City Logistics Research: A Transatlantic Perspective (2013)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

18 Schemes and Technologies for Enhancing Urban Distribution Marcel Huschebeck, PTV AG, Karlsruhe, Germany Cathy Macharis, Free University of Brussels, Brussels, Belgium Martin Ruesch, Rapp Trans AG, Zürich, Switzerland Jack Levis, United Parcel Service of America, Inc. (UPS), Baltimore, Maryland, USA Chris Kozak, Wal-Mart Stores, Inc., Fayetteville, Arkansas, USA IntroductIon Marcel Huschebeck Marcel Huschebeck began by saying that after hearing about the demand side in the previous session (Demand Patterns and Trends), this session would focus on the supply side and would offer perspectives from both Europe and the United States. When talking about urban supply, the “last mile” is considered to be the most costly. Everyone wants a good transportation system, but what is “good”? Trans- port must guarantee that citizens and enterprises get the goods they need. Transport is a very important function, comparable to water and energy supply, he said. There are two dimensions to urban distribution: get- ting goods into the city and operating within the city. In getting to the city, companies must get goods to consum- ers while coping with urban congestion, emissions regu- lations, and routing decisions and restrictions. Operating within the city, companies must deal with speed and weight limits, parking, and loading zones, all of which make urban deliveries a very frustrating experience. Huschebeck described several innovations in urban supply. In addition to off-hour delivery and accurate transportation planning systems, innovations include cooperation schemes that share capacity and vehicles, as well as adapted vehicle technology and driver assis- tance (vehicle propulsion, emissions, noise). Another set of innovations includes cooperative systems: vehicle- to-vehicle communication and vehicle-to-infrastructure communication. cAse studIes oF InnovAtIon Cathy Macharis Cathy Macharis presented four cases of innovation in city logistics using a “4 A’s” framework for sustainable city logistics: awareness, avoidance, act and shift, and anticipation. Sustainable city logistics means balancing environmental and societal needs along with economic ones. The first A, awareness, refers to making all actors aware of the social return of sustainable practices that lead to improved health, safety, air quality, and so forth. Actors calculate economic returns, but they do not know the social returns in monetary terms. Knowing the social returns can help actors cooperate and equitably share costs and benefits among companies and government. To calculate the social return first means calculating the costs of externalities like poor air quality, noise, and poor health. Such calculations require good data on fac- tors such as emissions, routes driven, and population. Macharis described this calculation for the Port of Brussels, the purpose of which was to arrive at the social return of the port and what it would cost if the port were not there. The calculations showed that thanks to the port, there were 688,000 fewer trucks and €27.5 million less of external costs. Another way to build awareness is through voluntary programs and certifications like the Lean and Green pro- gram in the Netherlands, which is also now in Belgium, and SmartWay in the United States. Companies partici- pate in these programs by promising, in the case of Lean

19schemes and technologies for enhancing urban distribution and Green, to reduce their CO2 emissions by 20% in the next 5 years. Companies who achieve these reductions get certified and can display those certifications in com- munications to their customers. This sets an example for other companies and creates awareness. The second A, avoidance, refers to avoiding unneeded traffic. Innovations in avoidance focus on avoiding empty miles driven and improving the capacity utiliza- tion of existing trucks. Straightsol, a 3-year EU-funded urban freight research effort, studied Oxfam, a British charity that recycles textiles and books. In this example, Oxfam collection bins were equipped with sensors that indicated the level of donations in the bin. The sensors allowed remote monitoring of the bins and eliminated the routing of trucks to bins that were still empty. Another way to reduce traffic is by bundling via con- solidation at city distribution centers. The DHL pilot test within Straightsol in Barcelona