City Logistics

Authors: Dr. Jean-Paul Rodrigue and Dr. Laetitia Dablanc

Dr. Dablanc: French Institute of Sciences and Technology for Transport, Development and Networks (IFSTTAR), Universite de Paris-Est.

Note: An expanded and adapted version of this text to appear in UN-HABITAT, 2013 Global Report on Human Settlements: Sustainable Urban Transport, United Nations Human Settlements Programme, London: Earthscan.

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1. Freight and the City

Freight transportation maintains a set of core relations with urban areas since a city is an entity where production, distribution and consumption activities are using scarce land. The global urban and economic system has also become functionally specialized, permitting a global division of production and its associated freight volumes. City Logistics, as a strategy ensuring efficient freight movements and innovative responses to urban customer and business demands, is an emerging field of investigation that was brought by the challenges of the commodification and massification of production and consumption.

City logistics / Urban logistics. The process for totally optimizing the logistics and transport activities by private companies in urban areas while considering the traffic environment, the traffic congestion and energy consumption. (Institute of City Logistics)

Urban economies are evolving rapidly towards a higher level of material intensivenness. Store inventory levels have shrunk and businesses are increasingly supplied on a just-in-time basis. The number of different products sold has increased considerably, and inventories change several times a year. With the rise of the service economy, the demand for express transport and courier services is also soaring. These factors have made urban economies more dependent on transportation systems, with more frequent and customized deliveries. All this incites a greater intensity and frequency of urban freight distribution and correspondingly improved forms, organization and management. Therefore, although city logistics appears to be an issue taking place at the local (urban metropolitan) level, a comprehensive understanding of its drivers and dynamics requires the following:

• Global supply chains. A salient issue relates to urban freight distribution in the context of global supply chains as global processes are imposing local forms of adaptation to insure that freight is delivered in a timely and reliable fashion. Offshoring has also contributed to the setting of supply chains where freight distribution activities taking place within an urban area cannot be effectively explained by the regional economic structure.
• Global freight distribution. Since the distances involved in supporting global supply chains have increased, the function of distribution has taken a new significance, particularly with the setting of large terminal facilities such as ports, airports, rail yards and distribution centers. They are handling movements originating from, bound to or simply passing through a metropolitan area. With containerization as a tool supporting the bulk of international trade, intermodal terminals have become a notable element of the urban landscape. With the growth of valuable cargo carried over long distances, airports are also active nodes interacting with urban freight distribution. Along with their attached freight distribution facilities (e.g. transloading facilities and warehouses) large terminals form a fundamental element of the interface between global distribution and city logistics.
• Urbanization. Global urbanization is compounding the challenges of city logistics since the share and the level of concentration of the global population living in cities is increasing. Historically, the production and consumption of freight has dominantly taken place in cities, but with the industrial revolution and subsequently with globalization this share has increased. Cities also present a variety of forms and levels of density, each associated with specific city logistics patterns. Socioeconomic factors, such as rising income and consumer preferences should also not be neglected.

Alternatively, city logistics is involved in all the means over which freight distribution can take place in urban areas as well as the strategies that can improve its overall efficiency, such as mitigating congestion and environmental externalities. Most of the early applications of city logistics were undertaken in Japan and Western Europe as these cities were more constrained by the lack of available land and had an established tradition pertaining to urban planning. Up to the 21st century the consideration of urban freight distribution within the planning discipline remained limited. This implies that urban planning generally does not pay much attention to issues related to urban freight distribution.

2. The Diversity of Urban Freight Distribution

A city is supplied by an impressive variety of supply chains servicing a wide array of economic activities such as grocery stores, retail, restaurants, office supplies, raw materials and parts, construction materials and wastes. The level of economic development is linked with the level of urban freight activity as income and consumption levels are interdependent. Because of the divergence in built environments and the diversity of urban economic activities, each city around the world has different freight transport and logistics activities and level of intensity. This brings the question about the specific size threshold after which urban freight distribution problems, such as delays and congestion, become more prevalent and thus require a concerted approach. Using the United States as evidence, congestion starts to be a serious issue once a threshold of about one million inhabitants is reached. For cities of less than one million, city logistics is less likely to be a problem and may be localized to specific areas such as the downtown or the port or other terminals areas.

The unique and often non-replicable conditions of each city is influencing the nature and intensity of congestion in its urban freight distribution system. The share of public transit use, land use pattern and density and income levels are common factors relatively unique to each city. Considering the growing level of material intensiveness related to the functions of production, distribution and consumption, cities above 4 million inhabitants should have planning and circulation management schemes where urban freight distribution is preeminent. Cities of smaller size can also proactively be involved at mitigating specific and localized urban freight distribution activities.

