It’s not all about electrification
If you read the industry press, sustainability is the future wave in last-mile delivery. Media coverage focuses on emerging technologies, but the real key to sustainability lies in something less interesting than robots or electric cars. Sustainable last-mile delivery is happening now, last-mile delivery is getting greener, and the key is not what you think.
Getting from here to there
Last-mile delivery accounts for 53% of the total cost of shipping. To understand why let’s look at a hypothetical. The average semi-truck gets 6-7 miles per gallon. For the sake of argument (and simple math), we’ll go with 6. We’ll fill that truck at a warehouse with 1,000 packages and drive 120 miles to the final distribution point. We burned 20 gallons of fuel, or roughly .02 gallons per package, to get there. Our last-mile delivery driver picks up 20 of those packages and drives a delivery route covering 30 miles in a vehicle that gets 30 miles per gallon. That’s .05 gallons per package. Now multiply that by millions of packages per day. While you’re at it, do the same math with driver costs, and you can start to see why the cost structure skews towards the last mile. That’s way over-simplified of course, and there may be multiple steps in getting the package to that last distribution hub, but you get the point – the least efficient step in the process is the last mile. And that inefficiency comes with a cost, both in carbon footprint and in real dollars.
Now take the example above and reduce the delivery route to 10 miles. You’ve just reduced the carbon footprint by 67% for each package. And you didn’t need robots or drones or any other technology from Blade Runner to make that happen. The key to sustainability is to aggregate demand – increasing delivery density – to reduce the miles and carbon footprint per package. In essence, you’re shortening the last mile. And when you do that, it opens all kinds of possibilities.
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The power of aggregation
There’s a snowball effect to aggregating demand. If a carrier can pull together demand from many retailers, it increases package density for delivery. The math is simple. If retailer A sends two packages to a city block, and you can aggregate that with two packages from retailer B and two more from retailer C, you now have six packages going into that single block. And it will be more efficient to have one driver deliver all six packages than three separate drivers making the deliveries. This isn’t rocket science (yet). And it’s not a new concept – the post office has been aggregating mail since the week after Ben Franklin was named Postmaster General. But watch how this can snowball.
Suppose you begin to scale with aggregation and increase package density. In that case, you achieve a scale that allows you to push the final distribution point closer to the end delivery point, extending the lower-cost middle mile and shortening the higher-cost last mile. The result is a lower carbon footprint and lower cost.
Suppose you can create enough density and push the final distribution point close to the end delivery. In that case, you can establish micro hubs that get packages close enough to the end delivery to leverage alternative last-mile delivery methods. For example, in a dense urban space, you could leverage green technology like URB-E, where delivery drivers transport packages using state-of-the-art bicycles, pulling small trailers with containers. Again, you can reduce your carbon footprint pretty easily.
Suppose you are more forward-thinking and have some data technology and data integration with your retail partners (here’s the rocket science part). In that case, you can make those micro hubs dynamic and mobile to scale up and down or even change location based on demand. You can optimize the last mile. And using gig economy drivers, you can optimize the delivery team and vehicles based on today’s demand. The post office can’t do that. Neither can the major national carriers. But the best last-mile carriers are already well down this pathway.
And we’re not done yet. Once I’ve established hubs close enough to the point of delivery, I can start looking at those Blade Runner technologies. But, again, this is not something that will happen overnight. The technology is still bleeding edge. But suppose there’s a future for robotics in scalable last-mile delivery. In that case, it will depend highly on our ability to shorten the last mile and put that final distribution hub as close to the end delivery point as possible.
Sustainability and cost
You may have noticed that we’ve linked the idea of sustainability with cost. That shouldn’t come as a surprise. The primary driver of sustainability in the industry today is efficiency – reducing the time in transit and distance traveled to deliver the last mile. If we use less fuel and driver time per package, the result is a lower carbon footprint and cost.
Win-win-win: A win for the last-mile delivery company that can extend margins, a win for the e-commerce retailer that can reduce the drag on margins that comes with meeting customer delivery expectations, and a win for consumers who get their goods delivered efficiently and sustainably.
There are a variety of other initiatives in the e-commerce and last-mile delivery industries aimed at sustainability, from eco-friendly packaging and processing to vehicle electrification to process and warehouse automation. Still, the most significant impact on carbon footprint and sustainable delivery will come from our ability to aggregate packages and drive greater delivery density. And that’s not something that will happen in some far-off future, it’s something that’s happening now.