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Episode 37: Reinventing Last Mile Delivery

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Bob Trebilcock: Welcome to The Rebound where we'll explore the issues facing supply chain managers as our industry gets back up and running in a post COVID world. This podcast is hosted by Abe Ashkenazi, CEO of the Association for Supply Chain management and Bob Trebilcock, editorial director of Supply Chain Management Review. Remember that Abe and Bob welcome your comments. Now, to today's episode.

Bob: Welcome to today's episode of The Rebound, reinventing last-mile delivery. I'm Bob Trebilcock.

Abe Ashkenazi: I'm Abe Ashkenazi.

Bob: Joining us today is Charles Jolley. Charles is the CEO of URB-E, a last mile delivery startup. Charles, welcome.

Charles Jolley: Thanks for having me.

Bob: We're thrilled to have you here. Abe, I don't know how things look in your neighborhood but even in the small town in New Hampshire where I live, there's a caravan of UPS, USPS and FedEx trucks making deliveries seven days a week and sometimes as late as 10:00 p.m. I've gotten up many a morning to find a package delivered after I went to bed on my back porch. It's hard to imagine congestion on the streets of a rural town of just 20,000, but I'm forever driving around delivery vans parked on the street.

Enter URB-E, now, we don't often have solution providers as guests on The Rebound, but startup has a completely different take on last mile delivery. That seemed worth exploring. If nothing else, what they're doing at URB-E is an illustration of the innovation going on in the supply chain. Let's get started. Before we talk about URB-E, walk us through the current landscape a last mile delivery and from your perspective, what's happening in the space, what are the limitations and what led you to believe there's got to be a better way?

Charles: I think everybody knows from the pandemic that the volume of deliveries has really increased a lot. The latest estimates is it jumped around 30% in 2020, it's growing around 15% a year. That's on a base of 60 billion packages that are delivered every year outside of China. 15% a year growth on that base is just phenomenal increase.

The last leg of delivery, the last 24 hours, what a lot of people call the last mile, is the part that is always been the most expensive. It's the highest impact because it's very visible. It's on your street especially when you have more and more delivery companies adopting these gig economy models where people might be showing up with a few packages in a car instead of a big truck full of packages. It's really put everybody who's trying to do deliveries under a lot of pressure.

First, you have consumers that are asking for more and more things to be brought to their homes. These companies have to expand. We've already had a lot of instances of big companies like UPS and FedEx at some points of the year just saying they're done. No more. They can't take any more volume.

Then you have all these new companies popping up to try to fill that need. Then on top of that, you have pressure coming from cities who are hearing complaints from their citizens about all of this traffic that's being generated. Especially in more dense environments, it's creating a massive pressure. Then on top of that, you have carbon targets which now a lot of companies are taking very seriously. Their end customers, even consumers are asking for green delivery.

These three competing pressures have really combined to create a lot of new force for innovation in this space. It's really the key element we hear a lot about, supply chain issues with ships and logistics coming from China. That's a little bit more of an issue of blockages and disruptions happen to COVID. The last mile is a structural problem where there are really major changes that will need to happen here to both meet the demand of consumers and the demand of cities and regulations in order to scale.

Abe: Charles, a follow up to that. Would this have been possible without the pandemic? We know that e-commerce has taken a on a significant portion of the consumers purchasing power right now and it's only accelerating. Was this an opportunity prior to the pandemic or only accelerated because of the pandemic?

Charles: That's a great question. The funny thing is, I joined URB-E, initially as an investor in 2019. The founders, Peter had Sven had been working on this for a number of years. The reason I got involved was I'd been in the tech industry and they were doing pilot after pilot with a number of really big e-commerce companies and shipping providers. In 2019, I would say we thought the opportunity here is some very big providers in some very dense cities are going to need to find a better way than using trucks and then the pandemic hit and it totally changed the opportunity set for everybody.

