Is last-mile delivery with electric vehicles viable given the stochastic and dynamic nature of the delivery environments?
Freight transportation is the backbone of the economy, moving goods between various production, consumption, and disposal sites. The rise of e-commerce platforms and with it the ability to shop on-the-fly (on-demand economy) has substantially increased this flow of goods in the urban environments. Conceptually, this increased flow brings prosperity for the consumer and the retailer, thereby fostering economic growth – 1st pillar of sustainability, and expands access to essential products for otherwise disadvantaged communities, thus improving social equity – 3rd pillar of sustainability. Further, since the retailer can consolidate deliveries and optimize delivery tours, e-commerce can significantly reduce shopping-travel-related emissions and can therefore render environmentally efficient flow of goods – 2nd pillar of sustainability. However, the competitive nature of e-commerce has prompted retailers to offer incentives to customers in the form of free shipping, faster delivery, and free returns, among others, which has resulted in inefficient flow of goods with substantial increase in shopping-travel-related emissions. These emissions, such as the greenhouse gases (CO2, CH4, etc.) adversely affect the health of the planet, while the criteria pollutants (NOx, PM, etc.) have negative impacts on human health. In 2017, the transportation sector in the US produced 1787 million metric tons of CO2 emissions, thus contributing to more than a third of nation-wide CO2 emissions. More than a quarter of these transportation-related CO2 emissions were produced by freight vehicles alone, despite the freight sector accounting for less than a tenth of vehicular traffic. Considering the urgent need to address global climate change and the negative health impacts of criteria pollutants, it is pertinent that stakeholders (regulator and retailer) better plan and manage urban freight to foster a sustainable flow of goods that is economically viable, environmentally efficient, and socially equitable. To this end, using alternate fuel vehicles such as battery electric freight vehicles can render low-cost, zero-emission (tailpipe), equitable delivery of goods, though an effective utilization of these alternative delivery options is contingent upon stakeholders making appropriate decisions.
Incentivizing transition towards an electric delivery fleet
A retailer’s choice to purchase a fleet of electric vehicles (trucks or delivery vans) depends on the total cost of ownership (TCO) of this technology against other options (e.g., diesel trucks). While an electric truck typically has a higher purchase cost in comparison to an equivalent diesel truck, the lower operational costs (maintenance and fuel cost) can justify the purchase of an electric truck fleet in the long-run. Nonetheless, the high upfront purchase cost of an electric truck with the potential operational cost savings far in the future, dissuades retailers to replace its diesel truck fleet with an electric truck fleet. Thus, considering these trade-offs for the retailer, government support in the form of incentives play a critical role in fostering the transition to zero emission vehicles. These incentives can be one-time purchase incentives such as the one offered under the Hybrid and Zero-Emission Trucks and Bus Voucher Incentive Program (HVIP) program in California, or continuous support incentives such as the one offered under the California Low Carbon Fuel Standard (LCFS) program wherein credits are disbursed based on the quantity of diesel fuel substituted and relative carbon intensity of the alternate fuel. Further, in California, these incentive programs are bolstered by the Advanced Clean Truck (ACT) rule which sets targets for truck manufacturers on minimum sales of alternate fuel trucks, thereby ensuring availability of a wide-range of industry competent electric trucks for retailers to purchase. Such supply- and demand- side incentives are essential to make electric trucks compete with diesel trucks until the electric powertrain and the associated battery technology achieve cost parity with diesel trucks.
Developing infrastructure to support last-mile electrification
In addition to purchase and operational cost targeted incentives, government and other agencies support through public charging infrastructure has a critical role in influencing retailer’s purchase decision. Though electric trucks available in the market today have sufficient range to carry out typical day-to-day last-mile operations without having to be re-charged during the working hours as is evident from the figure above, range anxiety and consequently perceived lack of reliability in an extremely time-sensitive market can also dissuade the retailer to purchase electric vehicles. In fact, a sophisticated network of (fast) charging infrastructure is necessary to tackle the challenges in transitioning from a conventional diesel truck fleet in the short- and medium- term, wherein certain strategic aspects of the supply-chain cannot be re-configured. One such aspect is logistics network configuration. i.e., location of warehouses, fulfillment centers, consolidation facilities, delivery stations, vehicle depots, etc. Further, such facilities are constrained by land-use and warehousing patterns, and therefore may have to locate away from market. Thus, in certain markets, limited vehicle range can become serious hindrance to successful adaption of electric vehicles in the delivery fleet. In such markets, it becomes even more pertinent to provide incentives and establish a sophisticated network of fast-charging stations to encourage retailers to transition from conventional diesel-powered fleet to electric delivery vehicles. In addition, support for retrofits and other infrastructure upgrades at retailers’ vehicle depots may also be required.
