Collaboration in urban distribution of online grocery orders

• Pages: 1196-1214
• DOI: https://doi.org/10.1108/IJLM-11-2017-0303
• Published date: 07 September 2018
• Date: 07 September 2018
• Author: Dimitris Zissis,Emel Aktas,Michael Bourlakis
• Subject Matter: Logistics,Management science & operations

Collaboration in urban distribution

of online grocery orders

Dimitris Zissis

School of Management, University of Bath, Bath, UK, and

Emel Aktas and Michael Bourlakis

School of Management, Cranfield University, Cranfield, UK

Abstract

Purpose –Population growth, urbanisation and the increased use of online shopping are some of the key

challenges affecting the traditional logistics model. The purpose of this paper is to focus on the distribution of

grocery products ordered online and the subsequent home delivery and click and collect services offered by

online retailers to fulfil these orders. These services are unsustainable due to increased operational costs,

carbon emissions, traffic and noise. The main objective of the research is to propose sustainable logistics

models to reduce economic, environmental and social costs whilst maintaining service levels.

Design/methodology/approach –The authors have a mixed methodology based on simulation and

mathematical modelling to evaluate the proposed shared logistics model using: primary data from a major UK

retailer, secondary data from online retailers and primary data from a consumer survey on preferences for

receiving groceries purchased online. Integration of these three data sets serves as input to vehicle routing

models that reveal the benefits from collaboration by solving individual distribution problems of two retailers

first, followed by the joint distribution problem under single decision maker assumption.

Findings –The benefits from collaboration could be more than 10 per cent in the distance travelled

and 16 per cent in the time required to deliver the orders when two online grocery retailers collaborate in

distribution activities.

Originality/value –The collaborative model developed for the online grocery market incentivises retailers

to switch from current unsustainable logistics models to the proposed collaborative models.

Keywords Sustainability, Europe, Mixed method, Food logistics, Urban logistics

Paper type Research paper

1. Introduction

Managing urban areas has become one of the most significant challenges of the twenty-first

century. Current projections estimate that the world’s urban population will be 66.4 per cent

of total population by 2050 (UN, 2015). Figure 1 illustrates the percentage of population

living in urban areas and a forecast for the USA, Brazil, Western Europe, China and India

(UN, 2014). In Europe, 74 per cent of the population lives in urban areas already and it is

estimated to increase to 82 per cent by 2050 (UN, 2014). As more people prefer to live in

urban areas, the demand for all kinds of products is going to be higher in cities.

Consequently, more products will be transported to and distributed within cities to satisfy

the needs of a growing population.

Urban areas represent specific challenges related to economic, environmental and social

aspects of freight transport (Lindholm and Behrends, 2012). Some of the main challenges

are: cutting transportation cost, fuel-distance efficiency, lack of traffic infrastructure

capacity, redesigning the distribution network and cities’plans to meet the air quality

standards set by the European Commission (Directive 2008/50/EC). The latter is due to the

significant effect of urban freight transport on quality of life in urban environments through

traffic congestion, vehicle emissions and noise pollution (Nathanail et al., 2017).

The International Journal of

Logistics Management

Vol. 29 No. 4, 2018

pp. 1196-1214

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-11-2017-0303

Received 9 November 2017

Revised 8 March 2018

2July2018

Accepted 16 July 2018

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

The authors are indebted to the three anonymous referees and the Associate Editor for their comments

and suggestions that helped improve the context and the presentation of the material in the paper.

This work has received funding from the European Union’s Horizon 2020 research and innovation

programme under grant agreement No. 635773, U-TURN (www.u-turn-project.eu/).

1196

IJLM

29,4

Specifically, transport is the fastest growing sector with the road transport subsector

being the largest contributor to total CO

2

emissions (EPA, 2011), whilst pollution and noise

are accompanying problems in urban areas. To alleviate these problems, megacities

usually have transport-related restrictions such as the sizeoftrucksthatcanmoveincity

centres, the hours they can supply retail shops, etc. Such restrictions make the distribution

of goods more complex and raise the total operational and transportation cost, harming

retailer’s profitability.

During the past few years, developments in information technologies have enabled

retailers to offer new services such as online shopping. Along with books, fashion items,

flight tickets and hotel bookings, people now choose to shop online almost anything,

including groceries. It is forecasted that e-retail would dominate the retail sector in the next

few years and online shops would harm traditional brick-and-mortar shops (Doherty and

Ellis-Chadwick, 2010), notwithstanding the distribution challenges posed by this online

activity (Ishfaq et al., 2016).

In this paper, we focus on the UK grocery retail sector as it is the second biggest online

market in the world in terms of size after the Chinese online grocery market (IGD, 2016). The

sales of the UK online grocery retail market accounted for £9.9bn in 2016 (Mintel, 2017), is

estimated to reach £16.7bn by 2021 and to be around 10 per cent of the whole grocery

market (Mintel, 2016). Figure 2 presents the market size from 2011 onwards and forecasted

up to 2021. The UK online grocery retail market has seen an annual growth more than

15 per cent (Figure 2), while the total grocery market has grown less than 5 per cent

annually in the last 10 years (IGD, 2015). Due to this unprecedented market growth, there is

a need for operational models for the distribution of online purchased groceries in cities and

this paper is investigating such operational models.

To raise their customer base and their market share, retailers offer online services and

try to raise their market share without compromising profitability (Murfitt, 2014). Likewise,

consumers always ask for more and better services, buy groceries online and expect to

receive the groceries at home or at convenient locations and times. Aiming to satisfy these

consumers, UK retailers provide them with two options: home delivery services and click

and collect services. In the first option, consumers select a day and a time slot to receive

grocery orders delivered to their houses. In the second choice, retailers transport consumers’

orders to a predefined collection point known as the click and collect point, where customers

must collect their orders during a predefined time interval on the selected day. Depending on

100

80

60

40

20

0

1950 1970 1990 2010

Year

Percentage of Urban Population

2030 2050

WORLD

USA

Brazil

Western Europe

China

India

Source: UN (2014)

Figure 1.

Population as a

percentage of

total population for

the USA, Brazil,

Western Europe,

China and India

from 1950 to 2050

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Online grocery

orders