attempted to create an urban distribution center that would receive full truck- loads directly in the city and from there use smaller vans to distribute the freight within the city. The demonstra- tion was difficult, and in the end DHL opted for an easier scenario and continued using a distribution center out- side the city and deploying small trucks from there to enter the city. A different demonstration within Straight- sol, that of TNT in Brussels, showed interesting results. In this example, TNT created a mobile depot (essentially the trailer of an articulated truck) within the city. Pre- viously, an average of 5.5 vans entered the city center daily. Now, one full truck enters the city and acts as a mobile depot from which deliveries are made by electric bikes. The third A, act and shift, recommends shifting to more environmentally friendly modes such as barge and electric vehicles. Although this concept is not transferable to all cities, as noted in Giuliano and Dablanc’s white paper, all large cities in Europe were constructed around rivers. Thus, barge transport can be used for city distri- bution. Amsterdam, Utrecht, and Paris all use barges as part of their distribution network. Utrecht has the “beer boat,” and in Paris containers arrive via river to the cen- ter of Paris from where freight is distributed to small establishments. In Flanders, Belgium, some successes have been realized in the shipping of palletized freight on the inland waterways. Barges could carry anything from building materials to fast-moving consumer goods. Cargo trams are another example of a shift in mode. In Dresden, cars from the Volkswagen factory enter the city via tram rather than big truck. Cargo trams work in spe- cific situations like this, but they may be harder to imple- ment for distributed flows. Finally, off-hour deliveries are another solution demonstrated by Straightsol. Five supermarkets in Brussels will receive nighttime deliveries from PIEK-certified trucks that are less noisy than tradi- tional delivery trucks. The fourth A, anticipation, refers to using new technologies, such as natural gas–powered vehicles or electric vehicles, for more sustainable city logistics. DHL uses vans powered by natural gas, and numerous manufacturers (e.g., Alke, Goupil, Iveco, Renault Z.E.) are building small electric vehicles. New electric offer- ings are coming from well-known manufacturers such as Peugeot, Mercedes-Benz, Volkswagen, and Nissan. Companies like FedEx use these smaller vehicles, but the larger electric vehicles still have a very high battery cost, which at present makes them uncompetitive with diesel trucks. Having discussed successful urban distribution inno- vations, Macharis next looked at why some implementa- tions fail. The commonality was a lack of coordination between numerous actors involved in an implementa- tion: shippers, receivers, logistics providers, authorities, and citizens. Each actor has his or her own objectives. For example, citizens do not want the noise of nighttime deliveries. Straightsol developed a framework for city distribution concepts. In addition to the traditional social cost–benefit analysis and business models, a method called multiactor, multicriteria analysis (MAMCA) takes each actor’s objectives into account and weighs the importance of those objectives. With MAMCA, it is possible to see who is likely to support or oppose a given scheme. Macharis concluded by saying that sustainable city distribution is possible through awareness, avoidance, act and shifting, and anticipation as long as the fifth A— actor involvement—is taken into account in the multiac- tor setting of a city. QuestIons And AnsWers WIth cAthy MAchArIs A participant had an immediate question for Macharis, asking about the situation in which a city wanted to do something that would affect many shippers and carri- ers. The shippers might care if competitors were doing it. Does the framework take competitor response or bargaining power into account? Macharis answered that yes, the Straightsol frame- work identifies who the main actors are and might be refined to specific logistics service providers. The frame- work specifies the criteria of all actors, so the actors are asked what criteria they consider important and to attach weights to each criterion. Straightsol gives cities the framework so they do not have to reinvent it. René de Koster commented that doing MAMCA at the project level must be difficult if one has many projects.

