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    Exploring changes in delivery and logistics

    Danial Norjidi

    A new report from the World Economic Forum (WEF) has found that there was a 25-per-cent rise in consumer e-commerce deliveries in 2020, with some increased demand expected to last well beyond the pandemic.

    Titled Pandemic, Parcels and Public Vaccination: Envisioning the Next Normal for the Last-Mile Ecosystem, the report explores changes seen over the last year which will greatly influence last mile deliveries in the future.

    ‘Last mile’ is a term used to describe the last leg of a journey in the movement of goods from a hub to a final destination.

    An example of such a change is the expectation that 10 to 20 per cent of the recent increase in e-commerce deliveries will continue after the pandemic and the lifting of COVID-19 restrictions. According to a press release, beyond rising demand, the past year has also seen a large shift to greener delivery options, with wider spread Electric Vehicle (EV) across the industry and more stringent carbon emission rules from cities expected to shape delivery networks in the near future.

    The report noted that the WEF and McKinsey & Company launched The Future of the Last-Mile Ecosystem initiative to provide insight into the economic, social and environmental impacts of e-commerce growth on last-mile logistics.

    “More than 50 cross-sector leaders from cities and businesses meet regularly to discuss trends, interventions, and ecosystem pilots. In their discussions, workshops and roundtables since the beginning of the pandemic, these leaders have identified six structural changes that are reshaping last-mile ecosystems.”

    Overall, the report finds six main structural changes to the delivery and logistics sector that are expected to last.

    One such structural change is that the pandemic has caused an increase in last-mile deliveries that is likely to persist. “Globally, e-commerce sales have tripled since 2014 to more than USD3.5 trillion thanks to rising urbanisation and the ubiquity of smart devices, as well as new e-commerce business models. The pandemic has amplified and accelerated this trend.”

    “In 2020, business-to-consumer parcel deliveries have risen by about 25 per cent and our analysis shows part of this increased demand will be durable.

    “The pandemic is also driving demand for autonomous, contactless delivery.

    “As investments flow into the technology that makes it possible, on-road urban testing is under way around the world.”

    A second structural change is that consumers increasingly buy new types of products online and consider environmental and health impact when buying.

    “Hundreds of millions of people are now accustomed to ordering products of all kinds online for home delivery and they expect to order more across categories, including food, beverages, home improvement items, plants and beauty products.”

    “Consumers are also becoming more ecologically aware. For instance, 56 per cent of millennials cite environmental protection as the reason for choosing alternatives to home delivery, and more than half of consumers say they are conscious of environmental issues in e-commerce. More shoppers now feel the need to choose health safety along with sustainability – a preference that is likely to endure in the wake of the pandemic.”

    A third point shared is that de-carbonisation of last-mile deliveries has accelerated.

    “Some companies and cities have already made commitments to make emission-free deliveries.

    “IKEA Retail (Ingka Group), for example, aims to make all deliveries emission-free by 2025. Some 90 per cent of deliveries made in China by IKEA Retail are already electric.”

    “Pandemic-related economic stimulus packages, especially in the European Union and China, contain provisions to support green mobility and goods transport. For instance, Germany is raising subsidies for new EV from EUR6,000 to up to EUR9,000, pushing entry-level EV models such as the Tesla Model 3 and Volkswagen ID.3. China is extending its consumer subsidies and tax breaks for EVs until 2022 as retailers and shipping companies drive demand for electric delivery vehicles. Micelio, an EV start-up in India, is investing in R&D to build a new EV that is suited to the hyper-local delivery needs of a city like Bangalore, keeping in mind delivery executive safety and with the broader goal of building a more efficient delivery system.”

    Fourth, faced with budget challenges and increased transportation needs, cities steer last-
    mile transitions.

    “City budgets are facing unprecedented pressure. Worldwide, residents report fear of catching COVID-19 from public transport, which is fuelling a rise in automobile traffic. Cities must now cope with the proliferation of more personal vehicles on the road and record levels of demand for optimised goods transport.”

    “C40 cities and many others use this momentum to make serious commitments to accelerating de-carbonisation. The Paris ‘15-minute city’ announcement and pledge to ban diesel vehicles in 2024 might be the most prominent example. Cities like Seattle and Boston re-purpose kerb space to designated delivery pick-up. Also, Santa Monica and Amsterdam are taking bold actions to get into the fast lane for zero-emission.”

    Fifth is that proven technologies are fuelling the last-mile ecosystem revolution.

    “While disruptive new technologies will continue to emerge, the last-mile revolution is happening now as proven technologies scale up and the costs of ownership fall,” states the report. “Parcel lockers are being adopted around the world, and companies of all sizes can now share and gather data to improve load pooling and real-time route optimisation at a lower cost than ever. Drones can help the ecosystem but scaling the use of existing technologies – from EVs to route optimisation – will fuel the last-mile ecosystem.”

    The sixth and final structural change shared is that new business models emerge to meet an increased demand for sustainable delivery vehicles.

    The press release elaborates that “certain logistics companies are now offering services to online retailers, which will help them identify the delivery routes most suited to make the immediate transition to electric delivery vehicles”.

    In study, the authors offer a perspective on how the last-mile ecosystem will evolve. “For example, we can expect EV penetration to increase dramatically. Autonomous driving will occur in the goods segment before it scales up into the people transport segment.

    “Real-time data, re-routing and capacity sharing will ease congestion. Delivery options for consumers will diversify as commuter habits have changed. Urban commercial traffic rules may become stricter to manage congestion.” The report also provides a deep-dive analysis of logistics challenges related to vaccine deliveries. As elaborated in the press statement, while ensuring equitable access to COVID-19 vaccines remains the most pressing issue in global vaccine distribution, effective last-mile delivery is another critical issue for countries. The key challenges are cold storage, second vaccine dose needs, and a disconnect between the vaccine and patient journey.

    The study concludes thatthere has never been a time of greater change for the “last mile”, stating, “The last-mile presents complex, interwoven challenges and opportunities for
    every stakeholder.

    “While there is no silver bullet or breakthrough intervention, we encourage last-mile stakeholders to work with both urgency and a collaborative mindset to improve the lives of hundreds of millions of city dwellers around the world and support the businesses that serve them.”

    “The vaccine delivery challenge shows us the twin realities of the last-mile ecosystem – the tremendous innovations that allow consumers to get same-day goods that were manufactured three seas away juxtaposed against persistent inefficiencies in the vaccination roll out. It’s a testament to the point that public-private cooperation plays a central role in the evolution of the last-mile ecosystem.”

    “Cities are already looking for ways to reduce traffic congestion, carbon emissions and delivery costs. As millions of people rely more on e-commerce, last-mile ecosystem players will need to implement the interventions that are most beneficial in the context of each city they serve.”

    “While every ecosystem player faces tremendous pressure to act, they can make dramatic progress quickly by aligning on shared goals and acting in partnership.”

    “Finally, the pandemic has taught us that all interventions will go to waste without a core trust-based system that allows consumers, governments and companies to achieve a more equitable, climate-friendly future,” the study added.

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