Published on February 20, 2014
Global Mega Trends and Implications to Urban Logistics Sandeep Kar Global Director- Commercial Vehicle Research NA99-13 1
Mega Trends Driving Urban Logistics Industry 1. Urbanization There Will be 35 Mega Cities Globally By 2025 Demanding For Unique City Logistics Solutions 2. Connectivity and Convergence By 2025, each person will have a minimum of five connected devices 3. Bricks & Clicks By 2025, 20% of retail will happen through online channels 4. Future Infrastructure Development By 2025, globally over $800 billion will be spent on high speed rail projects. What does this mean for Urban Logistics? 500 million deliveries per person per day to cities ‘On-the-fly’ deliveries will have to made anywhere, anyhow, faster and quicker Demand for urban parcel deliveries will increase – shipments to become smaller and frequent Multi-modal, low carbon footprint, mission critical utilization of road, rail, marine, and air infrastructure Source: United Nations, Department of Economic and Social Affairs, Population Division (2012). World Urbanization Prospects: The 2011 Revision , Frost & Sullivan, 2012 NA99-13 2
Urbanization Trends Influencing Urban Logistics Development of Mega Cities, Mega Regions, Mega Corridors, and Mega Slums to Drive Demand for Logistics Services in Urban Areas Urbanization Trends, Global, 2011–2025 MEGA CITY MEGA REGIONS City with a minimum population of 8 million and a GDP of $250 billion in 2025 (12 Mega Cities in 2011 and 35 Mega Cities in 2025) Cities combining with suburbs to form regions (Population of over 15 million) (21 Mega Regions in 2025) EXAMPLE: Greater Tokyo (Population of over 27 million by 2025) EXAMPLE: National capital region of Delhi (includes New Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad) MEGA CORRIDORS The corridors connecting two major cities or Mega Regions (60 km or more apart, and with a combined population of 25 million or more) (37 Mega Corridors in 2025 MEGA SLUMS 1 billion urban poor live in an area measuring just 1.5 square miles EXAMPLE: GuangzhouShenzhen-Hong Kong Corridor Image Source: Dreamstime Source: Frost & Sullivan Analysis. NA99-13 3
The Future of Urban Distribution The Hub-and-Spoke Logistics Model In Urban Environment Will Feature Mega Size Warehouses on Outskirts of Cities, with Smaller Decentralized Warehouses Inside the City Perimeter Illustration of Global Urban Distribution in 2025 Macro to Micro Implications The Spokes: Drop off delivery points for double-trailer trucks • • New technologies in tracking deliveries, such as track and trace, RFID in warehouses to evolve • New business models, such as in-night services, special delivery, and self-collection points, to grow in popularity • ~50% reduction in trucks going in and out of cities • The Hub: All trucks to operate at 80%– 100% capacity (load factor) Ensures “on-time delivery” for retailers Central Distribution Centers Medium and light CVs will deliver goods to warehouses within city Heavy commercial vehicles (doubletrailer trucks) will carry goods to big warehouses at outskirts Outer Ring Road ~ 25 miles from City Center Source: Frost & Sullivan Analysis. NA99-13 4
Multimodal Trends Influencing Urban Logistics Road and Rail Accounted for Nearly 60% of Total Domestic Freight Traffic in Large Trading Regions, Such as EU and US in 2010 Modal Split of Domestic Freight, % (Million tonne per km), Global, 2010 Modal Split of Domestic Freight, United States, % (Million tonne per km), 2010 Modal Split of Domestic Freight, EU-27, % (Million tonne per km), 2010 0% 8% 29% 12% 38% 49% 10% 31% Road Rail Water Air Road Rail Water Air Source: Eurostat, US Bureau of Transportation Statistics NA99-13 5