20 city logistics research: a transatlantic perspective Macharis answered that each analysis looks at the current situation, the demonstration situation, and the future situation, because the demonstrations are one step in a global evolution. TNT is currently looking at three communities in Brussels, but the future situation would include all of Brussels and Paris, so Straightsol is com- paring those three main scenarios (current, demonstra- tion, and future). IMpAct evAluAtIon Martin Ruesch Martin Ruesch provided an overview of BESTFACT, an ongoing European research project that deals with best practice and impact evaluation in freight logistics and freight transport, especially in urban areas. The BEST- FACT project evaluates best practices developed over the last 10 years. European cities face numerous challenges involving urban freight, including freight intensity, conflicts with other road users, and the high costs of the last mile. With the goal of achieving CO2-free city logistics in major urban centers by 2030, the objective of the BESTFACT project is to develop, disseminate, and enhance the use of best practices and innovations in freight transport that contribute to meeting European transport policy objec- tives. The focus is on competitiveness and environmental impact. The BESTFACT project provides a knowledge base and recommendations for policy tools for facilitating best practices. It also supports implementation strategies by market sectors in cooperation with private actors, trade associations, regional bodies, and technology plat- forms. The €3.4 million project is funded primarily by the European Commission (80%) and is in the first year of its 4-year duration. Of the 18 partners in the project, six attended this symposium. Methods for Evaluating Best Practices and Their Impacts Ruesch next presented a method for best practice and impact evaluation. For impact evaluation, it is impor- tant to know the strategic targets of public-sector and private-sector actors so that practices are assessed with those targets in mind. BESTFACT conducted an online survey of actors to learn how they rank different out- comes. Public-sector actors ranked environmental and social targets the highest (e.g., safety, reduced emissions), while private-sector actors ranked economy (increased efficiency and productivity of logistics process, increased company profitability) and services targets (increased quality) the highest. Private-sector actors ranked envi- ronmental targets lower than public-sector actors did. The online survey also asked respondents to rank their top challenges so that BESTFACT could focus on the best practices related to the top-priority areas. Ruesch showed a slide (see Figure 1, page 21) of the 14 top chal- lenges listed in five categories: infrastructure and tech- nology; organization and cooperation; operations and services; regulations and policy; and knowledge, tools and methods. For example, some of the top challenges were access to transport networks, business-to-customer solutions like last-mile delivery, and modeling and fore- casting. Ruesch provided a definition of “best practice” as used by BESTFACT. A practice is considered a “best practice” if it has the following four attributes: • It is an innovative and feasible approach that is beyond common practice; • It addresses both business and policy objectives; • It has considerable and measurable positive effects on business and policy targets; and • It is transferable to other companies, initiatives, or contexts. Next, Ruesch described the two-phase process of best practice identification and evaluation. The first phase included selecting cases based on minimum require- ments and a preassessment using a multicriteria analysis. The second phase included in-depth surveys on the most promising potential best practice cases based on the ful- fillment of strategic targets, expected effectiveness, and feasibility. The online survey results provided an impor- tant input to the whole process, identifying the key topics for case selection and strategic targets for assessment. In addition, in the second phase, a more detailed analysis of the cases was performed that assessed the fulfillment of strategic public and private targets. Expert opinion on the effectiveness and feasibility of the potential best practice cases was also used. Within the first year, 92 urban freight projects were identified, and 15 were selected as “best” based on the criteria listed above. Reusch went on to describe four of the best practice examples in depth. Examples of Four Best Practices The first best practice example focused on loading– unloading zones and lanes. Several European cities implemented loading–unloading zones, partly in combi- nation with parking and partly with time restrictions for the loading and unloading process. Another option to improving street space management is to use street lanes during off-peak hours for loading and unloading. The use

