Over the course of just one decade, spending on logistics in urban areas will more than double, according to a new report from Frost & Sullivan's Visionary Innovation Group. The research firm forecasts that urban logistics expenditures will increase from $2.55 trillion in 2010 to $5.98 trillion by 2020.
The study, titled Global Mega Trends and Their Impact on Urban Logistics, asserts that four trends will drive increased spending: urbanization, connectivity convergence, "bricks and clicks," and multimodality (specifically high-speed rail). Transportation and distribution activities are expected to account for the majority of those logistics expenditures.
By 2025, the report predicts, three out of five people will live in urban areas, and there will be 35 "mega cities" across the globe. Those cities are expected to have a minimum of 500 million daily deliveries. "To meet that kind of volume, logistics companies must consolidate their delivery and [segment] their fleets," said Frost & Sullivan Senior Research Analyst Archana Vidyasekar. "Companies will also adopt innovative last-mile options, such as the use of self-collection locker boxes or 'lifestyle couriers' where people volunteer to deliver goods."
The report said that by 2025, consumers will have multiple connected devices that will provide them with an "omnichannel touch point" with suppliers, making it possible to order goods from anywhere at any time. As technology becomes more proactive and connectivity influences every stage of supply chain activity, logistics will have to become agile enough to provide spontaneous, "on the move" deliveries. "Route planning and scheduling will become imperative," Vidyasekar said. Technologies like traffic-predicting tools, RFID tags, GPS devices, road sensors, bar codes, geofencing, and location-based tracking will help companies optimize trips and ensure they are going as planned. In cases of unexpected disruptions, on-board vehicle telematics will aallow deliveries to be redirected or rescheduled, she added.
The report also predicts that by 2025, nearly 20 percent of retail purchases worldwide will occur through online channels, and some markets like the United States and United Kingdom will see nearly 25 percent of retail conducted online. Global online retail sales are expected to reach $4.30 trillion by 2025. That growth of online retailing will result in most retailers adopting a hybrid "bricks and clicks" model in the future. In fact, consumer demand for access to products both in-store and online has already pushed retailers to introduce multiple delivery options, the report pointed out. One example is "click and collect," a fulfillment model in which consumers order products online and then pick them up at a retail store.
As for the fourth trend, multimodality, Frost & Sullivan noted that by 2025 more than $800 billion will be spent globally on high-speed rail projects. Increasing the use of rail for freight deliveries would reduce road congestion. But high-speed rail could also be a viable and cost-effective option for same-day or next-day deliveries, Vidyasekar said. The researchers also noted that there is potential for establishing high-speed freight-only services in the parcel market, particularly in Europe.