In late 2016, global consulting firm McKinsey partnered with Bloomberg New Energy Finance to publish a headline-making report on the future of urban mobility. It concluded that electrification, autonomy, connectivity and the sharing economy would fundamentally reshape the notion of mobility as we understand it today and kick-started a global debate on the future of urban life at large.
Now, a follow-up report has emerged, claiming the same trends would also affect one of the most polarising support structures of urban living – commercial road transport. Urban Commercial Transport and the Future of Mobility argues that commercial vehicles contribute “disproportionately” to urban pollution and congestion, mostly due to the start-stop nature of city traffic, loading and unloading issues, and the relentless rise of e-commerce.
Without intervention, it says commercial road transport could continue to clog the arteries that nourish modern conurbations well into the future, with freight volumes projected to grow up to 40 per cent by 2050.
Relief, however, is unlikely to come in the guise of infrastructure investment alone, according to McKinsey – it will require a mix of new technologies, new business models and new regulations, and with it a new level of public-private collaboration. “By 2030, a billion more people will live in cities,” the consulting firm’s new report says. “Spending on infrastructure, on the other hand, is not keeping pace. To cope, individuals and businesses are going to have to use roads and other assets better and be ready to adopt new technologies.”
While McKinsey is confident that the same megatrends that are currently reshuffling retail and public transport will also help us prevent a global infrastructure infarct, the company’s is quick to point out that urban freight movement must evolve in line with the environment it’s meant to serve – after all, cities vary greatly in density, size and stage of development.
Depending on location and existing infrastructure, possible solutions may involve electric vehicles, drones and droids, but also new delivery concepts like direct-to-trunk delivery and autonomous ground vehicle lockers – mobile parcel lockers that customers open using a personalised code.
“Autonomous commercial vehicles, for example, will likely be most attractive at first in places with high labour costs,” McKinsey found (see breakout box). “Drones will work better in sprawling cities where there is ample space to land. Electric vehicles can and eventually will work everywhere.”
On a service level, McKinsey is also expecting order grouping – a concept where multiple parcels for the same recipient are grouped to arrive around the same time – and on-demand 3D printing to help alleviate the pressure on our cities. Software-driven solutions such as load pooling – the online matching of demand for capacity with available supply – as well as live route optimisation are also expected to make a significant difference to urban mobility in the future.
Load pooling, which has few technical barriers to overcome and low infrastructure requirements, is seen as especially promising. “Companies such as Uber and Lyft use the principle to move people, and new business models are extending the practice to goods,” McKinsey summarises. “DHL [already] has a digital freight platform operating in 17 countries and using more than 200,000 trucks, while UPS recently bought two brokerage companies – Freightex, a UK company, and Coyote Logistics, which serves more than 14,000 shippers in the United States. Using a similar model, Amazon’s Prime Now service crowd-sources delivery for fast service; drivers sign up to work specific time blocks, and customers pay a premium for speedy delivery.”
Next to new, disruptive technologies and cloud services, McKinsey says there is a whole a range of already established business models and practices that could help us future-proof transport – for example parcel lockers and night deliveries. “With a regulatory nudge here and a little creative thinking there, scaling up implementation of these could start tomorrow,” the consultancy explains.
One of the more ‘traditional’ solutions McKinsey’s new report assesses are Urban Consolidation Centres (UCCs). Typically located on the outskirts of a city, they serve as a central point of contact for deliveries and also organise sorting and dispatching. That way, goods from multiple suppliers can be consolidated into fewer shipments to optimise loads and make full use of a truck’s capacity.
McKinsey found that that UCCs work best in dense cities, located no more than 30km from the centre, and close to highways or other forms of transit. While the concept is hardly new, the consultancy says the urgency of finding new solutions for the ever-growing e-commerce industry has notably improved the business case for it.
“Companies in developed, dense cities that deploy UCCs could save 25 per cent on delivery costs per parcel (compared to traditional methods, ed.), due to greater capacity utilisation, lower labour costs and fewer miles driven. We estimate that mileage could be reduced by as much as 45 per cent to deliver the same volume of goods – thus reducing general wear and tear as well as all types of vehicle emissions.”
A second more basic solution investigated is night deliveries, which shift traffic to off-peak hours in a move to reduce congestion during the day – allowing suppliers to use bigger trucks and in turn reduce the number of deliveries per location. “While night delivery is hardly a new or complicated concept, it could nonetheless bring big benefits,” McKinsey points out. “In dense, developed cities, we estimate that shifting to night could speed up commercial deliveries by half and cut costs by up to 50 per cent.”
McKinsey says there have already been some promising night-delivery initiatives around the globe. In 2003, Barcelona started an experimental program in 20 locations to allow commercial deliveries from 11:00pm through to 6:00am. “Two larger night trucks could carry as much as seven day trucks. To mitigate noise problems during driving and unloading, delivery vehicles were fitted with noise-cancelling devices. The program worked so well that it was subsequently rolled out to more than 140 locations across Spain.”
According to McKinsey’s report, one local supermarket chain estimated it took less than three years to see a return on its investment, in large part because its trucks could go three times as fast at night as during the day.
For all the potential, though, the use of night deliveries in cities is limited, the consultancy argues, largely because of noise concerns linked to traditional diesle engines. Electric technology might help solve the problem eventually, though: “[Many] commercial vehicles travel an average of less than 50km a day, well within the range of commercially available electric vehicles. The power infrastructure is well developed and reliable in developed, dense cities, and many of them are imposing more stringent local emission regulations.”
High technology or not, megatrends like electrification, autonomy, connectivity and sharing will present a host of new solutions for managing urban transportation, McKinsey explains. “There is no single solution for cities to relieve the stresses on their mobility systems – they will need to deploy a range of solutions based on their specific circumstances.”
In a city like New York, for example, a triple play of using a fleet of electric vehicles to supply businesses from UCCs at night could cut costs per parcel by 35 per cent and require up to a third less commercial vehicles on the road.
To realise the potential, however, McKinsey says governments need to take a more comprehensive view. “The success of many approaches, such as parcel-locker zones and night delivery, will depend on planning, infrastructure and regulatory direction. Together with private investors, governments should develop a vision of a modern commercial mobility system and create a framework that encourages early adoption of solutions and penalises patterns that damage urban life.”
What’s more, private-sector businesses will need to collaborate with regulators and each other to enable change. “Retailers, for example, will find that logistics are likely to become an even more critical element in their business model.”
The same is true for automotive and technology players – including trailer builders – who will need to combine their complementary skills to create the products and services that will define the future of urban commercial transport and mitigate a global infrastructure infarct.