Identifying best use case for electric delivery vehicles
A retailer’s choice to deploy a fleet of electric trucks is contingent upon the delivery environment. In general, last-mile operations with conventional-sized class-5 delivery trucks (diesel or electric) is a good fit for markets with lenient temporal constraints that allow for demand consolidation and route optimization, and thus render low-cost delivery. However, as temporal constraints become stringent, consolidation levels drop leading to frequent less-than-truckload delivery tours, increased vehicle miles traveled, and therefore increased costs for the retailer. Nonetheless, due to a much lower operational cost of an electric truck in comparison to a diesel truck, the increase in costs for the retailer from stricter time-windows is less severe when operating an electric truck fleet instead. Thus, class-5 electric trucks can provide an 8% savings in comparison to the class-5 diesel truck for last-mile operations under 2-hr delivery time-window. In fact, for delivery under such strict time-windows, smaller electric vehicles or electric vans render up to 50% savings in comparison to conventional-sized class 5 diesel truck. Moreover, with improvements in the battery technology in the form of improved energy density, and faster charging rates, the delivery cost can be further reduced by as much as 25%, making electric delivery vehicles significantly better than diesel-powered delivery vehicles across all delivery environments (see figure below). These results highlight the potential opportunities with electric trucks to render low-cost, zero-emission, equitable delivery of goods.
Deploying and managing electric vehicles
A retailer’s choice to operate a fleet of electric trucks depends on the reliability and consistency with which the retailer can carry out day-to-day last-mile operations in a dynamic, stochastic, and time-constrained environment, typical of e-commerce delivery in urban markets. The dynamic elements pertain to weather-related events, traffic accidents, vehicle failure, same-day customer requests, etc., while the stochastic elements pertain to travel speed, travel time, customer demand, and customer availability, among others. Such dynamic and stochastic changes in the environment can affect the capability of electric vehicles, especially smaller electric vans with limited battery size and vehicle range, to successfully carry out last-mile operations, unlike diesel vehicles. While a sophisticated network of fast-charging stations in such delivery markets can safeguard against operational failures, eco-routing and eco-driving strategies can further help the retailer extract the full potential of electric vehicles to effectively utilize battery energy and maximize vehicle range, and therefore ensure reliable last-mile operations. Such eco-routing strategies pertain to optimal path choice, while eco-driving strategies pertain to optimal vehicle operation – acceleration, cruising, braking, and idling. Typically, battery efficiency peaks at moderate level of vehicle operation, thus, passiveness or aggression behind the wheel renders a drop in battery efficiency, thereby increasing vehicle energy consumption. Thus, while eco-routing strategies guides vehicle towards energy-efficient route, eco-driving strategies guide vehicle to optimal battery use. Combined, these eco-routing and eco-driving strategies can help the retailer optimize its fleet use and therefore improve reliability of last-mile operations with electric fleet. In addition, optimizing fleet use through such strategies can potentially further reduce operational cost with minimal increase in total distance traveled and time taken to deliver goods. Further, owing to reduced heavy acceleration and braking events, these eco-driving strategies can lessen driver fatigue and therefore reduce traffic accidents, especially for retailers providing expedited service.
Last-mile delivery service in dense urban environments with lenient temporal constraints provides best opportunity to deploy electric delivery vehicles. In fact, across all market segments and delivery environments, electric trucks have proven to be competitive with diesel trucks, yet, despite such opportunities, challenges in transitioning from conventional diesel vehicle fleet to electric vehicle fleet remain. These challenges largely pertain to lack of reliability in dynamic and stochastic delivery environments. Due to such challenges, adoption of electric vehicles in the freight sector has been slow, while there is an urgent need to address global climate change and local criteria pollutant issues which have serious implications for the planet and human health, respectively. Nonetheless, with a joint effort between stakeholders (regulator and retailers), freight related externalities from last-mile delivery can be addressed. To begin with, upfront government support in the form of purchase incentives and/or continuous support with operational incentives can encourage the retailers to switch to electric vehicles for last-mile delivery. Such policy measures could mandate retailers to implement regular eco-driving training and assessment for its staff, not limited to only drivers but also managers, and therefore instill eco-friendly behavior top-down in its firm, as a prerequisite to subsidies, permits, licenses, etc. In addition, local governments must establish sufficient public charging infrastructure with fast charging capabilities in urban environments, near residential and commercial spaces. Thus, with stakeholders making such appropriate strategic, tactical, and operational choices, electric vehicles can be deployed for a low-cost, zero-emission, and equitable last-mile delivery.
Jaller & Pahwa (2020) – Evaluating the environmental impacts of online shopping: A behavioral and transportation approach
Jaller, Otero-Palencia, & Pahwa (2020) – Automation, electrification, and shared mobility in urban freight: opportunities and challenges
Jaller, Pahwa, & Zhang (2021) – Cargo Routing and Disadvantaged Communities
Pahwa & Jaller (2022) – A cost-based comparative analysis of different last-mile strategies for e-commerce delivery