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Last-mile solutions with multi-tiered distribution

In this episode of Thought starters Matthias Winkenbach, Director of the MIT Megacity Logistics Lab and the MIT CAVE Lab explores how businesses can master last-mile logistics within urban environments.

The urban last-mile is typically defined as the last leg of transportation to the final recipient. According to Matthias, ”while the last-mile is just the shortest, final leg of the global supply chain, it's actually the most complex and most costly part.”  That's why getting those one to five kilometres right, is the most critical thing to do to ensure efficient deliveries to consumers.  

With more than two thirds of the world’s population predicted to live in cities by 2050 , cities are becoming bigger and more dense. Matthais says it’s this density that is what drives uncertainty for last-mile delivery. “While urban environments are getting increasingly uncertain, consumers are getting increasingly demanding” he says. 

Customers want to receive their purchases as fast as possible with 55% of consumers in a CapGemini survey saying they will switch to a competing retailer/brand if it offers a faster delivery service.   
The solution Matthias proposes to last-mile logistics problems is multi-tiered distribution. Multi-tiered distribution involves having a larger number of small facilities within urban centres that are located close to the end-consumer. These small facilities are often called satellite facilities. “So, if you fulfil from a local satellite facility rather than from a centralised distribution centre, you have to overcome a shorter distance to that consumer” explains Matthias. 

“As we move towards ever faster delivery lead times, ever more individualised logistics services for urban consumers, where you have your distribution facilities, what kind of facilities you have and how you use them, is basically the most strategic question that you have to answer if you want to master the urban last-mile” concludes Matthias. 

 

i UN, 2019

ii Cap Gemini, 2019

"The shortest part of a global supply chain, that last mile is actually the most complex …. So that's why getting those last one to five kilometres right is the most critical thing to do."