21schemes and technologies for enhancing urban distribution of the loading zone and loading lane has to be indicated, either in a static way or dynamically by using variable message signs. Such solutions, which have been imple- mented in Munich, Barcelona, Bilbao, and Ghent, have achieved positive impacts in improving freight access to city centers, making better use of the existing infrastruc- ture, reducing loading–unloading times, and reducing conflicts with pedestrians and other road users. Overall, this best practice showed a good benefit–cost ratio and has good transferability to cities that have streets with more than one lane in each direction. To implement this practice successfully, cities must provide proper signage of the zones and enforcement of the regulations. The second best practice example was of an urban microconsolidation center and use of electric vans and tricycles in London. This practice was motivated by the need to reduce the environmental impact of diesel vans. The solution established a new urban consolidation center close to the Tower of London. The consolidation center is served by trucks from a suburban depot and is used as a transfer point for parcels to electric vans and tricycles, so that the last mile is delivered by environmentally friendly vehicles. The microconsolidation center and end delivery is provided by a third party. The solution was implemented about 3 years ago, and the results show a 54% reduction of CO2 emissions and profitability after 3 months of oper- ation. A 20% reduction of mileage was also observed, pri- marily outside the city. Within the city, mileage increased but was handled by environmentally friendly vehicles. Overall, this approach is very promising, Ruesch said, and there are comparable approaches in French, Spanish, and German cities. Important success factors are acceptance of these vehicles for road use, a high density of delivery points, and support by authorities and retailers. The third best practice example was about delivery management for a big trade fair in Basel, Switzerland. Basel is surrounded by residential areas, and some bigger fairs were expected to induce up to 8,000 trips before and after the fair. Given the high freight volume and lim- ited space, as well as environmental concerns, the trade fair operator decided to implement a demand manage- ment system for the deliveries. Exhibitors, stand build- ers, and other suppliers had to register online in advance for all deliveries and pickups related to the fair. The demand management was supported by a logistics tool that let transport companies book time slots for access and loading–unloading. The system was implemented in 2012; results have not yet been quantified, but a bet- ter use of existing loading and unloading facilities and a more efficient loading and unloading were observed. The approach showed very positive impact at limited cost and seems transferable to other freight transport– intensive facilities like terminals and distribution centers. Important success factors were the communication and cooperation between the trade fair operator, the logistics companies, and the city authorities. © BESTFACT Fi el d Infrastructure and Technology Organisation and Cooperation Operations and Services Regulations and Policy Knowledge, Tools, and Methods To pi cs Access to transport networks, infrastructure and nodes Business to business (B2B) solutions, cooperation Business to customer (B2C) solutions (e.g., e- commerce, last-mile delivery) Access rules and restrictions of urban areas Modelling and forecasting Freight consolidation and transhipment Competitive aspects: collaboration (cooper- ation with competitors), prioritisation (priorities on infrastructure and in nodes) Innovative operational solutions Land use and spatial planning: assessment and siting of transport facilities and infrastructure Data collection and statistics Implementation of low emission technologies Communication between authorities: cooperation, procedures, legal frameworks Value added services, development (or extension) of services Infrastructure financing: taxation, user charges, PPP Education and training IT-technologies and solutions (for management and administration) Communication between businesses and authorities: coordination, consultation Service quality and sustainability agreements / certification Environmental standards and policy Working and implementation guidelines Innovative vehicles, vessels and equipment Business models: new form of ownership, risk management Transport management, fleet management Interoperability and standardisation: vehicles, equipment, loading units, infrastructure Monitoring and benchmarking of processes ICT (e.g. routing, guidance), transport optimisation Safety and security: measures, regulations, insurance FIGURE 1 BESTFACT online survey results revealed 14 top challenges (starred entries) in five categories. (ICT = information and communication technology; PPP = public–private partnership.)