The intensity of urban freight distribution depends on local economic, geographic, and cultural characteristics, which leads to different objectives and preoccupations in urban freight distribution. For instance, world cities have each a diverse array of concerns:

• Paris aims to limit the environmental footprint of freight distribution so that the quality of life of its residents can be maintained and improved. The city's status as one of the world's leading cultural and touristic hub has a notable impact on the strategies and priorities accorded to urban freight distribution.
• Mexico tries to cope with the contradictory demands related to the dual presence of both modern (motorized) and traditional forms of urban distribution in terms of infrastructure provision and regulations. Modern logistics services are as vital to the urban economies of developing countries as are more basic freight activities serving street vendors or home based manufacturing workshops.
• Chicago aims at maintaining its role as a major rail and freight hub for North America in light of the growing level of truck congestion and complexity of rail freight movements between the numerous rail terminals located within the metropolitan area.
• Los Angeles is concerned with congestion and environmental issues such as air pollution. Salient initiatives concerns trucking associated with the ports of Long Beach and Los Angeles and nearby major import-based distribution centers.
• Shanghai. The megacity has become the largest cargo port in the world and acts as the major transport hub supporting China’s export-oriented strategies. A significant share of the freight circulating within the city is therefore linked with global distribution processes.

All urban freight distribution systems involve a wide array of supply chains, each of various importance depending on the urban setting and the level of development, but coming into two main functional classes. The first involves to consumer-related distribution:

• Independent retailing. It concerns a wide variety of retailing activities, often of small scale (single store) and which can also take the form of more informal activities such as street stalls (prevalent in developing countries).
• Chain retailing. It concerns larger stores (such as "Big box" stores) that tend to be located in both in urban centers and suburban locations, enabling them to offer parking space for their customers as well as dedicated delivery bays accommodating larger trucks. They also tend to rely on the expertise of third party logistics services providers to mitigate urban freight distribution challenges, but mostly to organize complex multinational sourcing strategies that are prevalent in the mass retail sector.
• Food deliveries. They concern specialized supply chains supplying outlets (grocery stores and restaurants) with goods that are often perishable. In developing countries, outdoor (or central) markets are particularly important as they represent a dominant supply of fresh food for the urban population. Limited information is available about urban food consumption levels but high levels of spoilage are observed, in the range of 50%.
• Parcel and home deliveries. Due to the significant growth of transactional activities (e.g. trade, finance) the movement of parcels has increased on par with the companies specialized in these freight distribution services (e.g. UPS, DHL, TNT, FedEx). They maintain a network of strategically located distribution centers where shipments are consolidated or deconsolidated. International shipments are often taken care of by parent companies, namely air freight integrators. Another emerging dimension concerns home deliveries, particularly with the growth of web-based retail transactions.

The second functional class of city logistics is related to producer-related distribution:

• Construction sites. The constant renewal and repair of urban infrastructures (e.g. housing, offices, roads) requires a supply of materials to construction sites.
• Waste collection and disposal. Concerns the collection and disposal of the variety of wastes generated by daily urban activities. It is a form of reverse logistics since the waste being discarded were previously goods being delivered. To this can be added recycling activities, all of which using specialized vehicles and dedicated pick-up tours.
• Industrial and terminal haulage. Industrial activities and transportation terminals such as ports, airports and railyards generate a substantial amount of goods movements within cities. Gate access at intermodal terminals, particularly ports, can lead to congestion (queuing) and local disruptions. For instance, gate access at intermodal terminals, particularly ports, can lead to congestion (queuing) and local disruptions. Logistics zones and industrial parks also generate substantial amounts of freight movements.

Two actors, private and common carriers, are handling commercial freight transportation. Private carriers are at the same time beneficial cargo owners (manufacturers or retailers) using their own transportation assets (fleet and workforce). They can also subcontract this function to an independent carrier. Common carriers service any customer on a contractual basis, which also leads the opportunity to consolidate cargo and deliveries, which can benefit smaller users. The share of private carriers is dominant for urban freight distribution in developing countries while in developed countries common carriers account for about half of urban deliveries.

The issue of dualism remains prevalent in urban freight distribution as it underlines different modes of operation between distribution systems that are integrated to globally-oriented supply chains and distribution systems linked with informal activities that are more related to the local or regional economy. This is best represented by owner-drivers, or small independent truckers acting as sub-contractors to large carriers for the final distribution of goods in urban areas. Dualism is therefore illustrative of a co-existence of modern and traditional means of freight distribution within the same metropolitan area. Another aspect of dualism is related to an active informal transportation sector that supply the needs of lower income segments of the population, a very important component of city logistics services in developing countries.

