February 27, 2020

Making last-mile work for 2030 – a new report

Last month, the WEF released an intriguing new report entitled ‘The Future of the Last Mile Ecosystem’ analysing the basic sustainability factors and potential interventions in the last mile at Davos. A collaboration between the World Economic Forum, McKinsey and the World Business Council for Sustainable Development, the report forecasts a base scenario for 2030 and then looks at and evaluates potential interventions in the market to achieve sustainable last-mile deliveries.

The report describes a rapidly expanding market, forecasting 2.1 billion people to shop online by 2021 and 78% increase in urban last-mile deliveries by 2030. It also counts some of the social costs of that expansion, noting that we’ve experienced between 20-35% more congestion since 2010. One of the most useful statistics in the report comes courtesy of a chart which looks at the impact of ecommerce delivery replacing individual car trips to stores. This is sometimes cited as a benefit for home delivery – the thesis being that ecommerce deliveries involve one van making lots of drops rather than each of those shoppers making a trip in their cars to a shop.

WEF research ecomm commercial vs private traffic

In reality, the chart shows that for every 100 vehicle kilometres driven to deliver parcels, individual traffic driven to shop offline is only reduced by 32 vehicle kilometres, and other factors like less store replenishment and more traffic from parcel pickups scarcely make an impact. The overall effect of ecommerce on roads is to add around twice as much congestion as it removes.

The bulk of the paper explores the potential for changes in the last mile, breaking these out into six categories: vehicle change, secure delivery, customer movement, consolidation, last-leg change and the delivery environment.

It then groups changes into different scenarios, depending on the industry’s priorities.

WEF research scenarios

There are several important things to emphasise here.

Firstly, the report’s best-case scenario for emissions is a 35% reduction from the 2030 base estimate, i.e. not a 35% reduction from current levels. Compared to today, considering that the same report forecasts 78% increase in urban last-mile deliveries in that time, this represents the total emissions volume associated with last mile continuing to increase. That is simply not good enough. The IPCC says that in order to limit warming to 1.5ºC globally, we need to reduce carbon emissions by about 45% from 2010 levels. There’s no reason last-mile delivery should consider itself an exception to this rule.

Secondly, the suggested scenarios seem to be constrained by the ‘Disruption’ and ‘Unit cost’ factors. It seems strange to say that the most sustainable possible scenario does not involve even medium disruption – surely if we were willing to countenance a little more disruption than ‘minor’, we might achieve even more emissions reductions?

Similarly, all of the scenarios involve reduced unit costs. Is it untenable to suggest that unit costs might remain the same or even increase slightly as we overcome the hurdles towards sustainability? If we can accept flat costs or even slight cost increases, and/or some major changes to how the last-mile works, we might be able to actually reduce emissions from their current levels, rather than aiming at halting their growth slightly. A little more ambition might have made this chart a lot more interesting.

Finally, and we’re back to a more standard point about last-mile deliveries, the “multiplayer ecosystem” scenario exemplifies something we’ve always been about here at Doddle. We were innovators in carrier-agnostic parcel lockers, boxes and shops – perhaps we were before our time on this! Regardless, having so many competitors each with their own networks of PUDO locations and distribution and fulfilment centres results in a massive amount of inefficiency. For now at least, the carriers themselves are the only ones who can decide to work together.

Overall, we’re disappointed that the report didn’t look into PUDO in more detail. Countries like Estonia and Sweden are really showing how PUDO can really change the ecommerce delivery landscape, transforming the structure of last-mile entirely. In a PUDO-first scenario, the last-mile is massively more consolidated and the consumer comes some of the way to the parcels, which has a big impact on emissions per delivery.

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