By Franck Leveque, Partner & Business Unit Leader, Mobility Group, Frost & Sullivan

With many exciting vehicle and technology premieres centered around Electrification, Connectivity, Autonomous and New Business Models. The future-focused New Mobility World Forum, a centrepiece of the event, provided a common platform for leading industry participants, technology companies, startups, and policy makers to share perceptive, if sometimes provocative, insights into the dynamic and multidimensional engagement of cities with mobility and logistics.

As one of the speakers at the New Mobility World Forum, my presentation on “The Future of Urban Logistics: Implications and Opportunities” assessed how urban logistics is transforming and being transformed, by relentless social, economic, and technological currents.

Today, mega trends—urbanisation, bricks and clicks retail, connectivity, and new business models, among them—are creating widespread disruption in end-to-end supply chain management. Rapid urbanisation has converted cities into giant economic hubs. By 2020, urban logistics is expected to be a $5.98 trillion industry, with an average of 500 million deliveries made every single day to cities. Bricks and clicks—a model in which retailers have a bricks and mortar presence as well as an online identity—is emerging as the retailing norm of the future. By 2025, nearly 20% of all retail will shift to online channels. This will drive further increases in urban logistics, in the frequency of deliveries and in the number of small shipments.

Simultaneously, improved connectivity and convergence means that over 70 million trucks will be connected by 2025. This trend will provide logistics providers with the visibility and transparency they need to make more effective decisions. New business models including asset light, platformisation, servicification and Uberisation are, in the meantime, already changing industry dynamics.

However, the fact is that road freight capacity utilisation levels are highly inefficient at present. Commercial trucks, on average, rack up nearly 25% of empty miles and, when they are not empty utilise only about 55% of their capacity (weight, floor space or volume). Together, this translates to a less-than-stellar overall freight efficiency of 42% (of the rolling trucks). When one considers that trucks are on the road only one-thirds of the time, with the remaining two-thirds being fallow periods during driver resting times, weekends, etc., this translates to an asset efficiency of only 12%-15%. Not surprising, therefore, that transport companies are struggling to remain profitable.

Connectivity technologies can change this scenario but will need to penetrate beyond traditional fleet management solutions centred around the vehicle and driver, if their true potential is to be realised. As enabling technologies that can digitise the entire value chain, connectivity technologies can span the distance from shippers to customers, integrating carriers, freight forwarders, and many more. This approach will also yield multiple solutions for drivers, on-route transport services, cost optimisation, revenue addition, and asset optimisation.

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Importantly, connected technologies will enable the aggregation of load at a more holistic level and allow efficiency gains through real-time load matching. The resultant mobile-based freight brokering business model that will emerge—an ‘Uber for trucks’ scenario, where freight will be brokered through mobile devices in real time on the go—is projected to generate more than $26.5 billion by 2025 in North America alone. Ultimately, connectivity needs to develop towards becoming an integrating, open, end-to-end and scalable platform for logistics.

Motivated by emissions regulations, city restrictions, and breakthroughs from new players, truck electrification has made giant strides. The principal challenge here has been one of load capacity versus range and, of course, cost. However, improvements in battery energy density, aerodynamics, and rolling resistance are making electric trucks increasingly more competitive and a viable option in a number of scenarios / applications. Such developments are allowing electric trucks to draw parallel or even overtake traditional trucks with respect to total cost of ownership (TCO). Initial applications for electric trucks are expected to be short haul hub-to-hub and refuse trucks.

Autonomous is another key trend in the urban logistics industry. The intensifying pressure of near real-time e-commerce delivery has caused glaring imbalances between current logistics delivery models and capacity utilisation, particularly in urban areas. At present, trucks are driven about 1-2 miles from one urban parking bay to another, and then the driver proceeds on foot for the final door delivery service. This ‘stop & walk’ delivery model results in a 15-20% underutilisation of the delivery time per driver, and a reduction in the area covered by the delivery vehicle.

This is precipitating developments of mobile hub and spoke solutions coming into a telescopic model where the stock is mobile and the last mile automated through drones and bots. While automation will streamline inefficiencies in urban logistics, it will still require governments to regulate the flow of goods to allow for effective and efficient freight aggregation, and make higher investments in city infrastructure.

Today, the last mile (or kilometre, as the case may be) is widely considered one of the biggest pain points in logistics. The most critical challenge, however, lies addressing the last metres and final handover.

Several innovations are emerging in response to last mile delivery problems. To reduce the reliance on infrastructure, warehouses are being transformed into consolidation centres, while stocks are being pushed into mobile warehouses in order to be closer to the customer. To lower the cost per mile, logistics companies are increasingly embracing approaches that take the vehicle and, subsequently, the driver out of the equation (from light commercial vehicles to cargo bikes, to bots and drones), even while they expand the use of robotics. Many ongoing efforts are also aimed at improving customer convenience through the use of in-car delivery or smart locks that allow couriers to deliver packages into homes and car trunks, even when residents or drivers are not physically present to receive them, hence reducing the need for multiple trips as customers are often not available at the time of delivery.

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Innovative logistics models, powertrain electrification, and autonomous vehicles will dramatically transform the logistics industry.

By 2025,

  • Logistics innovation will gravitate around the last mile
  • Digital freight load matching platforms will boost road transport efficiency by 8-10%
  • 2.5 million electric trucks will ply the roads
  • Multiple robotic fleet solutions, ranging from drones and bots for last mile delivery to autonomous trucks for long haul transportation, will emerge

However, these solutions will be unable to work effectively in isolation. Instead, they will need real intelligence to regulate overall logistics processes and optimise their deployment in real-time. As these changes unfold, therefore, cities will see the emergence of control towers that synchronise all such siloed fleet innovations to one cohesive solution.

The upheaval will not stop here. Today, internal combustion engines (ICEs) and cabins account for 40% and 20%, respectively, of the current value of a conventional truck. By 2040, however, as fully electric powertrains and autonomous freight mobility reach maturity, the aftermarket for products and services related to ICEs and cabins will dwindle. As these profit centres take a hit, commercial vehicle manufacturers stand to lose north of 60% of their current business.

The prospect of such steeply declining revenues will compel the commercial trucking industry, which is the backbone of urban logistics, to completely reinvent itself and vertically integrate into the new electric value chain. However, that will not be adequate to cover the losses. In addition, innovative, out-of-the-box approaches, which embrace other transport solutions as well as a growing involvement in downstream logistics and transport service operations, will need to be considered.

About Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

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