City Logistics-basic approaches and problems

Authors: Dr. Laetitia Dablanc and Dr. Jean-Paul Rodrigue

Dr. Dablanc: National Institute for Transport and Safety Research, Universite
de Paris-Est.

City logistics. The process for totally optimizing the logistics and transport
activities by private companies in urban areas while considering the traffic
environment, the traffic congestion and energy consumption within the framework
of a market economy. (Institute of City Logistics)

1. Overview

City Logistics is a relatively new field of investigation brought by the
challenges of moving growing quantities of freight within metropolitan areas.
It thus concerns urban freight distribution. While cities, particularly since
the industrial revolution, have always been important producers and consumers
of freight, much of these activities were taking place in proximity to major
transport terminals, such as ports and railyards, with limited quantities of
freight entering the city per se. The functional specialization of cities, the
global division of production, the rise of service activities as well as
increasing standards of living are all correlated with a higher demand for
transport and logistics services in cities, a higher frequency of deliveries,
and larger quantities of freight shipments coming from, bound to or transiting
through urban areas.

Simplistically, city logistics concerns the means to achieve freight
distribution in urban areas, by improving the efficiency of urban freight
transportation, reducing traffic congestion and mitigating environmental
impacts.

Urban freight represents 10 to 15% of vehicle equivalent miles traveled on
city streets and two to five percent of the employed urban workforce. Three to
five percent of urban land is devoted to freight transport and logistics. A
city not only receives goods, but also ships them: 20 to 25% of truck-km in
urban areas are outgoing freight, 40 to 50% are incoming freight, and the rest
both originates from and is delivered within the city. Transport companies
providing urban freight services are generally very small. In Europe, 85% of
short distance truck companies have less than five employees.

Surveys are most developed in Europe, with experimental programs and
networking activities supported by the European Union, as well as national
urban freight programs. All of these projects have helped disseminate practices
and methods. A city is provisioned by hundreds of supply chains, one for each
economic sector. Freight can be handled as private carriage, where transport is
carried out by manufacturers with their own employees and fleet, or by an
independent carrier with his own vehicle to supply the store, or by a common
carrier. In a typical European city, both categories make an equal amount of
deliveries. In developing countries, private carriage is more dominant, and
includes transport serving the informal sector.

2. The Diversity of Urban Freight Distribution

Since cities throughout have a different built environment, so are their
freight transport and logistics activities. Freight strategies have depended on
local economic, geographic, and cultural characteristics. For example, Chicago
has been preoccupied with maintaining its role as a major rail hub for North
America, and is thus concerned about rail freight movements between the
numerous rail terminals located within the city, many of which done by trucks.
Los Angeles is primarily concerned with air pollution, and thus targets urban
trucking associated with the ports of Long Beach and Los Angeles. Shanghai is
becoming the largest cargo port in the world and the fact that more than 13% of
Shanghai’s GDP is value added by logistics underscores the city’s vocation as a
transport hub. Still, all urban freight distribution systems involve the
following supply chains, each of various importance depending on the urban
setting:

