Computational results - 6 Simulation analysis

6 Simulation analysis

6.3 Computational results

The simulation highlights as the emerging of Green subcontractors such as the bike couriers, changes the dynamics that govern the urban freight dis-tribution system in last mile segment. Figure 8 and Figure 9 summarize the efficiency respectively of the Traditional subcontractor and Green one, in terms of equivalent vehicles and number of parcels per hour, when the Green subcontractor delivers ”mailer” and ”small” parcels. Notice that KPIs are expressed in percentage respect the benchmark scenario S 0. The detailed results obtained from the Monte Carlo simulation are shown in the Table 6.

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Concerning the performance of the Traditional subcontractor, the simulation highlights three main results:

it reduce the number of equivalent vehicles by half;

it loses in efficiency;

it saturates the capacity of its vans.

By outsourcing ”mailer” and ”small” parcels, the Traditional subcontractor manages only large sized parcels (over 5 kg), usually difficult to handle, with a consequent increase of the service time needed to execute the delivery ope-rations. The latter causes the rapid saturation of the vans’ capacity and, thus, the reduction of the number of parcels in a single round and of the duration of each route. Consequently, the Traditional subcontractor needs double rounds and lose efficiency, here measured in number of deliveries per hour. Figure 8 shows that the Traditional subcontractor loses more than 15%

of efficiency when ”mailer” parcels are delivered by the Green subcontractor and more than 30% when also ”small” parcels are outsourced. Finally, it is interesting that the area, where the Green subcontractor operates, does not affects the KPIs of the Traditional subcontractor. This is due to the distribution of parcels. On the contrary, the Figure 9 shows that for the Green subcontractor, the area of service is a relevant factor for its efficiency.

In fact, both when it manages the mailers and the small parcels, extending the service from the central area to the semi-central one, the efficiency of the Green subcontractor, in terms of number of deliveries, decreases. However, to maintain an equilibrium condition in the system after the transition to low emission vehicles, it is necessary that the improvement in quality ser-vice level, consequent to the value proposition of the Green subcontractor business model, must at least compensate this loss of efficiency in which the Traditional subcontractor incurs. In fact, the results of the simulation highlights as when the Green subcontractor manages the parcels up to 5 kg, the benefits are negligible than the consequent inefficiency for the traditio-nal operator. However, particularly when the Green subcontractor operates both in centre and semi-central area, the benefits in terms of costs savings (operative and environmental) are on average of the 29% and thus, lower than the reduction of the efficiency of about 34%. This negative variance discourages the traditional courier to outsourcing this segment, while it is more inclined to outsource the parcel up to 5 kg in central area. Moreover, it

is important to extend this analysis distinguishing between the case in which the fleet of vehicles is owned by the International courier (internal fleet) and those of fleet managed by another firm (external fleet). This company in-curs in the costs related to the vehicles considered, but also in the general costs and those of the structures, charging a percentage of margin. Thus, according to this classification, the above mentioned values are referred to the case of internal fleet. On the contrary, when the fleet is external, the dynamics change. First of all, we have to move from a cost per kilometre to a cost per stop. This can be done by considering an average distance between two vehicle stops of about 700 meters and a minimum requirement of 80 deliveries per day [4]. Then, analysing the results it emerges how the loss of efficiency for the Traditional subcontractor of about the 30% as il-lustrated in the Figure 8 must be overturned in an increase of the Green subcontractor performance of about the 70%, without guarantee its desired fee of margin of the 15%. This percentage related to the increase of the per-formance is traduced into 130 deliveries per day, which is a goal difficult to achieve for the Green subcontractor. Moreover, although in the case of ex-ternal fleet, the costs savings connected to the parcels with a weight between the 3 and 5 kg in the semi-central area are on average of the 36% compared to a loss of efficiency of the 34%, the consequences of this inefficiency do not justifying the outsourcing. More in detail, the contractual schemes imply a remuneration based on the number of delivery and penalties in case of not fulfilment of the minimum requirements and thus, the loss of efficiency due to the less number of deliveries of the Traditional subcontractor as a con-sequent of the outsourcing and the remaining deliveries with high distances could have a negative impact, making needed a re-definition and negotiation of the agreement conditions. The new contract should contemplate an in-crease in the number of deliveries required for the Green subcontractor in order to balance the loss of efficiency of the traditional one without alter the equilibrium state of the service level in the system, but decreasing its costs per stop to a value of about 1.90 e/stop and leading a critical margin of the 10%, nearly identical to the gross contribution margin. Moreover, the outsourcing of all parcels leads to a complexity in the management of a high number of agreements with different contractual clauses, based on the class of parcels. This could imply strategical risks, due to the less control on the process, entrusting the activities that could be strategical levers and due to the increases of the bargaining power of the Green subcontractor.

Concerning the environmental issue, we measured the CO2 savings that 30

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occurs outsourcing the ”mailer” and ”small” deliveries. Table 7 shows the CO2 savings in each scenarios as the difference between the total emissions generated in scenario S 0 to those generated in the other scenarios by tra-ditional vans. By outsourcing both ”mailer” and ”small” parcels (scenarios S 5 C and S 5 S) to the Green subcontractor can lead a highest reduction of emissions, closes to 14 tons of CO2 per year. The area served by the Green subcontractor has a strong impact on the number of travelled kilometres and so on the emissions. Reducing the accesses to the centre and the semi-centre, the routes’ length of the Traditional subcontractor is reduced of about 25%.

Consequently, the CO2 savings are more than 40%.

