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Final Mile

Cutting supply chain costs with technology - To deliver real savings in the last mile you need a smarter way of working

It’s our combined responsibility to leave the environment better than we found it. But, when your business depends on deliveries, what can you do? Today’s technology is playing a key role in shaping a more sustainable final mile. Planning tools help reduce mileage; journey optimisation stops vehicles sitting in traffic jams and bottlenecks: it all cuts tonnes of carbon emissions. And then there are electric vehicles - which I believe will soon be a common sight on our roads - and a growing number of bike couriers. Now is the perfect time to get started.

Steve Maddison, MD, BT Final Mile

Final-mile delivery is booming. As people order more online, the demand for getting things quickly from depot to door is soaring. Globally, we expect these last-mile deliveries to grow by 78% by 2030 . While this is excellent news for the bottom line, it’s not great for the environment. Getting this many parcels to people will need 36% more delivery vehicles. This will increase carbon emissions by 32% . And all this by 2030, the year that UN scientists are calling our ‘climate change deadline’. This is when global warming will rise above 1.5̊C, causing lasting damage.

 

Something needs to change. We need to find a better way to deliver fast, efficient service without harming the planet. Customers are already demanding it. Studies show that half of people are more likely to trust a company that protects the environment. While three-quarters expect CEOs to be able to explain what they’re doing to help. “There has never been a more relevant time to engage in the sustainability policy agenda,” says Peter Harris, International Sustainability Director at UPS. The benefits go beyond keeping customers happy. Going green can also help boost team morale. Peter explains: “Prioritising sustainability will inspire and motivate employees to engage with their employers, as they see how their company is striving for sustainable growth and long-term environmental improvements.”

 

This all makes sense, but what can you do if your organisation relies on a fleet?

According to consulting firm McKinsey, three main last-mile delivery models are likely to take over: self-driving cars and vans, with parcel lockers on board; drones, especially for same-day deliveries; and bike couriers. It expects self-driving vehicles and drones to deliver four out of every five items.

 

Meanwhile, the World Economic Forum believes there are massive savings to be had from electric vehicles (EVs). They could reduce carbon emissions by 30% compared to a ‘do nothing’ baseline. 

 

This is exactly what UPS is doing. “Alternative technology costs are dropping,” says Peter, “with urban electric vehicles beginning to pay for themselves within their operating lifecycles.” In January 2020, UPS also invested in the UK startup Arrival, which has designed an electric delivery van. The aim is for 10,000 custom-built UPS EVs to hit the road between now and 2024. And there’s the potential for another 10,000 after that.

 

This radical emission-cutting move is inspiring. But not every organisation can replace their entire fleet with EVs at this speed or scale. So what else can we do?

“A lot of the time we sit and wait for technology to come and save us,” says Angela Hultberg, Head of Sustainable Mobility at IKEA Group. “Yes, there are a lot of amazing technologies coming out but we can't wait for them. We need to get going with the best available option today, and then work to make it better, because there won’t be a perfect solution unless we work to make it so. 

 

“Then there are the circular initiatives, where you look at innovation within business models. It’s equally, if not more, important than innovation in technology. We say things like ‘never waste a journey’, but how do we do that? How do we make sure the truck doesn’t go back to the warehouse empty once we’ve delivered the goods? We need to look at how to fill the truck up again, whether that’s recycling packaging materials, picking up returns, or consolidating with other companies.”

 

Taking positive action today

Have a look at your business model. Are there changes you could make to help you work more sustainably? There’s every chance it will mean you’re working more efficiently too, helping you meet your business goals. “For us, business and green targets are one and the same,” explains Angela. “We set a target to have 100% electric deliveries by 2025 and at the time we didn’t know how that would work with our supply chain. But when we had the target, we got going rather than waiting for the perfect technology and deployed what we could.

 

“As a non-fleet owner, we ran the numbers and quickly realised that we weren’t doing enough to hit the target. So, we engaged in conversations with our service providers to make them identify how much of a risk we had, and how to mitigate that risk. For example, there’s lots of local regulation around and if we can’t actually reach our customers’ front doors with our fleet, we don’t have an online business. “We knew we had to invest and set the business case, which involved creating five pilot cities. Unless there are external factors we can’t control, we’re expecting four out of five to hit their target for 100 per cent electric delivery this year.

 

“But it’s not enough to just talk to the fleet, we need to do everything we can to push the agenda forward. That’s why we’re also collaborating directly with original equipment manufacturers to make better vehicles. Too many people sit and wait, you have to jump in and tackle things as you go.”