* Independent retailing. Concerns a wide variety of retailing activities,
often of small scale (single store) and which can also take the form of more
informal activities such as street stalls. Depending on the retailing activity,
the frequency of deliveries can vary from 10 times (convenience store) to 3
(hardware store) times per week, accounting for 30 to 40% of all daily urban
deliveries. On par with the concerned activities suppliers are diverse, with a
predominant use of own-account delivery vehicles (such as trucks, vans or other
carriages in developing countries). The stores often do not have receiving
facilities implying that deliveries are ad hoc, with delivery trucks often
tending to double park if storefront parking space is not available.
* Chain retailing. Concerns much larger stores (such as «Big box» stores)
that tend to be located in suburban locations, enabling them to offer parking
space for their customers and well as dedicated delivery bays accommodating
larger trucks. Shopping malls are organized along this paradigm. This gives
opportunities to have consolidated deliveries, particularly if part of a large
chain having its own distribution centers servicing an array of regional
stores. They also tend to rely on the expertise of third party logistics
services providers to mitigate urban freight distribution challenges, but
mostly to organize complex multinational sourcing strategies that are prevalent
in the retail sector.
* Food deliveries. Concern specialized supply chains supplying outlets
(grocery stores and restaurants) with goods that are often perishable. A share
of this freight distribution system thus involve cold chain logistics that are
established to maintain the thermal integrity of the shipments. Fast food
restaurants rely heavily on this form of distribution since the outlets simply
prepare pre-frozen or pre-packaged meals. In developing countries, outdoor (or
central) markets are particularly important as they represent a dominant supply
of fresh food for the urban population.
* Parcel and home deliveries. Due to the significant growth of transactional
activities (e.g. trade, finance) the movement of parcels has increased on par
with the companies specialized in these freight distribution services (e.g.
UPS, DHL, TNT, FedEx). They act as freight integrators with the consolidation
and deconsolidation of shipments with a process that begins and ends with
delivery vehicles (vans and small to mid-sized trucks) that are now common in
most of the world’s cities. They maintain a network of strategically located
distribution centers where shipments are consolidated or deconsolidated.
International shipments are often taken care by parent companies, namely air
freight integrators. Another emerging dimension concerns home deliveries,
particularly with the growth of web-based retail transactions. These delivery
services are mainly assumed by parcel carriers.
* Construction sites. The constant renewal and repair of urban
infrastructures (e.g. housing, offices, roads) requires a supply of materials
to sites. Different contractors and freight flows are involved depending on the
stage of the construction process (e.g. laying the foundation or installing
wall partitions). These supply chains concern large volumes because of the
tonnage they generate (up to 30% of tons carried in cities). They commonly rely
on heavy trucks, creating local congestion, particularly since deliveries are
done on a ad hoc basis as the construction project progresses.
* Garbage collection and disposal. Concerns the collection and disposal of
the variety of wastes generated by daily urban activities, which represents a
form of reverse logistics since the waste being discarded were previously goods
being delivered. To this can be added recycling activities.
A European city generates about 1 delivery or pick-up per job per week,300 to
400 truck trips per 1000 people per day and 30 to 50 tons of goods per person
per year. In less developed countries, rural migration and population growth
have led to very rapid urbanization, while the public supply of infrastructure
and transport services has lagged behind. A significant proportion of roads are
unpaved and poorly maintained. Air pollution has decreased with the gradual
phasing out of leaded gasoline. However, diesel trucks remain a major source of
particulate matter and NOx. Traffic congestion is a significant operational
problem for the urban freight system, with slow non-motorized vehicles
(including hand or animal pulled carts) merging into faster motorized traffic.
Other features of cities in developing countries include a greater use of
manual labor for transport and handling. Also, the recycling of used goods,
packages, and cardboard takes specific forms: in developing countries, cities
essentially leave a significant share of the recycling of goods to the informal
sector. Rag-pickers and scavengers are an important feature of city life. Urban
scenes in developing regions also include street vending, selling everything
from fresh fruits to electronics goods. Slums are also part of the city
landscape in many developing countries, and have specific characteristics and
supply needs. In general, the share of urban freight depending on the informal
sector is hard to evaluate, as are economic, environmental and social
indicators for these underground activities.

However, it is important to note that in most cities in intermediate or
developing countries, part of the economy is fully integrated into global
economic networks. What best characterizes the cities of the developing world
is their economic dualism: the informal sector operates alongside very advanced
industries and services that have logistics behaviors and concerns similar to
those in developed countries. Today, the demand for modern logistics services
is as strong in Sao Paulo or Istanbul as in Athens or Sydney.

3. Environmental Impacts

Urban freight distribution tends to more polluting than long distance freight
transport. The main reasons are:

* Urban delivery vehicles are older on average. It is common that trucks end
their life cycle in drayage operations between port or rail terminals and urban
distribution centers.
* Operating speeds are slower due to congestion and traffic restrictions,
implying that the engine is running consistently lower than optimal speed (75
km per hour on average).
* Constant acceleration and deceleration due to traffic lights and congestion.
* Vehicle idling is frequent either for deliveries or at stops.
In large European cities, freight transport is responsible for a third of
transport-related NOx and half of transport-related particulate matter. In the
metropolitan area of Mexico, 71% of the 3,500 tons of PM2.5 generated in 2002
by mobile sources were from freight vehicles. Greenhouse gas emissions and
noise pollution are also among the most severe environmental effects of urban
freight transport. In Dijon, France, freight transport consumes 26% of the
total road traffic-related TOE (tons of oil equivalent, the amount of energy
released by burning one ton of crude oil). It has been calculated that during
the morning rush hour in Bordeaux, France, freight transport traffic added five
decibels (dB(A)) to the noise from the circulation of private cars.

Urban freight vehicles can be quite old. In Dublin in 2004, a fourth of all
vehicles were manufactured in or before 1994. Only 15% of vehicles were new
(one year or less). In the Milan region, 40% of circulating trucks are more
than ten years old. The renewal of the freight fleet is generally slower than
for non-urban road freight traffic, because urban freight involves numerous
competing small operators that cut costs as much as possible.

Another important issue is road safety. Trucks participate in a small share
of the accidents in cities, but the accidents involving them are serious. On
London’s roads in 2005, about 14 per cent of all collisions involving goods
vehicles result in serious or fatal injuries, which is higher than the figure
for other road users. The conciliation of truck traffic with bicycle use has
been a recent policy target in Paris and London following fatal collisions that
received a lot of media attention.

