Business and Operating Models for Sustainable Urban Freight Transport

The first autonomous shuttle on Flanders public roads

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Research and development in urban freight transport is generating vast amounts of new on-demand and sustainable solutions. These include new types of urban freight facilities, vehicle technology, and ICT. Without sound operating and business models, however, such innovations will be short-lived in the hyper-competitive urban freight transport market.

The ULaaDS project has developed an overview of recent practices in urban freight transport that purposefully contribute to the transition towards carbon-neutral cities. Generally, such practices either focus on introducing sustainable vehicle technology and/or on utilising existing transport resources more efficiently.

Sustainable vehicles can replace polluting transport resources, thereby reducing greenhouse gas emissions. Given the sheer number of urban freight vehicles and current production rates, replacing every polluting vehicle with a sustainable one seems impossible in the short- to medium- term. Therefore, using existing transport resources more efficiently deserves attention too. Doing so would curb the need for more vehicles as urban freight flows increase. Indeed, improved resource utilisation can help justify investments in sustainable vehicle technology – in other words, developments in sustainable vehicle technology and improved resource utilisation are inextricably linked.

ULaaDS has examined three main fields of urban freight innovation: innovations in sustainable vehicle technology, in logistics facilities and networks, and in information technology.

Innovations in Sustainable Vehicle Technology

Slowly but steadily, polluting urban freight transport vehicles give way to more sustainable variants. Nevertheless, not all current vehicle types have a direct sustainable alternative – or at least not one with a similar operating profile or cost of ownership. For some vehicles, the total cost of ownership of an electric variant will break even with its polluting counterpart shortly, if it hasn’t already. However, this does not hold true for all vehicle types. Further technological improvements are especially needed for larger vehicles.

A shift to smaller vehicles for use in urban freight transport seems logical – both for economic reasons and because smaller vehicles better fit the urban environment, especially in European cities with historic city centres characterised by narrow and busy streets.

Enter: the cargo bike. Cargo bikes appear in many shapes and sizes, from regular bicycles to bikes or trailers with a capacity of 2m3 and over 200kg loading capacity. Larger ones are often equipped with electric assistance too. Light commercial freight vehicles are increasingly electric too.

Innovations in Logistics Facilities and Networks

Urban freight transport networks are changing, both in response to the operating restrictions of sustainable vehicle technology, and because of ambitions for more efficient use of existing vehicle capacity.

For the better part of the 20th century, logistics facilities in urban areas have increased in size and moved away from the city centres to suburban or peri-urban areas, a concept known as logistics sprawl. This sprawl enabled economies of scale for material handling, and made land available for residential areas and commercial activities closer to the city centres.

The resulting logistics network structure is rather unsuitable for the use of sustainable vehicles – considering their operating restrictions – and for urban consolidation schemes that are often highly localised. Hence, we observe a trend where companies have once again turned to searching for logistics facilities closer to the city centre. Available space is scarce, however, and often heavily used by other stakeholders.

Innovative solutions to this challenge include smaller facilities, automatic lockers, and crowd-sourced neighbourhood hubs. To curtail material handling costs, urban freight facilities are often combined with the introduction of standardised and modular load carriers that enable a seamless handover of freight at the facility (i.e., containerisation).

Innovation in Information Technology

The last type of innovation identified as part of the ULaaDS project can be categorised as information and communication technology (ICT).

Partly, this involves novel hardware and algorithms needed to enable autonomous vehicles. In the domain of freight transport, there are developments in indoor applications (e.g., drones for counting stock or moving parts), in aerial carriers (e.g., drones for transporting blood between hospitals), and in autonomous road-based vehicles. The latter are especially interesting from the perspective of urban freight transport, as they could potentially enable the reduction of an expensive element in last-mile transport: labour cost for couriers.

Equally interesting are developments in digital platforms. Some platform developments are pushed by local authorities with the aim to collect, bundle, and/or publish data on all sorts of processes in the city. But, most platforms are commercially driven – often by start-ups aiming to create a platform economy for various aspects of the logistics sector. Such platforms hold the promise of more efficient use of transport resources, and they too are often deployed in an attempt to curb labour costs.

Business and Operating Models

Business models are commonly discussed in the context of ways to capture revenue and profits from an innovative solution. However, they can equally focus on capturing societal or environmental value. Even when adopting this more holistic view of business models, however, any innovative solution should still be economically viable to ensure its success and uptake. If a solution has societal and/or environmental benefits, but is not economically viable, it can be supported with subsidies or operated as a governmental service.

The focus of research and development in urban freight transport is often on the technological aspects of novel solutions. Whether they are focused on novel vehicle technology, facilities, or ICT, most resources are consumed by technological developments and deployment. Business and operating models are often an afterthought. ULaaDS, however, integrates business and operating model considerations from the outset. This includes designing research trials in which solutions can be tested, and engaging relevant stakeholders to ensure (public) acceptance of the solution. Figuring out potentially successful business models, and fine-tuning business models that already exist, are explicit parts of all ULaaDS trials.

Studying the role of business and operating models in sustainable urban freight transport is a major component of ULaaDS. An overview of best practices was developed at the beginning of the project and is publicly available here. Another ULaaDS publication maps insights on the business and operating models identified by ULaaDS trials in Bremen, Mechelen, and Groningen.

To learn more, keep an eye on the ULaaDS website, where all project findings are published:

Authors: Nacho Sarrió, Lorena Axinte, Paul Buijs




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