22 city logistics research: a transatlantic perspective The final best practice Ruesch described was also shared by Macharis, namely the zero-emission “beer boat” in Utrecht. An electric boat using green energy was used for the delivery from four breweries and one wholesaler to 65 clients along the canals of Utrecht in the Netherlands. The implementation took place in 2009, although a nonelectric beer boat had already been in use since the 1990s. Results showed a reduction of CO2, particulate matter with a diameter ≤10 microm- eters (PM10), and nitrogen oxides (NOx), as well as a reduction in road freight transport in the city center and operational cost savings. The solution seems to be trans- ferable to cities with canals or rivers, and there are plans to implement it in other cities, Ruesch said. Conclusions Ruesch noted several conclusions. First, regarding meth- odology, it is clear that a comprehensive and standard- ized approach of best practice identification and impact assessment is needed. It is important to carry out moni- toring and evaluation of the cases to provide support for future decision making. Ruesch noted that in the first year there was a dominance of consolidation and clean- vehicle projects, but modal shift is also an option. Few large-scale transfers exist so far, although some solutions have been transferred to another city or company. Over- all, the best practices examined show high to very high benefits, but quantification of the impact is not always available, which hampers dissemination and uptake by others. More schemes and technologies will be analyzed in 2013 through 2015; additional information can be found at www.bestfact.net. Recommendations for Research Ruesch’s recommendations for research in urban freight encompassed methods as well as urban freight–specific topics. In terms of methods, data collection, and instru- ments, Ruesch suggested innovative urban freight data collection (e.g., GPS tracking, handheld devices, Inter- net, enquiries, and use of company data). Urban freight topics for research include the following: • Changes in logistics strategies and requirements for transport infrastructure and land use planning; • The impact of increasing e-commerce on transport systems, society, the environment, and economy (freight and passenger transport); • Functions and design of different types of nodes in urban areas (e.g., urban consolidation centers, termi- nals); and • Management of urban freight transport (including the use of information and communication technology [ICT] in urban freight and integration of short- and long- distance freight). Questions and Answers with Martin Ruesch Alberto Preti shared some data from Italy that he thought were similar to the European scale in general. He said the pressure on urban areas from freight trans- port can be measured in terms of percentage. About 55% of the tonnage has an origin–destination within 50 kilometers, at least in Italy, which puts a huge pressure on local and metro contexts. Of this 55%, approximately 50% concerns own-account transport, which means shopkeepers, small retailers, and crafts. He suggested that future research and experimentation in the field of city logistics be focused on the topic of logistics outsourcing. In many instances, the case for outsourcing is clear: certainly it is evident for parcels. There is a win–win situation between the public and the private sector because the higher load factors mean fewer pollutants from the vehicles and more gains for the companies. Small shopkeepers and retailers prob- ably do not have a clue about the cost of their logistics activities, therefore they do not have a clue about the environmental footprint of their activities, he said. Preti suggested that the idea of promoting logistics outsourc- ing as a public policy, perhaps with incentives or even direct actions on these generators of freight traffic, may be a topic of future research. Ruesch agreed that lack of outsourcing was a prob- lem. A survey in Switzerland showed that only 10% of the vans are used by logistics service providers, and the rest were used by shippers to transport their own accounts and also by service-related transport. He agreed that outsourcing would improve the situation, but there were also other solutions, such as electric vehicles. Macharis commented that an urban consolidation cen- ter can be very helpful, and that this concept should target shopkeepers. There is the example of Citydepot in Belgium and Binnenstadservice in the Netherlands. To make these solutions work requires targeting the shopkeepers, who have to tell their suppliers to deliver to the city depot rather than to the individual estab- lishment. These are solutions that are oriented toward stakeholders. The point is to look at the stakeholders within the city distribution and figure out how to make it a win-win for everyone, as Citydepot and Binnenstad- service did. Anne V. Goodchild asked how the microconsolidation center was implemented in London. She could see how

23schemes and technologies for enhancing urban distribution it reduces CO2 or vehicle kilometers traveled, but is it a requirement that a business near the Tower of London use it? Are they incentivized to use the services? Incen- tivization is an important point for transferability to an American city. Ruesch replied that it was a service for retailers in the city. Goodchild asked whether the retailer gets to choose who provides their goods to them. Michael Browne, who undertook research on the microconsolidation center, explained that it was designed to serve the office sector in London’s financial center. It reduced vehicle kilometers in London as a whole because of a change in the system. But in the city itself, because the vehicles are smaller, the number of kilometers driven has risen slightly. The program started with just one company, Office Depot, which was already working with many offices. Office Depot probably has 25% to 30% of the office supply market in the center of Lon- don. Office Depot decided at the corporate level to do something different, and