Urbanization: a trend often described as some kind of tour de force is a defining characteristic of the 21st century, and could shape the world geographically, politically and economically.  But what new models are required to cope with these changes? How can a city organize itself to meet the changing demands?  And what is the role of logistics in ensuring things run smoothly?

Usefully and somewhat ahead of his time, Professor Eiichi Taniguchi of Kyoto University defined city logistics back in 2001 as:

The process for totally optimising the logistics and transport activities by private companies in urban areas, considering the environment, the traffic congestion and energy consumption within the framework of a market economy.

There are a couple of points of interest in his definition:

Firstly, we are considering optimization – of improving over time current processes to allow for improvements in quality and / or capacity.  In essence, to make tomorrow run better than today.

Secondly, we are looking for such improvements to be made by private companies.  It is not the public sector who will deliver city logistics.  Innovation and operational efficiency gains will come from the private sector and are subject to market economy forces.

Finally, the city, especially a megacity, should be viewed as an ecosystem: a dynamic living being, where the flows of people, goods & services, vehicles, energy and even data, all interconnect to define its progress and prosperity.

So what of the public sector and how can it create the optimal conditions for city logistics to flourish?  There is a clear role for the public sector to set the conditions for city logistics principles to flourish.   But for cities to maximize the potential of the logistics sector to match and delight their stakeholders, a new framework is required.  I summarize this under the mnemonic of an 8Cs model:

Clean

“Cleanliness is next to Godliness” goes the old adage and this seems a good place to start.  After all, who doesn’t want to live (and work) in a smart, healthy and attractive place?  So therefore cutting down on congestion and its associated pollutants seems an obvious goal for a City.  And, of course, there are many types of air pollution and many contributing factors, not least of which is vehicle emissions.  Perhaps less appreciated but equally important to residents in cities are noise and even light pollution, particularly where historic cities are concerned.

Clean doesn’t only mean green – it means safe and providing a place where people want to live and to work.

Compliance

Closely related to cleanliness is the principle of compliance: a city’s ability to demonstrate that it meets the standards levied at it, especially environmentally.

These days a range of stakeholders are integrally interested in a cities eco-performance: at a tactical level: there are residents and businesses and local government; wider stakeholders would include the press and a variety of lobbying groups.  At the political pinnacle lies central and pan-national government: in Britain a judgment is imminent on UK Government plans to delay meeting NO2 standards in major cities until 2020 – or in the case of London, 2025.  London has the worst air quality of any European capital according to the European Environment Agency and the UK is likely to be heavily fined over these failings.

Those responsible for our cities need to think about security standards too.  Terrorists increasingly strike at the financial heart of nations – think of the London Docklands bombings of 1996 or the two attacks of New York’s World Trade Center in 1993 and 2001.  A key tool in the armory to avoid such horrific events is the ability to control who have access to vehicles, to specific areas within cities and, ultimately, to key, strategic buildings and domains.

So city authorities have incredible complexity and challenges to wrestle with.  But they also have at their disposal a unique toolbox of policies.  These tools can encourage or frustrate efficient logistics systems.

Control & Coordination

The ability to coordinate and control the flows of traffic, including freight traffic in addition to public transport and private transportation, lies at the heart of every city’s strategies to avoid gridlock and enhance its productivity and appeal.

Technology increasingly provides the key, both to make living easier and to maintain law and order – it enables the city ecosystem to move from an ad hoc to a planned state.  City authorities are able to monitor, measure and manage through a range of technology measures that capture the movements of the individual parcel or pallet, vehicle and even entire network.  And once you measure something, you can often shape it differently.

Compression:

Our 5^th principle has a number of different elements to it.  From a technology standpoint, compression encourages certain innovations: research institutes such as the German Aerospace Center (DLR) are interested in measuring and cubing-out the trucks using microwave technology.

