Remapping the Last Mile of the Urban Supply Chain

It is estimated that by 2025, a quarter of the world’s population will reside in its 600 largest cities, and these urban centers will collectively account for about 62% of global GDP.

Today, there are already 28 so-called megacities on the planet — defined as cities with more 10 million or more inhabitants — and the United Nations projects that the number will reach 41 by 2030, accounting for a population of some 453 million people.

These urban centers represent a vast market for a wide range of products. But a major hurdle to unlocking the market’s full potential is the last mile — the final segment of supply chains where products are delivered to urban customers.

Limited infrastructure, traffic congestion, and arcane city planning and regulations are some of the problems that disrupt last-mile operations. The fragmentation of demand, spurred by the dramatic growth in e-commerce, adds another layer of complexity.

In addition, most megacities are located in emerging countries where small retail outlets — or “nanostores” — dominate the landscape. A nanostore may be a mom-and-pop grocery, or even a simple kiosk, and, due to their highly limited size, their stocks need to be replenished frequently. In Mexico City, for example, some 60% of the city’s nanostores maintain only one to two days of inventory.

In spite of such challenges, there are many reasons to believe we are on the crest of substantial progress with even the most challenging of last-mile deliveries. Innovative models such as smart locker systems, the use of electric vehicles, and on-demand fleet services such as UberRUSH are being explored. Autonomous delivery vehicles, while still years from wide-scale implementation, hold game-changing promise.

But new delivery technologies will not solve this problem alone. Even more fundamental is the way companies mine and model their data. Enterprises already routinely collect a wealth of data on vehicle movements and product sales, which can be combined with other data sources to improve the design and management of urban delivery services. In the longer term, advances in distribution network modeling, combined with innovative simulation and visualization technology, will dramatically transform the way companies view, design, and manage the last mile in densely populated urban centers.