it focused on the last mile of the supply chain. This niche solution worked well because Office Depot gained publicity benefits (its name is on the vehicles), and the solution does not cost them additional money. Michel Savy said that while outsourcing is a way to get efficiency, shippers who ship their own loads can also be efficient. He cautioned against assuming that all shippers were inefficient compared with outsourcing. He cited France’s Shippers Inquiry, which was a survey sent to shippers rather than carriers. The survey asked about the logistics organization of the shipper, which traditional surveys had not done. Ruesch agreed that big shippers could be very effi- cient, too. Edgar Blanco asked about the depth of the business cases, not just from the financial standpoint but whether the cases included a robust description of the layout of the city, the density of the city, and so forth, so that a city manager could look at the case and say, “This looks like my city.” Ruesch replied that yes, BESTFACTS always describes the framework conditions of the city, such as its density and conditions. Those conditions are very relevant for a case’s transferability, he said, so that city managers can assess whether a solution is a potential solution for their city. Blanco asked whether BESTFACTS was being used in planning. Ruesch replied that they were not developing plan- ning concepts in this project, but they did look at the constraints from the land use side. IMpleMentAtIon Aspects: ups’s roAd to optIMIzAtIon Jack Levis Jack Levis described how UPS has optimized its route planning for efficiency and reduced the company’s over- all environmental impact. The road to optimization begins with collecting data to analyze existing routes, volumes, and service commitments and forecast future patterns for its drivers. UPS uses robust tools to make a plan from that forecast, optimize the plan, simplify the plan so that it can be executed, and then monitor it in real time and make any adjustments. Historical analysis tools validate and inform future plans. From Descriptive Analytics to Predictive Analytics Levis cited research by Gartner, which found that 70% of companies use descriptive analytics (what happened?) and 30% use diagnostic analytics (why did it happen?), but only 16% use predictive analytics (what will hap- pen?) and 3% use prescriptive analytics (what should we do?). Fewer companies move beyond descriptive data because it means using increasingly unstructured data and greater volumes of data. Levis described how UPS was implementing these increasingly difficult analytics applications. He began by explaining UPS’s handheld tool for drivers, the delivery information acquisition device (DIAD). The first DIAD was introduced in 1991 and has gone through four evo- lutions. The DIAD continues to be improved and is now more of an information assistant for drivers, and not just a data acquisition device. Currently, 85,000 DIADs are being used by drivers. In the descriptive analytics phase, UPS merges data from numerous sources, including DIADs and vehicles, and analyzes the data to get a picture of the current situ- ation (see Figure 2, page 24). For example, the analysis can show when an engine is idling, or when the driver’s seat belt is not fastened when the vehicle is in motion. This analysis, which used to take 1 day, can now be com- pleted in 45 minutes, resulting in faster improvements to reduce idling and improve seat belt usage. Because descriptive analytics only provide historical views, UPS needed to take the next step and move to predictive analytics (see Figure 3, page 24). The com- pany built planning tools to forecast when a package will arrive at a destination. If one truck looks as if it will have too many stops, the route is rebalanced. Levis made the analogy that UPS currently plans with a scalpel, but in the future, it will plan with a laser.

24 city logistics research: a transatlantic perspective 7 Visibility on primary and behavioral characteristics that affect fuel consumption Through GPS, DIAD, and Sensor Devices (Seatbelt, Bulkhead Door, and Reverse), a driver’s driving habits can be monitored and areas of improvement can be displayed visually on maps. Dispatch Planning process may be enhanced and simplified through “Work Area” Concept. Dispatch planning & address validation processes may be enhanced and simplified through GPS data. Combining GPS and DIAD data displayed on maps, allows us to monitor and analyze daily driver travel paths and highlight excess miles and dispatch inefficiencies. Using GPS, DIAD, and Map data, has allowed us to enhance, automate, and simplify several steps in On-Road time study and work measurement processes. Vehicle Diagnostics Data, Fault Codes, and Usage Cycles can be used to anticipate part failure and predict vehicle breakdowns. 1. Automotive 2. Safety 3. Dispatch Planning 4. On-Road Performance 5. Work Measurement Telematics Technology utilizes… Engine Data GPS Data Sensor Data DIAD Data Map Data Ap pl ic at io n Ar ea s Merging Multiple Data Sources FIGURE 2 UPS analyses merged data from numerous sources in its descriptive analytics phase to obtain a comprehensive overview of factors such as safety and road performance. FIGURE 3 Predictive analytics tools developed by UPS forecast when a package will arrive, so that routes can be rebalanced as needed. Current Location Completed Work Remaining Work Current Location

