Urban fulfilment centres become last-mile hubs

Delivering goods to downtown addresses poses enormous logistics challenges. Urban distribution centres could make the last mile more efficient, more sustainable and less disruptive to traffic.

January 14, 2020

E-commerce merchants ought to be celebrating. Never before have Germans bought so much online, with revenue growing by nearly 9 percent in 2019 alone. However, there is a bottleneck: logistics in urban centres. E-commerce is fast becoming a victim of its own success – the urban infrastructure can hardly absorb the influx of merchandise.

Streets clogged by delivery trucks, flagrant disregard for no-parking and no-stopping zones – all part of the grim reality of the last mile in e-commerce. It is hard to blame the delivery services – how else are they supposed to manage the onslaught of packages?

Customers expect ever-faster deliveries

The sooner a paradigm shift comes to urban logistics, the better, especially as pressure grows on the consumer-driven supply chain. While yesterday’s challenge was same-day delivery, tomorrow’s could well be same-hour delivery. All against the backdrop of growing environmental consciousness and serious impacts on downtown traffic.

So how should delivery logistics reinvent itself in this environment? One key will be to transport goods to the cities at night when traffic is light.

Packages will then be stored in micro hubs and delivered during the day. Electric vehicles, bicycles or even on-foot deliveries can sidestep traffic jams and stay compliant with environmental regulations.

Fully fledged advanced fulfilment centres in downtown locations are fast becoming a reality, too. “Urban picking operations in small-footprint facilities can reap outsize gains from sophisticated predictive analytics,” explains Werner Gliem, a supply chain expert at JLL.

Giving vacant retail properties a new lease on life

There are still no defined standard areas for city fulfilment centres. One thing is clear, though: languishing retail properties could benefit significantly from this new type of city logistics. Upper floors are a particularly hard sell in the retail market. They are specially built and so can only rarely be converted to offices or apartments. However, vacant retail space can be easily used for warehousing.

No shying away from multi-storey warehouses

Unfortunately, many operators still steer clear of multi-storey logistics properties. An unjustified rejection, says Frank Weber, Head of Industrial Agency Germany: “As long as you have a sophisticated two-story storage and picking system, you can manage an upper floor in a multi-storey building just as efficiently as a ground floor.”

Bringing together real estate and logistics experts

The Technical University of Munich also concluded that per-pick costs were no higher in multi-storey properties than in single-storey ones. Obviously, the requisite intralogistics have to be put in place first: buildings need suitable technology, floors have to be connected, loading and unloading facilities have to be implemented.

This can only be accomplished if real estate and logistics experts work together. Suitable buildings and properties must be found – and not just in terms of real estate parameters, either. “You have to consider other factors, too: what are the fire safety, traffic and noise requirements? Will your alterations to the property or the building’s new use violate any zoning laws or building codes? These challenges are best solved by logistics specialists and real estate professionals working together,” says Gliem.

Frank Weber
Head of Industrial Agency Germany
Werner Gliem
Senior Team Leader Supply Chain & Logistics Solutions, Germany