From a warehouse and facilities perspective, we’re interested in raising the truck utilization from an urban norm of around 40%, to the ~95% or higher that the Consolidation Center at London Heathrow Airport has demonstrated is perfectly possible.  After all, increased Full Truck Loads (FTLs) mean fewer vehicles on the road, less obstruction through poorly parked vehicles.  FTLs also mean lower delivery costs per pallet or roll cage.

Greater truck utilization has traditionally come from a facilities approach.  Urban Consolidation Centers allow carriers to drop-off with large articulated trucks, often in the middle of the night.   The downstream delivery is made with smaller trucks, sometimes using EVs or hybrid technologies, which are more able to access the shopping mall or airport terminal.

Logistics clusters allow different companies to leverage the economies of scope offered by co-loading for individual runs but also sharing vehicles, manual handling equipment and even staff, optimizing supply and demand with the logistics community.  Is this an operating model that BRIC countries will rapidly adopt, with state-sponsored logistic parks, servicing the needs of emerging cities?

Customer orientation

In order to test the veracity of such suggestions, we must consider the operational capabilities and associated value proposition.  Applied properly, city logistics principles can enhance the lives of both local residents and the business community, though it is the former that are often at the center of media attention.

Rather than simply adding cost, by double-handling deliveries, a well-appointed Urban Freight Center (UFC) can unlock value and benefit the stakeholders it supports.  Value-adding activities include off-site storage (at a rate much lower than inner-city premiums); also services to strip down, test and reassemble deliveries, to the specific requirements of an end-customer – not the convenience of a National- or Regional Distribution Center!  Quality issues can be identified earlier in the value chain and 3PLs (third-party logistics provider) with mature processes can offer customer helpdesk and other administrative services, allowing customers to focus on their core businesses.

Collaboration

One thing we can fully expect in tomorrow’s megacities is a greater degree of collaboration.  New IT solutions offer previously impossible levels integration.  Everyone involved in urban logistics, from the sole trader to multi-nationals, will benefit from identifying spare capacity, spot bidding for regular and ad hoc jobs.  Siemens City Logistics platform offers integration for different actors along the value chain, including with last-mile deliveries, allowing a seamless and expedited handover between carriers.

But cities are dynamic environments, so slot- and delivery management systems will enable landlords and carriers to deal with real-time changes to plans, without the need for massive capital investments.  An example of such low barriers is a   SAP / T-Systems slot management pilot for the Port of Hamburg, optimizing quayside delivery slots in teal-time.

Undoubtedly collaboration will have to extend beyond sectors and encompass differing partner entities that are also involved in future cities.  Best practice outside of city planning involves a design – build – maintain – dispose methodology for large capital assets, but this approach is hardly ever applied to cities and their logistics requirements.  A greater discourse is required between entities previously working in isolation: insurance companies, construction firms, utilities, as well as logistics providers.   Complimentary competencies will jointly meet the challenges expected of them.

There are real constraints to more open, agile thinking being adopted. The drive to maximize revenue and EBIT growth shows the limit of the market economy approach to City logistics.  Where individual revenues and profits for logistics companies collaborating in City logistics schemes may not be as great as in a pure market economy, the Public Sector must produce policies which incentivize their partners to take more risk and deliver increased innovation, whilst accepting a lower return, at least in the short-term.

Cost

So let’s finish where we started off: as Prof. Taniguchi observed, City logistics is concerned with lowering the total costs of delivery – total because increasingly we must measure both the financial and the environmental costs of each delivery.

True costs will need to be transparent: to the consumer, the business Manager and to the politician who are all interested (and increasingly all accountable) for the activity within their backyards.  Consumers and other stakeholders may well so be choosing their delivery methods based on carbon as well as cost considerations, as we’ve witnessed in their transportation preferences for commuting in cities.

The bar will be raised further, not because the Governments dictate so, but because the inexorable demand for quality goods & services, coupled with our relentless ability to innovate, will allow more and better solutions that meet tomorrow’s challenges.