 

This mentality of setting targets and getting stuck in is something we’re very familiar with. When we set up our network of intelligent lockers, we asked our engineers to test it first.We’ve now got more than 1,800 sites across the UK, and our engineers are never more than 15 minutes* away from the parts they need. It saves them over one and a half hours of driving each day. Time that they can use to deliver a better service to their customers.

 

Our lockers support thousands of field engineers from various companies. And we expect this to grow as final-mile deliveries become more popular. With so many people driving fewer miles, we’re helping drive down carbon emissions for many businesses. "We estimate we're driving 145 miles less per day, cutting our carbon emissions by 5.6 tonnes per year," says Alastair Lovell, Head of Customer Engineering for Calor Gas.

 

Today’s technology for a more sustainable fleet

In a national survey of more than 2,000 people, 26% said they’d prefer to buy from a retailer that uses electric vehicles*8. They’re a popular choice with businesses: they’re readily available and cheaper to run compared with fossil fuels. However, as Angela explains, they bring another benefit too. “EVs almost always come with data opportunities. The more we understand how they travel and where they travel, the more we can see where it makes sense to deploy them to further reduce emissions.”

 

Professor Lenny Koh, from the University of Sheffield’s Advanced Resource Efficiency Centre (AREC), agrees. “Sustainability crosses three different pillars – the environment, the economy and social,” she explains. “The use of EVs in the short term helps us to optimise journeys by taking into consideration the routing process, and making sure parts are delivered at the right time to the right locker so engineers can receive their parts. “It’s about maximising the efficiency and return in the shortest distance, which impacts the cost, reduces the carbon footprint and helps the customer feel satisfied that they’re not causing harm to the environment.”

 

Continual improvement and collaboration

As we discussed earlier, the best path can often be to use the technology that’s available now, and improve it over time. “In the automotive industry, for example, car manufacturers have replaced the combustion engine with an electric motor,” says Angela. “But they haven’t stopped there. Their R&D teams continue to innovate, looking to fix the battery issues so that cars hold more charge to go longer distances.

 

“There have been huge developments within renewable energy, opening up the possibility for vehicles to one day be powered through sustainable sources like solar, or fuel cell technology. The efficient production of hydrogen would be an absolute game changer. And there’s one university that has even managed to replicate photosynthesis in a tiny piece of plastic. Imagine if that was placed into the roof of a vehicle – it would end the need for charging infrastructure altogether.”

 

Thinking longer-term, Angela believes that working together across industries will be the key. “What I’m dreaming of is an easy platform that allows companies to coordinate their operations into one set-up. If we can share infrastructure and vehicles it becomes far more efficient. I don't want an electric vehicle at midnight because I'm delivering to customers, but someone delivering to lockers might be more inclined to do that. We’re starting to see this collaboration happen at a project level, but it needs to reach the tipping point where it becomes the new normal.”

 

The global pandemic has seen organisations uniting like this on a grand scale. VentilatorChallengeUK brought together Rolls-Royce, Airbus and F1 to produce medical ventilators for the UK. NHS staff, military engineers, and logistics and transport firms also joined forces to build the NHS Nightingale at the ExCel in London. It’s clear that, rather than giving competitors an upper hand, shared resources can actually strengthen a supply chain.

 

Regulations and the final mile

Many organisations have to consider local regulations for their final mile delivery, such as the central London Congestion Zone. And most of us will have broader sustainability targets to hit. Peter Harris, UPS, thinks organisations should work with authorities to meet these targets: “It is essential for organisations to be open to collaborations with policymakers and non-governmental organisations to create opportunities that will help shape urban logistics policy. This will, in turn, help businesses to meet rising customer expectations as they demand more sustainable solutions to reduce their own delivery emissions.”

 

But what immediate steps can organisations take? “Regulators are starting to trace the carbon footprint of the supply chain,” says Lenny. “If we can trace single steps, we can see the impact of the whole supply chain, which is useful to provide real-time data for further improvements.”

 

Getting to this level of transparency relies on a mix of technology and techniques. For example, EVs collect the data. Artificial intelligence (AI) and machine learning can analyse and interpret it. And industry standards help you see what you can do with that information. The University of Sheffield's AREC has also developed a tool, called SCEnAT 4.0. This uses AI to help organisations predict the environmental impact of what they’re planning to do and how they do it.

 

As your business plans for a more sustainable supply chain and last mile, you have choices to make. While innovative technology can undoubtedly help us now, and in days to come, don’t underestimate the power of small steps and smart decisions.

10 September 2020