Multimodal Trends Influencing Urban Logistics — High Speed Rail High-speed Rail To Improve Logistics By Freeing Up Space For Freight and Offering Exclusive High-speed Logistics Solutions Impact of High-speed Rail on Logistics, Global High-speed Mobility Freeing up space for freight on road and standard rail tracks as more people move to high-speed mobility High-speed Logistics High-speed freight trains that transport cargo exclusively at the same service cost as air, but at lesser carbon cost • Multimodal access point • Transport up to 300 km/h in some countries • Night time transportation: no non-peak hours restrictions Short transport time and lesser truck trips • Congestion zones, low emission zones • • • Green in comparison to planes Reliable and convenient • Reduction in delay and commutation time Image Source: Dreamstime Source: Frost & Sullivan Analysis NA99-13 6
Connectivity Trends Influencing Urban Logistics — Location-based Services (LBS) Over 40% of the connected devices globally will be LBS enabled by 2020 Subscriber Forecast of LBS Devices, Global, 2011 and 2020 2011 Total: 6.00 Billion Connected Devices Non-LBS Devices 5.58 Billion LBS Devices 0.42 Billion (7% of total) 2020 Total: 80.00 Billion Connected Devices NonNon-LBS Devices Internet 44.80 Users Billion LBS Devices 35.20 Billion (44% of total) • Navigation services will continue to drive growth in this market • Core navigation features include voice-guided turn-byturn directions with updated maps, 3D moving maps, and automatic rerouting for missed turns • Enhanced features include integration with contacts; multiple route capability; realtime traffic; gas prices and weather information; voice recognition for address input; traffic-optimized routing; intelligent navigation rerouting and updated estimated time of arrival based on current traffic flow, among others Source: Frost & Sullivan NA99-13 7
Bricks and Clicks: Growth in Online Retail to 2025 Global Online Retail Sales To Reach $4.3 Trillion By 2025 Accounting for 19% of Total Retail Online Retail Top Markets, 2025 2011 % share of online in total retail Non-Online Sales Online Sales 2025 19% $23.0Trillion 1.4 24% 18% 1.2 5% 1 $18.700 Trillion $11.8 Trillion 0.8 1.320 0.6 $11.250 Trillion 1.300 0.4 26% 10% 0.2 $0.550 Trillion Retail Market Size 15% 0.210 0 1 United States 2 China 3 United Kingdom 0.170 4 Japan $4.300 Trillion 0.090 5 Germany Retail Market Size Source: Frost & Sullivan analysis. NA99-13 8
Bricks and Clicks: Impact of Bricks and Clicks on Store Formats Retail Formats Are Becoming Smaller and Unique With More Emphasis Being Placed on the Concept and Urban Location of the Store Store Format Convenience Store: A small store selling basic items and over-the-counter medicines 100,000 120,000 Concept Stores: Small- to medium-sized manufacturer stores (e.g., Apple) Hypermarkets 80,000 Hypermarket: Large stores combining a supermarket and a department store (e.g., Carrefour in UK; Wal-Mart Supercenter in United States) 140000 10,000 Club Warehouse: Large store selling only bulk quantities (e.g. Sam’s Club) Era of Contraction 8,000 Supermarket: Large-size grocery and basic items Era of Expansion Average Size Grocery Store: Small market for basic groceries Evolution of Retail Formats, Global, 1970–2012 50,000 Express Store: Small convenience stores (e.g., WalMart Express) 12,000 Average Store Size (Sqft) 120000 Club Warehouses 100000 Supermarkets 80000 60000 Convenience Stores Concept Stores 40000 20000 Grocery Stores Express Stores 0 Pre-1970s 1970s 1980s 1990s 2000 2010 2011 2012 Source: RetailNet and Frost & Sullivan Analysis. NA99-13 9
Bricks and Clicks: From Big-Box to Small Box Retailer Store Size to be 15%–20% Less than the Current Average Store Size by 2020 Small Box Big-Box Size: 200,000 Sqft Size: 10,000 Sqft Shelf Capacity: 120,000 items Shelf Capacity: 12,000 items 15%–20% smaller Accessibility: Car drives–5 to 6 miles from city centers and urban hubs. Accessibility: Walkable distance–2 to 3 miles from city centers and urban hubs Building Format: Leased/owned, large scale standalone properties. Building Format: Leased small stores fit into existing city buildings. Location: Semi-urban areas—less dense areas with small populations. Location: Urban shopping centers—a minimum of 1,000 urban population per sqkm Image Source: Dreamstime Source: Frost & Sullivan Analysis. NA99-13 10
