“The biggest problem faced by our local delivery companies is in making door-to-door deliveries and finding that no one is at home to receive the goods. Return visits add to costs and often inconvenience for customers.”
Singapore Deputy Prime Minister Tharman Shanmugaratnam, April 2016
Last-mile in a Supply-chain refers to the final segment of transport before goods reach the consumer at their doorstep. As it happens, the last-mile is often the most complex and, therefore, the most expensive leg as it involves navigating complex residential areas to deliver packages to individual homes and buildings. Who amongst us hasn’t been involved in online parcel delivery in recent years? The reliance on e-commerce has been a large contributing factor to the dependence on parcel deliveries and it has seen an explosive growth in recent years, particularly since the beginning of the COVID19 pandemic in 2020.
Innovation in the last-mile has been of immense interest for businesses and research community since efficiencies in this process can lead to reduced costs, higher service levels (timely deliveries) and reduced environmental impact. Many creative and innovative solutions have been proposed, trialled and adopted by the industry, some of which include robotic deliveries, AI-powered delivery management, hybrid fleet management systems, and, finally, lockers.
Innovations in last-mile Delivery
Lockers offer an unique set of benefits such as reduced coordination and logistic costs, eliminating missed or rescheduled deliveries and parcel security by leveraging on the idea of asynchronous delivery. Lockers also attempt to circumvent negative impact on the environment by helping reduce CO2 emissions by lowering traffic. These upsides associated with lockers have boosted their popularity worldwide. Several nations, including Germany with DHL, Sweden with PostNord, Norway with Posten, Finland with PostNord, and Denmark with SwipBox, along with Singapore and others, have embraced this innovative solution.
Locker systems around the world
Lockers, however do have their downsides which are related primarily to their ease of access for the consumer and the cost of building and managing a network for the businesses. When the locker network is small, fewer consumers will have quick access to the facility thereby dissuading them from choosing it as a delivery option. However, a large network will mean higher business overheads for the delivery companies and it may not even be a possibility for the smaller players in this market. In Singapore, before 2021, the locker market was saturated by plenty of small-scale commercial locker installations by SingPost, Ninjavan, and other logistic companies. Such saturation leads to increased competition for limited space in high-demand locations, thereby diminishing the overall accessibility and convenience of locker services.
In the April of 2021, the Singaporean government introduced “Locker Alliance” (LA): an interoperable network of public lockers in residential areas and hot spots aimed at battling the inefficiencies of last-mile delivery of parcels. The Locker Alliance aims to address the inefficiencies of lockers by creating a wider network and improve the utilization rate by allowing the use of their lockers by all parcel companies. This “large-scale deployment of common lockers” is meant to encourage logistic companies to leverage on the efficiency of asynchronous deliveries without having to develop their own small scale networks. The LA Network has taken a novel approach by offering residential area options, fostering greater cost-effectiveness, convenience, and quicker parcel delivery.
Researchers in IORA have been studying the complexities in last-mile delivery operations and in their collaboration with the LA Network address some of the prime issues in the Locker Network design. In the paper “Last Mile Innovation: The Case of the Locker Alliance Network” authors Lyu et. al., study the impact of the LA network and address the following queries:
- What should be the right density and coverage of the LA network in the city? In particular, how near should we place a locker to a customer to make usage of the service appealing? The Singapore government aims to install a locker station within 250 meters of every public housing block in the city. Is this coverage suitable? How will this affect utilization?
- How many parcels in other part of the city will be shifted to self-pickup at lockers in residential areas? It has been argued that growth in parcel deliveries would contribute to slower city commutes and greater carbon emission. In the case of Singapore, shifting such deliveries away from the central business district (CBD) in the city will go a long way to curb the problems with traffic congestion in the CBD. How can a locker in residential areas, far away from the CBD, divert parcel volume away?
This study develops a method to determine network density and coverage based on a locker choice model calibrated using proprietary locker usage data. Using this knowledge of the locker density, the study then develops a Network Design model which is made computationally tractable by formulating it as a SOCP-MIP.
The findings reveal that the LA’s planning norm (250m) provides an appropriate trade-off for the network design. The choice model reveals that some strategic locations include MRTs and shopping malls are more attractive to the customers from residential blocks, compared to those from commercial blocks. Further, under the planning norm, the results show that a well-designed LA Network could reduce current CBD delivery levels by at least 7.5%, contributing to lower traffic and congestion.
The authors also note that even with a efficiently designed network individual lockers might suffer lower utilization. They suggest that such challenges can be circumvented by allowing commercial operators to use these lockers for temporary storage for other delivery operations: for instance when a door delivery fails, the parcel can be stored in the locker for future delivery attempts instead of being brought back to the warehouse.
The introduction of the LA Network in Singapore holds promise for improving last-mile delivery efficiency and customer convenience. It may also positively impact e-commerce volume and reduce traffic in congested areas. By optimizing network design, it has the potential to transform the last-mile delivery landscape, benefiting both customers and businesses.
