Route optimization as a solution to the new challenges of urban logistics

Urban delivery has never experienced so much pressure as today. Faced with new challenges as environmental challenges and the increase in e-commerce sales, urban logistics must reinvent itself. However, in order to be more relevant to our times, urban delivery must change and optimize its operations. What are the issues it must face? How can it change its processes to limit the number of miles traveled and improve the working conditions of its drivers?

The problems of last-mile delivery in urban areas

Rush hour traffic, finding a way between cars, buses, scooters and other means of transportation, lost parcels, absent customers, no parking: last mile delivery in urban areas is undoubtedly the most challenging part of the supply chain to manage. On top of that, there are new challenges, making the problem even more complex to bring agility and proactivity to the whole industry. What are the challenges? How can they be addressed? Urban logistics and last mile logistics can be part of city life and part of society’s evolution, something that is currently being proven by its players…

Consumers with different and sometimes contradictory requirements…

Today, 90% of French people buy online at least once a year. With the current Covid-19 crisis, e-commerce is estimated to have gained more than 3 million new customers in France during the 2nd quarter of 2020.

As previously reported by the Fevad’s (french e-commerce federation) 2019 key figures report, “the frequency of online purchases continues to increase and the average amount of a transaction continues to decrease”, thereby revealing online purchasing behaviors that increasingly include everyday products for which consumers have high expectations in terms of delivery times but are less willing to pay for delivery.

Carriers are thus dealing with very high expectations: in a few years, Amazon has become the benchmark for logistics and has made on-demand and short delivery times the new norm. Slowly, B2B customers have adopted the same standards, making the entire industry’s operations more complex.

On the other hand, consumers (sometimes the same ones!) are also becoming increasingly concerned about environmental issues and the negative impacts of their spending habits, preferring brands that are committed to more sustainable production and distribution methods. In order to meet these objectives, manufacturers are increasingly working with carriers that align with their values. This has led the entire industry to adopt an environmentally-friendly approach (e.g. Objective CO2).

Environmental policies, a major challenge for urban logistics

Green vehicles are allowed everywhere and at any time. But this is no longer the case for ordinary vehicles, which are restricted to certain hours and areas that have become almost inaccessible, known as low-emission zones (LEZ). As of 2024, the city of Paris will ban Crit Air (a standard to restrict polluting cars) vehicles above 2, thus banning diesel vehicles and removing the most polluting vehicles from the French capital. What are the solutions for carriers, especially couriers and express carriers?

Many of them have already begun to adapt their fleets of vehicles so that they can continue to deliver in the city. This transition, although partly carried out under regulatory constraints, still represents a real opportunity for the industry to optimize its costs over the long term (tax benefits, fewer variations in fuel costs, lower usage costs), despite the significant investment costs.

Initiatives in favor of greener logistics also represent a high value-added differentiator in this competitive market. Some companies have already realized this for a long time: in 2014, in Nantes, the DB Schenker company [1] entrusted its last-mile delivery operations to the Triporteurs Nantais, which delivers in electric three-wheelers. Every morning, a truck drops off the packages at the company’s premises, which then delivers them to the recipients without polluting the city center. More recently, Chronopost announced “100% green” deliveries throughout Paris by rolling out a fleet of clean vehicles from 7 Urban Logistics Areas (electric vehicles, CNG vehicles, cargo bikes, three-wheelers, trolleys). The examples are numerous… an entire industry is now working on these issues.

As we have just seen, the last mile players are adapting their resources to the new market challenges. This transition, which implies profound changes within their organizational structures, requires significant flexibility, particularly in terms of information systems. The digitalization of the industry must now enable them to support this transition. Among the applications made possible by this digitalization, the optimization of routes in urban centers also addresses the new challenges of service quality and reducing the environmental impact of last-mile delivery.

Route optimization to combine service quality, profitability and low environmental impact

Reducing costs and the environmental impact of fleet operations are the two major short-term benefits of using a route optimization solution. However, there are other, less obvious benefits that impact long-term ROI:

  • Customer experience: fast delivery at scheduled times is now an important satisfaction criterion, especially in large cities. For 62% of online shoppers, delivery is the number one criterion when purchasing online and 59% will abandon their cart if delivery options are deemed unsatisfactory. [3]
  • Reputation and CSR: companies that promote sustainable delivery, whether by using clean vehicles for the last mile, by encouraging their drivers to drive more efficiently, or by optimizing their routes (which means they are shorter and more fuel-efficient), improve their image with consumers.
  • Employee well-being: delivery drivers have a stressful job, especially in city centers. By optimizing their logistic patterns through digitalization and the use of smart solutions, companies also improve the quality of their workdays.

Using real time data to fulfill the need for instant urban logistics

Traditional route optimization tools provide a precise and comprehensive view ahead of delivery drivers’ scheduled rounds. But this is not enough to adapt to the reality and unpredictability of their daily life in urban areas.

Even with an improved logistical model and a software-prepared route, how can they deal with traffic accidents, traffic jams, breakdowns and other hazards in the city? Therefore, increasing the pressure on drivers to find a solution to keep up with the schedule. The delivery driver no longer follows the route schedule planned at the beginning of the day, making it irrelevant and counterproductive.

One possible answer is the use of a continuous route optimization software (which keeps on working and updating while drivers are on the road), adapting the route plans in real time when facing hazards. In this way, drivers and planners receive directly (and accept or not) the adjustments suggested by the tool (change in the delivery order, new locations to go to, change of teams, etc). Journeys are smoother and shorter, operating costs are reduced as well as fuel consumption and CO2 emissions.

With the rise of e-commerce and environmental challenges, urban logistics is now facing challenges that call into question the means, resources and organization of its players. As we have seen, the latter are adapting their fleet and digitizing rapidly, thus solving part of the problem. In-depth overhaul of logistics, urban distribution models, streamlining flows and the use of appropriate optimization solutions are complementary and essential ways of addressing the problem. Finally, in city centers and urban areas that are changing traffic regulations, real time is becoming more valuable than ever in managing delivery operations. The software created by Kardinal provide an innovative solution to this challenge.