kept these policies in place, and continues to move forward.
It’s clear from a great deal of research that OHD can be a boon to larger companies that are vertically integrated. But OHD seems harder on smaller, family-owned businesses. Can you talk about how to account for that and still create a broad, positive impact on a city’s logistics?
Yes, that’s the next big issue we face as researchers, because even when you move many of the biggest retailers to OHD, there’s still a good deal of freight that inevitably needs to be delivered during the day. A city like São Paulo has some 10,000 bars, restaurants, and shops. The vast majority of these businesses are very small, and not at all vertically integrated. So researchers have to look at what can be done to accommodate the majority of businesses, which are small, while still creating positive impact with a policy like OHD. One thing we’re looking at closely is developing centralized delivery centers.
That’s the tricky thing with city logistics. You can always have unintended consequences, or big things you didn’t anticipate at the outset of implementing a new policy. So we city logistics researchers are always looking at policy solutions from many angles. In São Paulo, our pilot was successful because we convinced the government to look at what would be best for the city as a whole. We convinced the businesses to look at what would be best for them and best for the whole city.
Look, companies are rational. CEOs are always looking to make or save money. The OHD pilot disrupted the inertia of many businesses simply “doing business as usual” by getting these 11 companies who participated in the pilot to examine their assumptions. What we learned was that if OHD makes good business sense, they will do it. So now we have to figure out what will make good business sense by and large for the smaller businesses, too.
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