Food, medication, pharmacy products – the coronavirus crisis has seen consumers ordering many daily essentials over the Internet. Sales of these product groups have risen by 17.3 per cent compared to last year, climbing from EUR 1.05 to EUR 1.23 billion, according to figures supplied by the German E-Commerce and Distance Selling Trade Association BVEH. “Demand is growing,” confirms the association’s chair, Gero Furchheim. “E-commerce has become a normal way to shop.”
This is proving a real challenge for courier, express delivery and parcel services, not so much in the major distribution hubs, but in the final stage of transport through town to the customer’s door. “The last mile has always been, and will remain, the most costly and complex part of the logistics chain,” says Wolfgang P. Albeck, CEO of express delivery company trans-o-flex. This challenge is ubiquitous across the logistics sector and there are different approaches to solving it, especially with regard to the premises used by the industry.
The fundamental problem is that “hardly anything has changed for decades when it comes to building distribution centres,” explains Janine Dietze, Head of Logistics at consulting and planning company Drees & Sommer. “The emphasis is mainly still on large sites just outside town, with good links to the transport network and centrally located in terms of manufacturing locations and customers.” However, this leads to columns of parcel trucks heading into town, day after day, to deliver goods to customers. If the customer isn’t at home, several attempts to deliver are often needed. This not only increases traffic in urban areas, with a corresponding increase in pollution and particulate matter, it also pushes up costs for logistics companies.
The last mile has always been, and will remain, the most costly and complex part of the logistics chain
Industry experts have thus long been seeking solutions to this challenge. One approach is to make use of vacant space in cities to establish small, decentralised logistics centres known as urban hubs. “These sites could be modern new builds, but they could equally be less attractive or temporarily underused spaces, such as the top floors of shopping centres, unused parking space, vacant space in office buildings or areas within sports stadiums,” explains Drees & Sommer expert Dietze. These small last mile facilities could handle inward and outward movement of goods seven days a week, 24 hours a day, to ensure short delivery times. “As an additional benefit, deliveries can be bundled together to take the pressure off transport routes,” says Dietze.
Another type of building being discussed as a new neighbourhood logistics solution is the white label hub. These shared logistics centres on the outskirts of cities could be used by all courier, express delivery and parcel services as a base for bundled transport using shared vehicles. “So alongside lower warehousing and staff costs, white label solutions also reduce transport costs,” comments Dietze.
Generic distribution facilities: modular construction, maximum flexibility
White label hubs can be planned from the outset as generic distribution facilities. Modular construction of the building is central to this strategy. If a user needs more space, or new users need to be accommodated, modules can be added as necessary, always provided the site is large enough. The hub is thus able to meet the users’ exact requirements at all times. This style of construction also has benefits to offer if the building is subsequently re-let, as it can easily be adapted to suit the needs of the new operator.
For new logistics strategies such as urban hubs and white label delivery to work, the needs of a whole range of different players must be taken into account – from online retailers and their customers to parcel delivery services, developers and public authorities. Many new neighbourhood logistics solutions are still in the trial phase or have so far only been implemented on a small scale and without dedicated premises. Examples include the “Hamburg Box” pilot project, created jointly by parcel delivery services Hermes and GLS in Hamburg. Shared parcel lockers were set up at 15 major subway and suburban railway stations, with customers able to have items delivered to the lockers and then collect them using a special code. This is particularly useful for public transport users and commuters who are away from home all day but use the transport system daily. By specifying the Hamburg Box as their delivery address, they can pick up parcels without disrupting their routine. The two parcel companies hope this will reduce the number of failed delivery attempts. The pilot project is set to run for one year initially.
UPS, meanwhile, has also trialled its own form of urban hub in Hamburg. This involved shipping containers being placed at various locations around the city and filled with parcels from a central depot. The parcels were then delivered to the customer by cargo bike operators, but the project never got beyond the pilot phase. Memo, an eco mail-order retailer based in Greußenheim, near Würzburg, is taking a similar approach with its “Würzburg Climate Package” solution. Orders placed by customers in Würzburg are brought into the city from the company’s central warehouse around 20 km out of town by electric vehicle before being handed over to partners who deliver them to customers using electric cargo bikes. “We see the use of electric cargo bikes to cover the last mile to customers as an important and effective way of cutting emissions that harm the environment, climate and health in cities and urban areas,” says memo board member Frank Schmähling. “As a mail-order company, we’re part of the problem and these measures are about taking responsibility and being proactive in tackling the issue.”
However, logistics property expert Dietze finds these isolated solutions an unconvincing answer to the last mile problem; she believes in comprehensive cooperation between providers. “The elevated number of items being delivered during the coronavirus crisis makes cooperation all the more important. We need to combine different approaches.” The potential for high levels of standardisation means that shared white label solutions can offer substantial efficiency benefits compared to separate systems.
However, trans-o-flex CEO Albeck fears that precisely this level of standardisation could create new problems in the long run. Data security is a major problem, for example. “A white label hub can only work if the information accompanying the shipment goes all the way to the recipient and then back to the sender, who needs confirmation of delivery before they can issue an invoice, for example,” explains the logistics expert. “The hub therefore needs access to all the IT systems used by the individual providers. So a hacker only needs to break into one system in order to gain access to all those networks.” Consequently, if the hub platform were hacked, none of the providers would be able to deliver anything, which is clearly not the point of the exercise. Janine Dietze of Drees & Sommer believes that even these problems can be solved by working together. “Silo solutions just don’t cut it,” says the property expert. In her view, the logistics industry would be wrong to respond to new problems with old solutions.
By Harald Czycholl