Smart City Logistics.

A United Nations report estimates that by 2050, there will be more than eight billion people living in urban societies; an increase of 100 percent on the current situation. Because the figures are for 2050, it is easy to dismiss them as ‘future guessing’ that does not apply to the ‘here and now’. However, the increases may apply to some cities much quicker than others, because increases will not be linear and will depend on the location, geography and population potential.

In the 2017 MHI Annual Industry Report, written by the consulting firm Deloitte, the section on ‘Smart City Logistics’ discusses various Logistics scenarios in relation to the challenges of urbanisation. Deloitte provides its definition of a Smart City as ‘an urban area that uses information to design policies and procedures which benefit its citizens’. They define an urban area as having a population in excess of 50,000 people, because smaller cities can consider that Smart City solutions will assist in making their location attractive to ‘smart’ companies and their employees.

The report is based on responses to a questionnaire of members and while 50 percent of respondent are aware of the term Smart Cities, only six percent (3PL businesses?) have begun any form of collaboration to understand and develop solutions to address the challenges. This is not surprising. However, for Logisticians that commence an investigation this year of what the term Smart City means for their organisation, it could well be more than ten years proceeding through the stages of discussion, proposal, approval, pilot, false starts, full roll-out and implementation (including training) of applicable solutions. So, it is time to get thinking.

The key (and greatest challenge) to a Smart City is the integration of many sensors embedded in physical aspects of the city – some of which may be already working, such as traffic light controllers. The network of fixed and mobile sensors, linked through Internet connectivity, is an example of the Internet of Things, whereby the sensors monitor the flows – of people, traffic, utilities, emergency services; then pass the data to software applications capable of analysing huge volumes of data and analysts that can make sense of the outputs.

Changing Logistics models

Not only is there a continuing trend of urbanisation, but for some cities there is an increasing concentration of people near the city core (the central business district or CBD). In some parts of central Melbourne, the population density is higher than Hong Kong and the apartments smaller – so much for the wide open spaces of Australia! The growth and density of population, smaller living spaces and growth of on-line shopping through eCommerce, is generating an increase in deliveries of less than truckload throughout urban areas. Eventually (and in some cities it is now), this will lead to traffic congestion and vehicle emissions within urban areas that are unsustainable.

The greater density of demand will require new distribution and delivery models. Some pilot schemes are being implemented now, but there should be a high level of uncertainty about the outcomes. As I was recently reminded, a retail shop is a warehouse that stocks individual items instead of cartons or pallets. Orders are picked and paid for by consumers; the majority of whom deliver the items to their final address – all at a low direct labour cost to the retailer. However, on-line shopping requires the retailer to pick the order, load the vehicle and deliver the goods to the consumer – often at no charge (‘free’ delivery), which is a situation that is not sustainable – there is no ‘free’ lunch!

To meet these challenges, some e-retailers are opening physical locations, to integrate the online shopping experience with bricks-and-mortar shopping. Eventually, the physical retail store could be a place for different shopping experiences; a location:

• to purchase or return items (as done today)
• for consumers to ‘experience’ (try) new products
• with an adjacent warehouse where employees pick and pack items. Orders can be delivered to consumer identified locations (for a fee) or collected from the store
• for the receipt of returned items

With smaller living spaces in city areas, consumer orders will be smaller and more frequent, therefore the design and function of shops will change. The shop/warehouse in inner city areas will have a smaller floor area and be more reliant on robots and automation, to utilise the expensive real estate volume. Electric delivery vehicles in urban areas will become common. Other likely changes are:

• urban road pricing, with different prices for peak and off-peak hours and for electric, petrol or diesel engines
• urban freight delivery time and size of vehicle restrictions. Curb space reservations for unloading vehicles with preference for those delivering to multiple shops in the parking area
• vehicle communication with traffic authority systems to obtain ‘best route’ data, based on traffic and road repair delays; traffic signals to prioritise truck movements in off-peak hours

However, the major challenge will not be the implementation of these technologies, but maintaining cyber security of the data. Examples already exist of hackers disabling urban infrastructure. To date, these situations have been inconvenient rather than catastrophic, but more organised attacks that incorporate attacks on a city’s commercial transactions, together with sensor based data, could have serious repercussions.

In addition to 3PLs, manufacturers and importers need to consider the future of distributing items to an urban population that will function in different ways from today. It is the role of Logisticians to work through the various scenarios and advise management of the best options for your organisation, the time scale for selection and implementation and the cost – all while doing your current job!