DELIVERY POINTS IN THE E-COMMERCE LAST-MILE: FORMALIZING A NETWORK MODELLING



DELIVERY POINTS IN THE E-COMMERCE LAST-MILE: FORMALIZING A NETWORK MODELLING

Authors

Ivan Dario Cardenas Barbosa, University of Antwerp

Description

E-commerce carrier companies are building a network of DP and integrating the location of these points into their planning process. We aim to model a network of DP by considering the implications of this decision in the last mile.

Abstract

Over the last decade, e-commerce shopping has been growing at two-digit rate year on year. Because of such a buoyant growth, logistics have been facing new challenges keep the pace of e-commerce. For the last mile of the distribution, logistics providers had traditionally focused on finding the most efficient solutions for business to business (B2B) segment with good results; but home deliveries pose a new set of barriers for efficiency, such as, failed deliveries, fragmentation in the deliveries and reverse flows. As a result, the rise in home deliveries is entailing additional costs and a higher level of complexity for the last leg of the supply chain that logistics providers are still seeking to cope with (Song et al. 2009; Gevaers 2013)
At the same time, e-commerce deliveries increase the demand for goods transport. While, e-commerce is generally regarded as good for the environment (Siikavirta et al. 2003; Edwards et al. 2010) because multiple customers can be delivered with a single van instead of multiple customers doing individual shopping trips. However, considerations need to be given. First, not all the shopping trips can be assumed to be substituted, a number of studies have found that e-commerce demand is complementary rather than substitutive (Weltevreden 2007). Second, the number of vans in densely populated areas is becoming an issue and city authorities are taking measures to control the traffic of these vehicles especially during peak hours (Browne et al. 2010). Third, the e-retailers are using delivery speed as a competitive difference and next-day, same-day or even one-hour options are available. The reduction in the time window of processing a shipment leads to lower consolidation, higher frequency of shipments and therefore, more transport demand.
As a response to the last mile challenges delivery points (DP) networks have become a growing phenomenon all over the world. For companies, DP are mainly used as a backup location when the recipient is not present at the moment of delivery, reducing in this way the number of failed deliveries. In some DP parcel can be returned alleviating the management of reverse flows. But more important, if the DP is chosen as the final delivery point for a number of customers, companies can increase the number of deliveries per stop, reducing significantly the delivery costs.
From a sustainability perspective, different studies have addressed the impact of using DP on the environment. So far the result of these studies is ambiguous. Most authors agree that DP deliveries may not perform well compared to home deliveries because collection trips trigger individual car journeys worsening the impacts on the environment. However, factors such as the trip chaining in those trips (Edwards et al. 2010) and the usage of other modes of travel (Brown & Guiffrida 2014) are yet to be fully integrated into the analysis. Finally, in addition to the negative impacts, additional collection trips are inconvenient and transfer the costs of the last-mile to the final customer.
Different studies have addressed the performance and sustainability of DP. However, most studies are limited to a single perspective either from the companies or the environment. Moreover, the analysis considers the DP as an occasional solution for failed deliveries, while observation leads to thinking that current DP are a component of the network. The aim of this paper is to propose a framework to analyse the performance of DP not as just an alternative solution but as a functional part of the distribution network. At the same time, by assuming a more holistic perspective and considering the cost and benefit functions of the parties affected by the e-commerce deliveries logistics.

Publisher

Association for European Transport