25schemes and technologies for enhancing urban distribution DIADs simplify drivers’ jobs by providing daily pack- age delivery plans with addresses, delivery orders, and time commitments. The DIAD alerts the driver if a sig- nature is required, as well as specific customer instruc- tions for package placement. DIADs are also equipped with GPS, a decision made several years ago, before GPS navigation systems were prevalent. The GPS feature will sound an alert if a driver is at the wrong delivery location. At any point in time, UPS knows where any package is in the UPS system, how many packages have been delivered at any point in the day, and how many need to be deliv- ered. If an on-demand customer call is received, UPS can quickly react and accommodate the customer by com- municating with a driver who is closest to that customer. UPS Route Optimization Results from UPS optimization efforts have been dra- matic. The company has reduced its truck travel by 85 million miles annually, resulting in a savings of more than 8 million gallons of fuel and an 85,000-metric-ton reduction in CO2 emissions. At the same time, UPS has achieved the highest levels of service in its history and has reduced training time by 95%. Faster training time lets UPS provide consistent service during peak times. Safety has also improved, with 99.9% seat belt usage. Driver acceptance of route optimization efforts came as drivers experienced improved route times with a reduction of miles driven per day. Driver performance metrics are aligned with such savings, encouraging effi- ciencies. Even 1 mile saved per driver per day amounts to approximately $50 million a year of savings, Levis said. In the future, prescriptive analytics will make possible more personalized services, with delivery alerts, delivery planners, and the ability to reschedule delivery time or delivery location. Called “My Choice,” these services will include a confirmed 2-hour delivery window to the home. Levis ended with a list of challenges, including having standardized, accurate data and avoiding increasing miles to redeliver packages when a customer is not available. IMpleMentAtIon Aspects: WAl-MArt’s urbAn sMAll-ForMAt strAtegIes Chris Kozak Chris Kozak began with some key statistics about Wal-Mart that indicate its size and global presence. The company operates 3,146 Supercenters, 561 stores, and 620 Sam’s Clubs. In addition, it has 256 smaller-format Neighbor- hood Markets and 12 Express Stores, its smallest-format store, which are currently being tested. Overall, Wal-Mart has more than 6,025 stores in 27 countries and 2.2 million employees (called associates) worldwide. Mexico has the most smaller-format Wal-Mart stores. Within the United States, Wal-Mart has 172 distri- bution centers, which provide 99.55% on-time deliv- ery to 75 to 100 stores within a 250-mile radius. These distribution centers result in vastly fewer miles driven than previously. Nonetheless, Wal-Mart is aware that its tractors, which drive 700 million miles per year, have an environmental impact. The company implemented a sustainability program in 2005 with a goal of improving efficiency by 100% by 2015. As of 2013, the company achieved an 80% increase in fleet efficiency and was named a superior environmental performer by the U.S. Environmental Protection Agency in 2012. Route opti- mization plays a role in this efficiency by telling drivers where to go and where to turn. The company operates 12 unique logistics networks and outsources 425 million miles to third parties, such as Schneider National, Inc. How Wal-Mart Measures Efficiency Wal-Mart defines fleet efficiency in terms of the ratio of cases shipped to gallons of fuel burned. Productivity initia- tives (number of cases per trailer, routing improvements, reducing empty miles and packaging) have improved effi- ciency over the past 5 years. For FY 2008 to FY 2013, Wal-Mart shipped 614 million more cases but drove 300 million fewer miles (a 47% increase in cartons shipped per mile). These improvements saved 50 million gallons of fuel, the equivalent of taking 85,000 cars off the road. Wal-Mart’s Smaller-Format Urban Stores Wal-Mart recently began experimenting with smaller-for- mat stores in urban areas. Its plans for Chicago called for opening six urban stores between 2011 and 2013: four Neighborhood Markets and two Express Stores. Wal-Mart estimated 10 to 15 deliveries a week to each of these stores and knew that time restrictions and ordinances might apply. None of these small-format locations have access for the 53-foot trailers Wal-Mart typically uses, so Wal- Mart explored three options for delivering to these stores. The first option was to deliver from its grocery distribution centers and regional distribution centers by using 28-foot straight trucks, which would travel an average distance of 105 to 115 miles, depending on the distribution center. The second option was to deliver from each of these dis- tribution centers via 53-foot trailers to a metro cross dock located 95 to 100 miles from each distribution center, and then delivering via a 28-foot truck to each store. The final option was to combine routes, delivering from the grocery distribution center to the regional distribution center and then to the metro cross dock.