3. The Externalities of Urban Freight Distribution

Modern freight distribution systems operating on the global urban landscape are generators of environmental and social externalities. In less developed countries, rural migration and population growth have led to very rapid urbanization, while the public supply of infrastructure and transport services has lagged behind, impairing the efficiency of urban deliveries. Road transportation is the most polluting per unit of distance travelled, but their are limited alternatives than the road to provide for urban deliveries. A positive trend has been the decline of air pollution due to better engine designs and the phasing out of leaded fuel in most countries. Diesel trucks still account as significant sources of particulate matter and NOx emissions, an issue compounded by their use as urban delivery vehicles. Urban freight distribution is on average twice as polluting than intercity freight transport, particularly because of the following factors.

• Vehicle age. On average vehicles used for urban deliveries are older and it is a common practice to use trucks at the end of their service life for short distance drayage. This problem is compounded in developing countries where vehicles are even older and thus more prone to higher emissions and accidents.
• Vehicle size. The size of vehicles used for urban deliveries is on average smaller, particularly in areas that have high density and limited street parking. This implies that the advantages of economies of scale cannot be effectively applied for urban freight distribution. This has also additional drawbacks from an environmental perspective as smaller delivery vehicles must undertake more travel to deliver a similar volume of freight than a regular truck.
• Operating speeds and idling. The conditions pertaining to urban freight distribution are such that vehicles are forced to have lower driving speeds, regular stops and acceleration (e.g. traffic signals) as well as much more idling than a vehicle operating in an uncongested environment. Additionally, driving restrictions such as one ways or car-only streets often make the usage of the shortest path unfeasible. The result is more fuel consumption and pollutant emissions.

Traffic congestion is a significant operational problem for the urban freight system, with non-motorized vehicles sharing urban roads with motorized traffic. The urban environment of many cities in the developing world is characterized by street vending (petty trade) supplying the urban population a range of basic necessities. This is particularly the case for shantytowns that tend not to be supplied by formal supply chains and are thus serviced by forms of urban freight distribution about which little is known.

4. Key Urban Logistical Challenges

Addressing city logistics requires an understanding of urban geography as well as supply chain management, which tends to be an uncommon set of skills. Urban freight distribution thus has a unique array of challenges as a multidisciplinary field. Urban freight distribution reflects many dimensions of contemporary logistics such as route and delivery sequence selection. It also exacerbates its constraints such as on-time deliveries. Among the most salient challenges of city logistics:

• Commuting and peak hours. Passengers and truck movements are not interacting efficiently as freight and passenger circulation are a zero-sum game; road capacity taken by freight transportation is at the expense of capacity available to passenger transportation. They share the same road infrastructure and peak hours due to commuting exacerbate the difficulties of freight distribution.
• Congestion. City logistics, like logistics in general, depend of consistent and reliable deliveries. The urban environment that tend to have high congestion levels is challenging. To avoid congestion, deliveries can take place during the night (or off peak hours) if possible.
• Parking. There is limited parking capacity to accommodate deliveries in high density areas. Delivery vehicles cope with this challenge by double parking, thus seriously impeding local circulation.
• Cargo load contradictions. Urban freight distribution is characterized by smaller volumes and high frequency deliveries. This is not prone to economies of scale and involves higher delivery costs.
• Land use. Land use patterns determine many features of the urban movement of goods, where the pattern of industrial, commercial and logistics facilities has a direct impact on the flow of commercial goods. Logistics sprawl has been a dominant land use change of the last decades with is the relocation of logistics facilities towards peripheral areas at faster rates and greater distances than any other economic activity. Suburban logistics has become as relevant as city logistics.
• Reverse (green) logistics. While cities are major consumers of final goods, there are also reverse logistics activities related to the collection of wastes and recycling.
• E-commerce. Related to new forms of demands and new forms of urban distribution with a growth in the home deliveries of parcels. While the concerned volumes were relatively small, the diffusion of information technologies has impacted the urban distribution structure of retail goods. This has been accompanied by a growth of parcel deliveries and new strategies to complement home deliveries with alternate solutions (pick-up-points, automated locker banks). For large apartment complexes, the lobby has essentially become a small freight distribution center.

The urban space is prone to conflicts between different stakeholders, as high population densities are related to a low tolerance for infringements and disturbances. There are also opportunities for collaboration as city logistics open new realms of engagement for urban planning, but with diverging priorities according to the urban setting. Insuring an adequate circulation of freight flows in urban areas can involve specific strategies that can be done at the level of the individual firm or as a concerted urban planning effort.

