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Efficient Last-mile Delivery in Tomorrow's Megacities

Analyst Insight: Rapid urbanization is an unstoppable challenge for supply chains that must be reckoned with—and soon. As more cities swell into megacities, the fundamentals of last-mile delivery, in particular, will require a rethink. Businesses will need to consider urban delivery based on the point of demand—where the products are delivered—rather than point of supply. – Brad Householder, Principal, PwC's Advisory practice

Efficient Last-mile Delivery in Tomorrow's Megacities

The global population crowding into cities will almost double from 3.6 billion in 2011 to 6.3 billion in 2050, according to the United Nations. The steepest increase will occur in developing areas of Africa and Asia, which together will account for 86 percent of the urban population boom, the UN says. 

Congestion in certain megacities is already choking resources. An area of Beijing, for instance, has 836 stores per square kilometer, with an average of 49 deliveries per hour to those retailers, according to the MIT Megacities Logistics Lab. While some metropolises have tried to curb runaway inefficiencies by taxing commercial vehicles and restricting delivery hours, too many partially loaded trucks continue to ply congested streets.

Many companies have improved urban deliveries by consolidating their multiple internal supply chains, and some are initiating efforts on multi-company logistics collaboration. Yet these efforts are generally incremental, and not moving at a pace or direction to fully transform urban logistics. Consider, for instance, a consumer packaged goods company that has multiple product divisions that all service a large retail chain. These discrete product lines are often shipped via separate channels to the same retail endpoint, resulting in untenable inefficiencies and congestion.  Consolidating the different divisions’ products is a fine first step, but still only represents a portion of the many product flows into just one retail location. 

Beyond internal consolidation, companies may need to accept a shared delivery approach. Archrivals may need to swallow their brand pride and employ consolidated distribution and transport to load products on the same vehicles for delivery to the same retail locations. Companies also can achieve more efficient last-mile delivery by use of urban consolidation and distribution centers, which are sprouting up across Europe and Asia.

Getting goods from distribution warehouses to city centers will eventually require that private companies and governments develop new trade flows. This will be an ambitious undertaking that may demand unconventional approaches. Consider, for instance, a proposed high-speed transportation system that would link Los Angeles and San Francisco in 30 minutes. While only hypothetical, this proposal embodies the type of bold thinking necessary to create efficient new routes into crowded urban areas.

Other forward-thinking examples come from the designers of planned cities like Astana, the capital of Kazakhstan. The Kazakh government is developing a “smart mobility” initiative that includes intelligent transport systems, light rail, electronic vehicles, and natural gas powered trucks. Astana also plans to build data-centric central hubs in which products will be aggregated and delivered via routes determined by real-time traffic data analysis.

                                                     The Outlook

If there is one thing to learn from Astana, it is this: An efficient supply chain will require data-driven logistics. Cities that understand the importance of data collection and analysis may gain a competitive edge over those that do not.

How is your company rethinking its supply chain strategy to prepare for accelerating urbanization? Does it have a plan for efficient last-mile delivery in the megacities of tomorrow?

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