26 city logistics research: a transatlantic perspective Kozak next described Wal-Mart’s experience with locating a store at the base of the Presidential Towers in Chicago, home to 20,000 people but with practically no parking. In contrast to its superstores, which sell 20-pound bags of dog food, this Neighborhood Mar- ket sells fresh, ready-to-eat foods and the ethnic foods that its urban customers want. One of the challenges Wal-Mart faced at this location was a curb with two parking spaces. Wal-Mart wanted the curb removed so that it could use larger trucks to deliver to the store, but locals did not want to lose those two parking spots. Ulti- mately, Wal-Mart prevailed, but if it had not, deliveries would have cost the company an extra $600,000 a year due to more frequent deliveries via a smaller truck. At its Lakeview store, Wal-Mart faced noise ordi- nance issues when wanting to deliver at 3 a.m. rather than during the busy daytime hours. Wal-Mart needs quiet trucks, but the trucks emit a “beep” warning when they back up, which they have to do to back into the building’s delivery area. In other urban locations, Wal- Mart faces the issue of having to deliver in an alley that has fire escapes that limit the height of the truck. The limited storage space of urban stores also means that there is no room for pallets, so Wal-Mart has to use small carts instead. Another new concept that Wal-Mart is testing is called “tethering.” The goal is to “tether” a small store supply chain to a larger store. That is, large trucks from regional distribution centers and grocery distribution centers deliver to a Supercenter that is within 15 miles of the small store. Because the cost to serve stores via small trucks is very high, tethering saves money. Tethering leverages the Superstore for order fulfillment, shortens lead time, and increases the assortment available to small stores. Wal-Mart also offers a multichannel option, in which customers can order online from Walmart.com and have their item delivered to a local store. The smaller urban stores outperform Supercenters for online delivery. Kozak concluded with some challenges to consider for urban small-format stores, such as the use of truck-only corridors to decrease transit times and how to mix dif- ferent products on the same trailer. Other issues are the frequency of deliveries to small stores, which is related to receiving deliveries from the company and direct store delivery from vendors. There could be opportunities for consolidated urban delivery. City ordinances pose another challenge and place restrictions on delivery pro- viders. Locals want the store there but then fine drivers when they deliver to the store, Kozak said. sessIon QuestIons And AnsWers Tom Cherrett asked about alternative delivery points for UPS and whether UPS could deliver to a person, not a zip code. For example, could an individual intercept UPS at a point of the individual’s choosing to, say, pick up a package on the drive home from work? Jack Levis answered that such a service had been discussed at UPS but was not a priority. Europe would need this service more than the United States, and in the United States it would be more needed in cities than sub- urban areas. UPS can see where individual drivers are, but an interception would not be easy to do. Caitlin Rayman commented that if fleets were changing to straight (single rigid frame) trucks, she would like to hear examples of that, as well as examples of the effects of intermodal shifting. She also asked about optimiza- tion: were companies using their own private fleet data to identify congestion times, or were they using some- one else’s data? She commented on the large amount of data that private fleets have on urban situations that the Federal Highway Administration (FHWA) does not have but that would be helpful for planning. She asked if it would be possible to improve data sharing, or if there was incentive for companies to share some level of data (omitting confidential data, of course) to enable metro- politan planning organizations (MPOs) and other plan- ners to use such data. David Logsdon said that Waste Management was using its own data for optimization and was also cali- brating drivers’ driving times and their average customer time to create a baseline to evaluate whether the tools are grounded in reality. He commented that the idea of sharing data was interesting, but data are proprietary, so there would have to be some incentive to make sharing worthwhile. Levis said that UPS uses its own data and shares data with others, except for data on its customers or cost to serve. UPS is willing to share its data and does that with universities. Of course, UPS has spent 15 years collecting the data, he said, and if everyone gets it identically, UPS would lose its competitive advantage, which makes shar- ing a more difficult proposition. Kozak said that Wal-Mart uses open source data from the American Transport Research Institute (ATRI). Rayman also asked if the companies were using real-time information about weather events or traffic congestion to make real-time change to their routes. Kozak replied that Wal-Mart has satellite communi- cation with trucks and is close to using weather data and traffic data to update routes in the cab. Levis added that at present UPS does not react to weather problems or traffic congestion in real time. It would be helpful to know the traffic flow, but UPS would need to know that flow hours beforehand in order to cre- ate the route plan. It is not possible to know exact traffic congestion in the future. Navigation systems in cars that

27schemes and technologies for enhancing urban distribution try to reroute drivers in response to heavy traffic often result in other delays, because those alternate routes get congested by the time the driver reaches them. The driver ends up driving longer routes with no time savings because traffic is everywhere. Levis added that UPS talks with each driver at three different times during the day. José Holguín-Veras asked the presenters to imagine that they could do anything to improve efficiencies. What would they do? Levis joked that it would be great to be able to ask a customer to take a later delivery than they wanted in order to improve the overall greater good.