By Susan Shaheen and Adam Cohen
Mobility on Demand (MOD) is an innovative concept based on the principle that transportation is a commodity where modes have economic values that are distinguishable in terms of cost, journey time, wait time, number of connections, convenience, and other attributes. MOD encapsulates not only how people move, but it also reflects how households consume goods and services, as well as the spatial aspects of consumer decision making. Goods delivery is one key defining characteristic of MOD, where consumers can substitute goods delivery for a passenger trip.
Innovative technologies and business models are helping to reimagine service delivery. Whether it is a startup (e.g., Uber Eats, Postmates, DoorDash); an Internet-based retailer (e.g., Amazon); or a supply chain and logistics firm, advancements in courier services (technologies and service models) are transforming consumer behavior and disrupting both supply and trip chains (e.g., linking a series of destinations in one single-origin based trip). For example, a travelers’ decision to change their consumption preferences from driving to the store on the way home from work to having goods delivered to them will likely drive fundamental changes in traditional travel behavior.
From “Just-in-Time Inventory” to “Just-in-Time Delivery”
In recent years, on-demand courier services have grown rapidly due to technology advancements, changing consumer patterns, and a growing consumer recognition that goods delivery can serve as substitutes for person trips to access goods and services. Together these trends have transformed the retail sector from “just in time” inventory, where retailers order inventory and stock shelves on an as-needed basis to “just in time delivery,” with goods delivered direct to consumers on-demand. In recent years, subscription e-commerce has grown exponentially led by subscriptions such as: 1) Dollar Shave Club and Ipsy cosmetics; 2) Stitch Fix fashion on-demand; 3) meal kit delivery services including Blue Apron, Hello Fresh, and Home Chef; and 5) grocery delivery services such as AmazonFresh, Postmates, and Instacart. And it is not just subscription services. This also includes shipping subscription services, such as ShopRunner and Amazon Prime, which offer unlimited priority delivery services for a flat monthly or annual fee. Even companies, such as Wayfair, are offering free shipping on most merchandise, even larger items (e.g., furniture).
Seven innovations in goods delivery that are likely to disrupt transportation in the future include:
1. Subscription Delivery Services: The growth of low-cost, flat-rate delivery subscription services (e.g., Amazon Prime and Shop Runner) are allowing consumers access to on-demand all-you-deliver consumption—a key factor contributing to induced demand.
2. Advanced Algorithms: Algorithms help merchants and delivery providers optimize the supply and delivery chain from order fulfillment to identifying the least expensive or quickest delivery route.
3. Locker Delivery: Locker delivery, already widely deployed by the U.S. Postal Service, allows consumers to order and ship items to a self-service locker at home, work, or an alternative pick-up location. Locker delivery can help consumers, merchants, and delivery providers overcome a variety of challenges, such as weekend and off-peak delivery services and enhanced security (versus leaving a package at a door).
4. Courier Network Services (CNS): Apps or online platforms employed to provide for-hire delivery services for monetary compensation. The apps match couriers—who use a personal vehicle, bicycle, or scooter for deliveries–with customers of the ordered goods (e.g., packages, food).
5. Drones: A delivery drone is a short-range unmanned aerial vehicle (or UAV) that can transport small packages, food, or other goods. Some service providers, such as the United Parcel Service, have experimented with pairing drones and truck-based delivery to improve service delivery.
6. Robotic Delivery: Like drones, delivery robots offer short-range unmanned ground-based delivery of packages, food, or other goods.
7. Automated Vehicles: Automated and connected vehicles offer another mechanism for future delivery options employing both business-to-consumer and peer-to-peer delivery services.
Automation will reshape retail consumption and goods delivery.
Increasingly, last mile delivery is being reimagined through automated processes. In Summer 2018, Kroger began testing driverless grocery deliveries in Arizona using automated vehicles. Numerous companies, such as Dispatch and Starship, are delivering food, beverages, parcels, and other items using small delivery robots. To accept delivery when a person is at work or away, numerous companies are developing innovations to facilitate secure parcel delivery such as:
1. ParcelHome, an electric lockbox that can securely send and receive parcels with any courier service;
2. Pharme enabling the delivery of packages to the trunk of a car; and
3. Amazon Key that enables both vehicle trunk and in-home delivery.
Together the growth of e-commerce, subscription services, and last-mile delivery may contribute to a dramatic increase in goods-related trips across the entire transportation network. However, it is not just the growth of e-commerce, subscription services, and last-mile delivery that has the potential to increase delivery trips. In an automated future, there could be an increasing number of marketplace players including startups, courier network services, and retailers (who may more readily opt to operate their own delivery fleets). This is an important space to monitor, as it has the potential to disrupt both businesses (e.g., retail) and daily travel behavior (e.g., induced demand, congestion).
Susan Shaheen and Adam Cohen are co-authors of the U.S. Department of Transportation’s Mobility on Demand Operational Concept. For more information, please review the report here.
Please note that this article expresses the opinions of the author and does not reflect the views of Move Forward.