Bricks and Clicks: New Retailing Business Models Case Study: Tesco Virtual Store Sparks New Generation of Grocery Shopping Virtual Store: Tesco Virtual Store Sparks New Generation of Grocery Shopping 2 Choose grocery item from “virtual shelves” Smartphone app registers product of choice The product lands in customer’s “virtual cart” 3 Number 1 shopping app in Korea, with over 900,000 downloads Online sales increased by 130% since launch in 2011 The product is delivered to the customer at a time and date of his choice 4 1 Virtual Store—The Fourthgeneration Retail Store Single virtual store opened in a subway Home plus online membership increased by 76% since launch in 2011. Image Source: Tesco Source: RetailNet and Frost & Sullivan Analysis. NA99-13 11
Impact of Bricks and Clicks on Logistics Evolution of Bricks and Clicks Model in Logistics Bricks (pre-2000) Regional Distribution Center to Shop (In-House) +Advent of Clicks (post-2000) Central Distribution Center to Customer (Packing and Last Mile Delivery Outsourced) Closest Central Distribution center identifies and sorts product which then packed and delivered by UPS Each distribution center supports 90 to 100 stores in a 200-mile radius. E.g. Wal-Mart US E.g. Amazon US Bricks and Clicks (2012 and Beyond) Hub and Spoke For Faster Deliveries (Special Delivery Options Such as Same-Day Outsourced) Same-Day Night Time Robotic Warehouses Stores as DCs Locker Boxes Image Source: Dreamstime, Wal-Mart, Amazon and Tesco Source: Frost & Sullivan Analysis. NA99-13 12
Urban Logistics NA99-13 13
Urban Logistics Spending: Urban Vs. Non Urban Urban Logistics Spending to Reach $5.98 Trillion by 2020, Accounting for 46% Total Logistics Spending Logistics Spending, Global, 2011 and 2020 2011 2020 In-House 0.890 (35%) 5.950 (70%) 2.550 (30%) 1.660 (65%) 2.990 (50%) In-House Outsourced 7.020 (54%) 5.980 (46%) 2.990 (50%) Outsourced Note: Numbers provided here are in Trillions Urban Non-urban Source: Frost & Sullivan Analysis. NA99-13 14
Top Industries Leveraging Urban Logistics Services in Future Food & Beverages Retail Industry Trend Urban Logistics Implication Urban Logistics Services Pharmaceutical Smaller Stores Generic Medicines More regulations Chilled and Frozen Food No more homogenous single supply chain model Need for Cold Supply Chain Services Pack-to-order Refrigerated Locker Boxes Smaller shelf size – need for constant replenishment Retail Consolidation Centres Source: Frost & Sullivan Analysis. NA99-13 15
Urban Logistics Spending by Segments Transportation Costs will Rise and Account for Majority of Urban Logistics Costs while Warehousing Costs Decline 2011 2020 2.5x $5.98 Trillion Urban Logistics Spending $2.55 trillion Transportation & Distribution 50% 55% Warehousing 32% 23% Value-Added 18% 22% NA99-13 16
Examples of Key Cities That Have Trialed City Logistics Policies: Time Windows, Vehicle Weight Restrictions, and Multimodal Initiatives Emerge As Most Popular Measures Implemented For City Logistics Management Measures by City Authorities to Manage Urban Logistics, Global, 2005–2012 Low Emission Zones City Time Windows Vehicle Weight Restrictions Pricing / Subsidies Loading and unloading zones Special Lanes Urban Consolidation centers Multimodal Initiatives London Barcelona Berlin New York Paris Tokyo Utrecht Beijing Mexico City Mumbai Seoul Highly Active / Implemented Source: Turblog, World Bank, International Transportation Forum, MDS Transmodal Limited, Frost & Sullivan NA99-13 17
Examples of Urban Logistics Business Models From LSPs* Targeted Deliveries, Hybrid Fleets, and Bundling of Consignments Emerge As Most Popular Measures Implemented For City Logistics Management Business Models by LSPs Targeting Urban Logistics, Global, 2005–2012 Off-peak Deliveries (Night Deliveries/ Early-morning Deliveries) Green Vehicles (Electric, Hybrid, Natural Gas) Nonconventional modes of Delivery (Trams, Foot, Bicycles) Urban Consolidation centers Locker Boxes (Automated Locker Boxes) Pick-up Vans/ Outlets (Parked Vans; Store-pickups) Smart routing and Scheduling (sensors, GPS, telematics, real-time monitoring) DHL UPS FedEx TNT KuehneNagel DB Schenker *The above examples are tactics and strategies trialed/piloted by LSPs in certain cities only (mainly in Europe). These are currently not offered in all cities as full-time services. These examples have been collated here for illustration purposes only. Source: Frost & Sullivan Analysis. Highly Active / Implemented NA99-13 18
