Smart Cities Logistics & Implications for Supply Chains

The race toward building the next-generation supply chain has been heavily affected by a trend of digitization driven by exponential gains in computing power. The next-generation of supply chain is digital, on-demand, and always-on. Yet, it's difficult to think of an industry that has been impacted more than logistics.

The world’s urban population is expected to rise to 70% by 2050. This means an increase from four billion to eight billion people living in urban areas using 75% of the planet's natural resources. Urban activities are responsible for all carbon dioxide (CO2) emissions. 

The rapid increase in freight deliveries that result from the continuing growth of e-commerce and online shopping will lead to unsustainable traffic congestion, CO2 emissions, noise, and unhealthy air pollution levels within urban areas.

Image courtesy: Institute for Sustainability

Image courtesy: Institute for Sustainability

One of the biggest challenges that this increasing urbanization brings is how to provide for last-mile logistics.

Smart city logistics

Smart city logistics proposes that logistics providers must leverage various innovations and technologies currently used in the digital transformation of the supply chain to find solutions for the challenges.

The Institute for Sustainability in the UK has been working with partner organizations to find solutions to manage the last-mile of deliveries that could work the best for government, businesses, consumers, and the environment.

A smart city is . . .

Logistics is directly interconnected with smart city initiatives and smart city developments. A smart city could be defined as an urban area that uses information to design policies and procedures that benefit citizens. 

LaMiLo (Last-Mile Logistics) is a project part-funded by the European Development Region Fund (ERDF) created to ensure that the last mile of a supply chain was fully considered when planning a freight logistics journey.

Both UPS and Fedex are using electric bikes to deliver in Europe.  In 2016, the first UPS delivery eBike, called Cargo Cruiser, made deliveries in Portland, Ore. as well. The UPS' electronically-assisted tricycles are just one of the initiatives designed to embrace the future of urban transport and last mile delivery in urban logistics. UPS has a goal to reduce its carbon intensity by 20% by 2020. 

Image courtesy: UPS

Image courtesy: UPS

Implications for supply chains

Supply chains are facing a challenge triggered by the absolute need to understand and effectively deploy innovative technologies to deal with the increasing reality of the urban consumers with always-on expectations.

Supply chain managers must acknowledge the need to start collaborating with other companies and cities to utilize supply chain innovations to develop solutions to address the challenges. Start collaborating with urban planners, city leaders, educational institutions, and leader from other potentially competing companies. Together, it's possible to develop better solutions to smart city logistics challenges 

This is a major opportunity that could positively impact supply chains over the next decade. However, to accomplish this, supply chain managers need to be more aware of the Smart City Logistics topic.

According to a survey conducted by MHI as part of its 2017 Annual Industry Report in collaboration with Deloitte (email required), only 6% of respondents say they have begun collaboration concerning smart city logistics, and only 50% are aware of the topic.

Making deliveries smaller and more frequent is one way of meeting expectations of urban consumers. New applications for supply chain innovation in the urban context, both in delivery channels and distribution networks are emerging to solve the problems of last-mile delivery.

Drones and autonomous delivery represent a step forward to solve the problem of last-mile delivery. However, regulatory agreements must be put in place quickly if we expect to see more results in this space.

Some supply chain firms are experimenting with smaller urban distribution centers. Robotics and automation are here applied in picking, packing, and storing, making small distribution spaces work.

Warehouse execution systems combine hardware and software as well as wearables to maximize warehouse efficiency. The same technologies enabling the next-generation supply chains are the ones required to address Smart Cities Logistics challenges. It's a combination of automation, sensors, analytics, and the Internet of Things (IoT) what makes it possible.

As smart cities work on building and improving smart infrastructure, mobile applications give real-time information about traffic, routes, and parking. Truck platooning with onboard communication technology improves fuel usage, reduce carbon emissions, and pollution. Here is also where autonomous vehicles come into the picture.

The road ahead

The understanding of these disruptive technologies is necessary to develop good strategies. Logistics providers must keep pace to understand what these opportunities represent.

The best supply chain leaders will be the first to realize that the best action, the best thinking, and the best solutions will be those coming from collaboration with cities. 

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