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The Profound Disruption of Last Mile Delivery
December 2019

The convergence of technology, CO2 regulations and the continued growth in e-commerce volume has started to transform the last mile delivery landscape. Electrification will enable logistics players to continue operating in dense urban areas where polluting vehicles will increasingly be banned. Autonomous driving technology will allow for a drastic reduction in the cost of delivery, thus triggering further growth in e-commerce volume. New types of vehicles and new logistics structures are emerging to address this new paradigm.


Whereas e-commerce penetration reached 9% of retail sales in the USA and 16% in the UK in 2017 (respectively 2x and 3x vs. 2008), it is expected by KPMG that further growth will result in 30 billion individual deliveries by 2030 and up to 90 billion by 2040. This growth should by far exceed the drop in shopping trips made by private vehicles, which KPMG expect to reach -30 to -50% over the period. E-commerce powerhouse Amazon, for one, has fully embraced this transformation as analyzed on my October article “Why Amazon Is Investing Massively in Mobility Tech.”


Transformation of the logistics organization

Heavy duty trucks (Class 8 / 38t) will continue to provide long distance, intercity service and deliver their goods at logistics centers outside cities. They will likely be among the first vehicles to utilize a high level of autonomy (SAE Level 4), but among the last to go electric, though they will likely be fuel cell electric by then. The main transformation in the short term is the deployment of digital freight forwarding platforms which maximize the use of available cargo space.

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Mid-size trucks or large cargo vans (or even river barges) bring the marchandise from logistics centers to stores and depots located in high density urban areas, or to their final destination in low density areas. These vehicles will quickly become electric — see Amazon’s recent order of 100k electric cargo van from Rivian (picture above) or DHL’s StreetScooter deployment— but are not likely to become autonomous in the next few years. 


Lastly, we will see a variety of vehicles, on land and in the air, to move goods from urban depots to their final destination, i.e. the last mile, progressively enabling one-hour deliveries. Whereas the previous delivery stages have high barriers to entry with costly sorting centers and broad networks, the last mile delivery space is more likely to see the emergence of new players, in particular for immediate deliveries or local services (e.g. pizza, laundry, etc.). Success in last mile delivery will likely hinge upon the ability to master distribution routing and orchestrate fleets of autonomous vehicles of different types, using analytics and artificial intelligence.


Emergence of new types of vehicles for the last mile

Urban delivery vehicles will likely embrace a considerable amount of technology. Most will eventually go electric, as city centers — mainly in Europe and China — will increasingly ban vehicles with internal combustion engines. This will also benefit total cost of ownership as battery cost continue to drop, and will enable quieter deliveries. Most vehicles will also become highly automated as the technology mature, and likely earlier than passenger vehicles thanks to lower operating speeds. According to McKinsey (see graph), driving autonomy can potentially reduce delivery cost by 40%.

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New form factors are emerging in this space, including low speed autonomous cargo vehicles, delivery robots operating on sidewalks, delivery drones and even a four-legged robot to climb stairs.


Autonomous cargo vehicles

Several players are already piloting last mile, urban deliveries with car-size vehicles (or a little smaller) operating on streets and intended to become autonomous. Among them is Nuro with plans to build a small, purpose-built vehicle (see below) first operating at 40 kph, thanks to $1B raised to date. The startup has already performed several thousand food deliveries for Kroger’s and Domino’s Pizza in the USA (picture below). Two other players also based in Silicon Valley are Gatik and Udelv. The former focuses on the “middle mile” — delivery from depots to stores — and has piloted its solution with Walmart. The latter, has made test deliveries with Silicon Valley-based groceries stores. 


Toyota is the OEM that has made the boldest statement in this space, presenting the highly modular e-Palette at CES 2018. The platform can be configured to move either people of goods and will be used to transport athletes at the 2020 Olympics. In nearby China, Alibaba is testing low speed (15 kph) driverless delivery robots in China.

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Sidewalk delivery robots

Much smaller than the previous category, sidewalk delivery robots are intended to enable deliveries in areas where vehicles are banned (e.g. pedestrian streets, campus) as well as one-hour deliveries in dense urban centers. They are at the core of a number of startups, including Dispatch, Marble, Robby, Starship or Kiwi Campus


These small bots are also an integral part of Amazon’s multi-modal delivery strategy. The e-commerce giant acquired Silicon Valley-based, Dispatch. The company also developed its own delivery robot, a small six-wheeled electric vehicle, and tested it in a new service called Scout.  Similarly, FedEx has developed Roxo, a four-wheel robot with the ability to climb a few stairs and aimed at same day delivery (image below), and PostMates was authorized to test its own vehicle on the sidewalks of San Francisco.

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Delivery drones

Delivery drones are becoming part of the modal offering. They will be particularly valuable in areas where access by road is difficult or for the urgent delivery of medical supplies, e.g. in war-torn areas. Their deployment is likely to be the highest in low density urban or rural areas, whereas regulations and limited landing space will likely throttle their deployment in cities. A number of companies are developing delivery drones for small payloads, including Matternet (carry 2 kg over 20 km), ZipLine (1.8 kg over 80 km), Flytrex or Flirtey.


Various industry majors are evaluating drones. French Groupe La Poste’s subsidiary DPDgroup recently opened its 2nd commercial line to deliver parcels at mid-altitude in the Alps, using a drone capable to carry 2 kg over up to 15 km (image below). The Swiss Post has collaborated with Matternet to deliver medical supplies, though they stopped after two crashes. Daimler has also worked with the German startup (picture below). Alphabet (Google’s parent company) and Amazon received authorization from the US Federal Aviation Administration to operate their drones and have started delivering via their subsidiaries, respectively with PrimeAir (2.5 kg over 25 km) and Wing Aviation (2.5 kg over 25 km).

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The massive increase in parcel deliveries will greatly benefit from the new technologies that are transforming the overall mobility space, namely electrification and autonomous driving. They will enable a reduction in delivery cost — thus feeding further growth — and make it possible for new form factors to emerge. Deployed mainly for the last mile, these new modes will likely also bring about new players which will disrupt the overall delivery ecosystem. However, regulation will be required to ensure that the net effect of fewer shopping trips and more deliveries still has a positive impact on trafic congestion and our environment.



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Marc Amblard

Managing Director, Orsay Consulting

Feel free to comment or like this article on LinkedIn. Thanks!

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