5. Freight Distribution Strategies for City Logistics

From a freight distribution perspective, a city can be considered as a bottleneck where transportation resources are scarce relative to the potential demand and are thus highly valuable. As a distributional strategy, city logistics can take many forms depending on the concerned supply chains (e.g. retailing, parcels, food deliveries, etc.) as well as the urban setting in which it takes place. Urban freight distribution strategies are however difficult to implement as they systematically imply higher costs and additional delays. The mitigation strategies that are the most considered concern three interrelated realms of engagement:

• Rationalization of deliveries. Relates to adjustments about how freight is delivered (or picked up) in urban areas so that externalities, namely congestion, are minimized. Such a strategy tries to better use existing assets. One of the simplest strategies is to regulate access to specific parts of the city, such as forbidding daytime deliveries in central areas. Distributors can also opt for night deliveries or at least extended delivery windows to avoid peak hour traffic. There is an array of information technologies that are increasingly being used to manage urban freight distribution systems. The most used technologies relate to global positioning systems that improve vehicle tracking and urban navigation as well as load management applications that can assist in building routes and delivery schedules. Under such circumstances it becomes more effective to match trip sequences, such as deliveries and pickups to strive towards forms of collaborative distribution. Still, urban freight distribution remains highly imbalanced as deliveries are more numerous than pickups and the most significant relation concerns very different supply chains; retail deliveries / garbage disposal.
• Freight facilities. Relates to the development of freight distribution infrastructures that are better adapted to the urban context. This can involve the setting of designated parking areas for deliveries, as well as the usage of urban freight distribution centers and local freight stations. If the opportunity arises, such as the availability of a brownfield site in proximity to the city center, urban logistics zones can be developed, which can provide a counterweight to logistics zones that have emerged in the periphery of most large urban agglomerations. Urban freight facilities are a value proposition in large cities while for smaller cities such initiatives would drive up costs and unreliability. Urban consolidation centers (UCC) specifically provide a bundled and coordinated delivery service. A UCC is a logistics facility located close to the city center from which consolidated deliveries are carried out, and which provides a range of other value-added logistics services. Land prices however constitute an important obstacle to the urban siting of freight facilities. Up to 200 such terminals existed in European cities in the 1990s and early 2000s. Due to operating costs, most of them closed down when municipalities could no longer subsidize them. 
• Modal adaptation. Relates to the usage of adapted vehicles for urban freight distribution. Smaller vehicles tend to be better suited for urban deliveries because of their lesser footprint, their ability to maneuver and their higher than average load factor. Yet, a similar amount of freight would require move vehicles to be delivered. Regulations can therefore be enforced concerning the permitted size of delivery vehicles (with a chosen limit permitting medium size trucks to operate) and even their age if environmental concerns such as emissions and noise are salient. Innovative strategies such as CNG vehicles and even bicycles have been successfully implemented and underline a good potential for modes to adapt to the diversity of the urban landscape. The usage of the existing public transit system has also been considered for urban freight distribution. However, there are no cost and logistically effective strategy to date. Urban transit is not well adapted to freight distribution and often involves additional load break and costs. Attempts at developing "cargo-trams" have failed, such as the ambitious cargo-tram project in Amsterdam, which went bankrupt in 2009.

Although each of these strategies has its own advantages, there are also drawbacks that are commonly related to higher distribution costs and additional delays. City logistics is facing the paradox of being incited to look at sites located at the urban periphery where land availability is less an issue while most consumers and activities tend to be located in more central areas. For instance, a high density and congested central city can be serviced by an independent freight distribution system calling from an consolidation center (UCC) located at a location in proximity to the city center, often a brownfield site that served an abandoned function (e.g. rail yard, industrial area). The vehicles used to service customers (either for deliveries or pickups along a flexible route) are likely to be cleaner (electric, CNG) and thus better adapted for distribution in an urban environment. The urban freight distribution center could be a neutral facility interfacing with a set of distribution centers, each being connected to their respective supply chains. Thus, a wide array of supply chains connected to the city can achieve a better distributional efficiency within the central city. Few projects for urban consolidation centers (such as the Motomachi UCC in Japan) have met success even because of their operating costs since they involve high rents and additional handling before final delivery.

Urban areas remain congested areas where space utilization comes at a premium and where the presence of many stakeholders imposes concerted efforts to insure that urban markets remain serviced in an effective and environmentally friendly fashion. The future is indicative of a transition towards greener forms of city logistics since the current situation appears unsustainable in many cities that are facing rising congestion and environmental externalities. Since each city represents a unique setting with its own prevalence of transport infrastructure and modal choice there appears to be no single encompassing strategy to improve urban freight distribution, but a set of strategies reflecting challenges that are rather unique for each city. As underlined, a salient difference relates to city logistics between developing and developed countries.