Picture a truck delivering product in a traffic-choked megacity and physical obstacles such as a maze of one-way streets come to mind. But hindrances like these are manifestations of a more fundamental problem: constantly changing traffic regulations.
How do companies overcome regulatory speed bumps in sprawling urban areas where government is highly fragmented and the movement of passenger vehicles often takes precedence over freight flows?
One approach that some companies are trying is to develop win-win relationships with city regulators.
The idea that working alongside public sector traffic agencies could help to improve megacity logistics might seem like a stretch. But the approach is yielding results in some places.
Two companies that attended the Last-Mile Delivery Roundtable organized by the MIT Center for Transportation & Logistics explained their experiences. The roundtable took place on May 21, 2014, on the MIT campus.
A Spanish food company makes 37,000 deliveries a month in Madrid, Spain, a city with almost 7 million inhabitants and a population density of nearly 14,000 people per square mile. Some 45% of the deliveries go to the city center on 83 trucks. Hotels/restaurants and food stores account for 68% and 23% of the deliveries respectively. The company’s Madrid distribution center (DC) is located about seven miles outside of the city.
The company deals with traffic-related issues that are familiar to any enterprise that supports last-mile operations in urban centers. For example, deliveries made before 1:00 pm face parking constraints in the center of Madrid.
In an effort to smooth the way for their trucks in city environments, the company partners with municipalities to address freight issues. They even employ a person who is responsible for educating local agencies about the company’s city-related logistics challenges.
Both sides gain from the relationship. The municipalities benefit from having a corporate partner that is aware of traffic congestion problems and tries to help the city to develop solutions. For example, the company has consolidated its deliveries and acquired 17 electric-powered vehicles as part of a program to ease congestion and improve air quality. In return, the company’s parking fees have been reduced, it has access to restricted areas for vehicles with specific loads, and it uses city infrastructure for consolidation operations.
A convenience store chain in Bangkok, Thailand, has developed a similar symbiotic relationship with the City Council of Bangkok and the Thai government.
The company operates thousands of convenience stores in Bangkok – a city of 8 million people – and their network is growing at an annual rate of over 500 stores. Three dry goods DCs and a chilled goods DC serve eastern and western Bangkok, and the company also receives direct store deliveries from suppliers. Almost 1,700 vehicles supply the stores in Bangkok, and some 1, 200 delivery trucks support suburban outlets.
Trucks have to meet stringent size, location, and time-of-day restrictions imposed by the city. Limiting vehicle operation to tight delivery windows reduces the amount of time for consolidating loads in DCs, and makes it more difficult to ensure that fresh food is available during peak demand periods. In general the chain replenishes stores with fresh food three times a day, but in Bangkok can only mange one daily delivery.
The company is working with the City Council and the government to rethink the way buildings and distribution hubs are zoned in Bangkok. Other companies that are active in the city are also involved in this initiative. The aim is to provide more loading and unloading bays for commercial vehicles, and ease parking restrictions. In addition, the convenience store chain is purchasing vehicles that meet Bangkok’s four-wheel, small-truck size limits but can carry 1.5 tons of cargo – 50% more than a standard, four-wheel vehicle. Other measures the company is taking include the use of more sophisticated demand forecasting to optimize both loads and routes.
In megacities the frequency at which traffic regulations change compounds the level of disruption they cause. It can be a frustrating picture from a logistics perspective, but given the growing importance of these markets, it’s surely better to collaborate with city regulators than to fight them.
This post was written by Dr. Edgar Blanco, Research Director, MIT CTL, Founder & Director, MIT Megacity Logistics Lab, firstname.lastname@example.org, and published by Connect, the supply chain expertise and technology Blog from TMC, a division of C. H. Robinson.