Urban Logistics Trends : Trends in Urban Freight Distribution Distribution will be Shared and become more Consolidated Without Consolidation Centers Deliveries to cities travel from warehouses directly to distribution points, making multiple trips and resulting in high congestion and rising C02 emissions in urban areas With Consolidation Centers Consolidation centers in cities will sort and dispatch goods intelligently, avoiding the need for multiple trips and thereby reducing congestion and C02 levels Source: Frost & Sullivan Analysis. NA99-13 19
Future of Connectivity in Urban Logistics: Smart Urban Fleet Design of Future Delivery Vans Will Revolve Around Technology Improvement, Carbon Footprint Reduction, Weight Reduction, Fuel Efficiency, Eco Driving and Aerodynamics Improvement New Vehicle Technologies, 2012 • • • • • • • • • • On-board real-time telematics (vehicle to grid communication, routing) Smart sensors and access cards for security and quality control Noise reduction technology, such as engine isolation Lightweight vehicles Low loading floor constructions Safety and ADAS technologies (driver distraction warning) On-board Traffic Analyzing tools Geo-fencing Chilled compartments New powertrains and low CO2 emissions Next Generation of Driving Support, 2012 Before Delivery On-board systems informs driver about the following conditions: • Vehicle condition such s tire pressure, Oil condition • Traffic updates • Route guidance • Delivery scheduling/deadlines During Delivery Through LBS and telematics, vehicle technology informs driver about the following conditions: • Inputs to make driving more energy efficient • Real-time updates on “on-the-fly deliveries” After Delivery Transport analytics systems inform drivers about the following conditions: • Eco driving • Vehicle and driver analytics Source: Volvo, OECD and Frost & Sullivan Analysis. NA99-13 20
Conclusions and Future Outlook Mega Trends, Such As Urbanization, Bricks and Clicks, and Access to Multimodality, Will Drive Demand for Time- sensitive Deliveries Resulting in Stricter Demands Being Placed on Shippers and LSPs Urban Logistics, Key Findings and Future Outlook, Global, 2020 SoSo What? What ? Over 60% of the world’s population will live in cities by 2025 The world will be connected through a network of 80 billion connected devices by 2020 Urban logistics spending will more than double to $5.98 Trillion over the next decade, with transport and distribution activities accounting for the majority of the cost. Online retail is accelerating at an tremendous rate and will grow to account for nearly 20% of total retail in 2025 City municipalities are encouraging the development of intermodal freight deliveries for medium- to long-distance flows A minimum of 500 Million deliveries per day will be made within cities by 2025. The parcel and express market will innovate and realign supply chains to deliver smaller and more frequent shipments in shorter time windows. City governments are also encouraging the development and take-up of low emission vehicles for “last-mile” deliveries Logistics service providers will offer unique urban logistics solutions, including targeted deliveries, hybrid fleets and the bundling of consignments, smart trucks, and advanced warehouse management systems. Governments will use ICT, including smart cards and e-tags, to enforce access restrictions to cities and to allow the use of dedicated parking/loading zones. Source: Frost & Sullivan Analysis. NA99-13 21
Thank You Sandeep Kar Global Director- Commercial Vehicle Research Direct: +1. 416.490.7796 Fax: +1.416.490.1533 Email: firstname.lastname@example.org NA99-13 22
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