4. Key Challenges

Addressing city logistics requires an understanding of urban geography as
well as supply chain management, which tends to be an uncommon set of skills.
Urban freight distribution thus has a unique array of challenges as a
multidisciplinary field. By its characteristics, urban freight distribution
reflects many dimensions of contemporary logistics and exacerbates many of its
constraints. The most prevalent challenges include:

* Commuting and peak hours. Urban areas are a priori the realm of passengers
movements since they account for the largest concentrations of population.
Passengers and freight movements do not mingle well. Additionally, the well
know timing of urban commuting around peak hours complicates freight
distribution.
* Congestion. Road infrastructures in urban areas are commonly congested,
particularly at peak hours. Repetitiveness is a salient issue as a regular flow
of deliveries must be maintained in spite of peak hour congestion, and
therefore many freight distribution activities take place during the night if
possible.
* Parking. Many stores in high density areas have limited capacity to
accommodate deliveries, implying that delivery trucks must park in the street
in the vicinity of the store, preferably in front. This induces the usage of
smaller trucks better able to circulate within urban areas and find parking
space for deliveries. It is not uncommon that for short deliveries that trucks
will double park, thus seriously impeding local circulation.
* Cargo load contradiction. Since real estate is at a premium in urban areas,
stores tends to have limited warehousing space and are of smaller size. Urban
freight distribution is subject to smaller volumes with time-sensitive freight
necessary to replenish a constant demand. This requires a high frequency of
deliveries, particularly considering high sales volumes and imposes a
contradiction in the cargo load. Stores in central areas would benefit from the
economies of scale of larger deliveries, but the setting does not permit this
advantage. This is one of the reasons why retailing has emerged in suburban
areas. Large stores with ample parking space can have their own cargo docking
bays that can accommodate the largest delivery trucks available.
* Land use. Land use patterns determine many features of the urban movement
of goods. The spatial distribution of industrial, commercial and logistics
facilities has a direct impact on the number of vehicle-kilometers that will be
necessary to reach the stores, industries and households that need to be
supplied. A majority (more than two thirds in the case of European cities) of
all shipments to and from urban areas are organized from terminals and
distribution centers located in the close vicinity. These terminals are key
elements of the urban freight system. Logistics sprawl is the spatial
deconcentration of logistics facilities in metropolitan areas. Confronted with
the severe land pressure in large cities, as well as with the large urban
renewal projects that took place in the city during the 1960s and 1970s,
logistics and transport companies began to follow a centrifugal locational
pattern. The physical moves were done by small-scale changes in their spatial
organization, with the closing of urban terminals and the opening of new ones
further away.
Since urban areas are large consumers of final goods, the issue of reverse
logistics deserves attention in the form of the collection of wastes and
recycling. The diffusion of e-commerce has also created new forms of demands
and new forms of urban distribution with a growth in the home deliveries of
parcels, which is complementing the conventional pattern where customers carry
their own purchases from the store.

From a regulatory perspective urban areas are highly constrained with a
variety of rules related to zoning, emissions and even access conditions to
roads and terminals (in metropolitan London, trucks older than 8 years cannot
circulate; this figure is 7 years in Gothenburg). High population densities
imply a low tolerance for infringements and disturbances, which again increases
urban freight distribution costs.

5. Freight Distribution Strategies

City logistics, as a distributional strategy, can take many forms depending
on the concerned supply chains (e.g. retailing, parcels, food deliveries, etc.)
as well as the urban setting in which is takes place. For instance, a high
density and congested central city can be serviced by an independent freight
distribution system calling from a terminal located at the margin of the area.
The vehicles used to service the customers (either for deliveries or pickups
along a flexible route) are likely to be smaller and thus better adapted for
distribution in an urban environment. There is also the possibility of using
the existing public transit system to move freight but this implies several
challenges in terms of the adaptation of modes, the usage of existing passenger
terminals and scheduling issues. The urban terminal itself could be a neutral
facility interfacing with a set of distribution centers, each being connected
to their respective supply chains. Thus, a wide array of supply chains
connected to the city can achieve a better distributional efficiency within the
central city.

Urban freight distribution strategies are however difficult to implement as
they systematically imply high costs. Many attempts of «cargo-trams» have
failed, such as he ambitious cargo-tram project in Amsterdam, which went
bankrupt in 2009. Projects for urban consolidation centers (such as the
Motomachi consolidation center in Japan

) have met higher success even though their operating costs are very high. As
new strategies and practices are implemented, more efficient urban freight
distribution systems will emerge. They will likely reflect the unique modal and
infrastructural lattice of each city.

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