From the analyses conducted and the results obtained by the simulation, it is possible to extrapolate some policies that guide the behaviour of the different operators and the stakeholders in the urban freight transportation system. In particular, the main actions to consider in order to guarantee the balanced mix of traditional and green transportations and thus, the efficient performance of the system are:

In the case of internal fleet (i.e., the fleet is owned by the Interna-tional courier), the Green subcontractor must manage the mailers in the central and semi-central areas. In fact, as emerged by the analysis described in the Section 5.1, it is the most profitable segment for this courier, because it permits to maintain the high quality level imposed by the International courier customer. Moreover, Green subcontractor must manage the small parcels in the centre of city where the traffic conditions and the mobility restrictions make more powerful the bene-fits and the reduction of costs for the Traditional subcontractor. On the contrary, outsourcing the management of the deliveries of the parcels with a weight greater than the 5 kg in the rest of the city not only af-fects the quality level perceived by the final customer, but also it leads to a decrease of the efficiency reducing the margins for the Traditional subcontractor.

In the case of external fleet (i.e., the fleet is given by a series of subcon-tractors), the Green subcontractor must manage the mailers in the central and semi-central areas, but the outsourcing of the parcels with a weight between 3 kg and 5 kg requires a change in the contractual scheme, decreasing the margins of the Green subcontractor that must increase its role in the selling of the energy and environmental credits.

Thus, the results obtained show that the goal required to the Green

Figure 8: Traditional subcontractor efficiency in terms of equivalent vehicles (Veh Eq) and parcels delivered per hour (nD/h)

subcontractor in terms of increase of deliveries, to face the reduction of the efficiency for the traditional one, makes the model not feasible and sustainable. This highlights that for the Traditional subcontractor, the more convenient solution is to internalize the green fleet, which will be used to manage the parcel up to 3 kg in the central area.

Although, the green aspects of the problem are today important topics and the introduction of business models based on low environmental impact leads to a reduction of the emissions in a medium sized city, as Turin, an efficient management and control of the system are nee-ded. In fact, the only focus on the reduction of emissions could lead to a cannibalization of the two types of business models. Otherwise, the optimization and the monitoring of the operational process of the two couriers and particularly for the traditional one, are needed. The purpose is to optimize and planning its activities in a view efficiency of the urban parcel delivery, also by means of decision support systems and simulation-optimization methods.

7 Conclusions

In this paper, the freight transportation in urban areas has been analysed, in light of the important role covered in recent years and the emerging of

mo-32

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Table 6: Results of Monte Carlo simulation. Notice that the Green subcon-tractor has no value in S 0 because it is not implied in this scenario.

Instances nD/h Veh Eq

Traditional subcontractor

S 0 S 3 C S 3 S S 5 C S 5 S S 0 S 3 C S 3 S S 5 C S 5 S I1 15.65 12.82 12.98 10.44 10.38 7.49 2.16 3.53 2.28 3.62 I2 16.18 13.79 13.77 10.92 10.73 9.89 3.03 4.86 3.07 4.98 I3 15.47 13.29 13.01 10.50 10.21 8.40 2.54 4.18 2.70 4.41

Green subcontractor

S 0 S 3 C S 3 S S 5 C S 5 S S 0 S 3 C S 3 S S 5 C S 5 S

I1 NA 11.94 11.24 12.47 11.94 NA 3.70 6.55 3.88 6.88

I2 NA 12.03 11.36 12.51 12.06 NA 4.96 8.39 5.45 9.02

I3 NA 11.82 11.16 12.56 12.04 NA 3.85 6.89 4.12 7.14

Table 7: CO2 savings per day with respect to scenario S 0 Instances CO2 savings

S 3 C S 3 S S 5 C S 5 S

I1 22% 34% 27% 45%

I2 16% 34% 26% 44%

I3 16% 41% 20% 48%

Figure 9: Green subcontractor efficiency in terms of equivalent vehicles (Veh Eq) and parcels delivered per hour (nD/h). Notice that S 0 has no value because the Green subcontractor is not used in this scenario.

bility sustainable issues, also promoted by the ”Horizon 2020” programme.

In particular, we highlight, by means of the GUEST Methodology approach, the impact of green vehicles adoption, such as electric vehicles and espe-cially bikes, as part of the City Logistics field. Based upon our analysis and simulation results, we highlight how outsourcing parcels deliveries to Green subcontractors could determinate on the one hand, benefits on the CO2 emissions and on the quality level required by the time-sensitive feature of the service, thanks to the reduction of delivery times. However, on the other hand, the switch to low environmental vehicles determinate a loss of efficiency for Traditional subcontractor. For this reason, to maintain an equi-librium level in the system, it is important that this inefficiency is contained and balanced by the increase of the service quality using green vehicles, by a re-definition of the contractual schemes with the Traditional and Green subcontractors or the integration of the green fleet in the International Cou-rier company. Moreover, a continuous process for the optimization of the activities through the implementation of a DSS is needed, in order to achieve reasonable levels of efficiency. According to this emerging bi-vehicular mo-del, a future direction of this work is to analyse how the dynamics in the urban freight transportation systems change introducing other vehicles with low environmental impact as the totally electric and the hybrid ones.

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Acknowledgments

Partial funding for this project was provided by the Italian University and Research Ministry under the UrbeLOG project-Smart Cities and Communi-ties. Partial funding for this project has also been provided by the Natural Sciences and Engineering Council of Canada (NSERC) through its Disco-very Grants program. We also gratefully acknowledge the management of PonyZero for is support, and the CEO Marco Actis in particular.

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