All about urban distribution centers

Typography

Countless books and articles have been written about urban distribution centers, logistics decoupling points, city hubs and urban consolidation centers. Every self-respecting European city has been the scene of such initiatives – the one more successful than the other, but all highly subsidized in any case. What can we learn from those initiatives? The best option could be no hub at all?

 

What has gone wrong?

The failed attempts at setting up urban distribution centers all had five mistakes in common:

1. They were developed on the basis of inaccurate data about city logistics. Many initiatives focused on the distribution to stores. Yet that only constitutes a small part of city logistics and often already involves bundling. Major transport flows like those for construction, waste removal, facilities management procurement and the catering industry remained out of the picture.

2. The proposed solutions were nothing the customer wanted. In some cases, they even added another day to delivery times.

3. The city logistics solution by means of urban distribution centers ended up being more expensive for the shippers. The entire chain – from the origin, via the hub, to the delivery in the city – was ill conceived.

4. The revenue model for city logistics was not sound and thus failed to gain a critical mass.

5. The local political situation proved volatile, changing the local playing field for city logistics every four years.

Urban distribution centers can be valuable. Around the edges of cities, slow mobility, with a focus on efficiently bundled flows of goods, turns into valuable personalized mobility, with a focus on the needs of the receiver. Improving the air quality in cities is an important incentive for the use of electric vehicles. That means that more and more shipments are being transferred to electric vehicles for distribution within or around the city. This only works for shipments originating at some distance from the city. Otherwise, an urban distribution center would only lead to more transport kilometers.

 

Urban distribution centers shouldn't be seen as a standard quick fix for city logistics

 

City logistics 

Not all shipments come from far away. Cities are not only where goods are delivered, but also where shipments originate. Outgoing transports amount to between 20% and 25% of the transport kilometers in urban areas, incoming freight amounts to between 40% and 50% and the rest originates in and is delivered within the city. Waste transport also forms a significant share of city logistics.

Research carried out by the Amsterdam University of Applied Sciences (HvA) on facilities management procurement shows that nearly six out of ten shipments in the city come from less than 50 kilometers away. Internationally, too, the distance a shipment travels to reach the city has decreased to an average of 30 kilometers. This makes electric transport feasible, with no need for any urban distribution center in between. Local wholesalers play a useful role in that process. We don't need any logistics service providers for that.

Most shipments remain within the region and are made using delivery vans. In the Netherlands, delivery vans make up 85% of all freight traffic; in America that is already more than 90%. Urban distribution is becoming more and more finely meshed. With such short distances, urban distribution centers are not the best solution. Instead, we should be thinking about UberCargo-like solutions, with real-time shipments being spread across a network of electric delivery vans: a local taxi system for city freight.  In that kind of situation, the best option could be no hub at all.

 

A chance for success

Do urban distribution centers stand a chance? They do if we make sure they focus on flows that come from far away, such as products for facility management, web store deliveries (both food and non-food) and building materials. In such cases, the transition from “slow mobility” to “personalized mobility” is worth it, giving the urban distribution center a transshipment function, for the transition from bulk to finely meshed shipments.

For urban distribution centers to be successful, they need to benefit the receiving party, they can't lead to higher costs for the chain, there needs to be a sound revenue model for the logistics service providers and there needs to be continuity in the local and national policies in relation to city logistics.

Urban distribution centers shouldn't be seen as a standard quick fix for city logistics. Sometimes it’s better without a hub than with one. In that case, “smart city” technology will need to help us connect the shipments in and around the city with each other in smart, responsive and local distribution networks.

 

By Walther Ploos