Definitely accelerated it but I think actually more than accelerated, the other really big change is it's changed the expectations of most societies. China has always been this for many years but most people didn't think about delivery. They assumed if you live in a city, you go to the places where the things are. I think now we have this growing expectation that when you live in a city, the city should come to you. It's both accelerated it, but it has really dramatically changed the expectations of the average person about what delivery should do for them and how often they should be getting it done.

Abe: Really interesting. Again, the concept as you indicated was in play prior to the pandemic. Give the listeners a little bit of a sense of what you're doing differently. I've got an e-bike, why can't I get into the business, Charles? Give me a sense of the technology and why you're different today.

Charles: A lot of people have actually been exploring this idea of how do we get away from big trucks and vans? If you look around especially in China and in Europe, you'll see a lot of people trying to do small electric e-bikes and things like that. There are two big issues that caused us to really land on the solution we use for URB-E. One is, like I said, 60 billion packages. If you're going to achieve efficiency, you really have to focus on being able to move a lot of packages at once even if you're using a small vehicle. Your typical e-bike, for example, even if it has a trailer or something attached, maybe you can move about 200 or 300 pounds.

That seems like a lot but when you break it down into boxes, that might be 10 boxes. It's just not very much. URB-E can pull-- our small electric vehicles, they have a custom-built bike and trailer system that can pull over 800 pounds of cargo. The second innovation is containerization, which I'll get into in just a second but between those two combined, it means that one of our small vehicles in a single day can deliver the same volume of packages as a large truck.

That was point one for us was realizing that if you're going to actually approach the density of these real vehicles, you need to build something that's designed to be used 16 hours a day with a lot of weight and day in a day out, rain or shine, which the e-bike that you buy at home, that's not what it's built for. It's meant to be cheap and fast and used for commuting every day for a few hours. Very different approach to just everything from the ground up and how you design the product.

Then the second thing, and this was really I think what's come to define URB-E, the big insight we had is if you're going to build these small vehicles, the only way they work is if they stay in the neighborhood where you assign them. If I'm in Manhattan, I can never leave Manhattan, these can't go onto highways. I have to stay in Long Beach or Downtown LA or even just a suburb a Burbank or something like that.

In order to efficiently move that cargo between those cities, we're really stealing an idea from shipping, which is containers. We have this whole system of small, they're foldable so they can sit in the back of a store something like that. They're small containers that you can pack out at the edge of a city at a distribution center where normally packages come from or you can pack them in the back of a grocery store or coffee shop. They're really great for enabling local delivery but because you can move these containers around and they're so efficient and so fast to swap, it allows you to deploy these small electric vehicles and actually exceed the volume and the capability and the efficiency of a gas fan.

The analogy I always use here is the internet. Before the internet became a real thing, the main way of sharing information digitally was through point to point connections. You literally get a telephone line and have a dedicated circuit. That's how we do delivery today. Containers allow you to break things down into little packets of boxes that move as a unit. It dramatically increases the flexibility and capacity of the system. That's really the underlying base behind what we think is the way last mile will be solved, is through microcontainers and then vehicle systems set up neighborhood by neighborhood tailored to the needs of that neighborhood, that's shared by everybody like electricity or water.

Bob: Charles, one real quick question on containerization. That was a great illustration, but you have two types of containers, correct? Can you explain briefly the two types of containers and then I have one other question.

Charles: One great thing about containerization, because they're broken down into relatively small chunks of maybe 40 to 50 packages, we can actually design different containers for different applications. We have a large what we call our Excel box that's out two cubic meters. That, more or less, replaces what you would see in a big UPS truck that's just stuffed full of boxes. If you're doing groceries, for example, where you're just shipping things in paper bags or what a lot of people are trying to get to is actually getting rid of all of these boxes and moving to much lighter weight, more reusable packaging, then you need a system that's more tailor-fit for that application.

We have a second design that has shelving internally that's designed to basically protect the packages while they're inside so you can fit in groceries or low packaging type bags. Then even further on top of that, we have solutions that can actually allow you to store cold food inside of that system. Basically, the reason we design different containers is they can be adapted to unique applications without having to have so many tradeoffs in-between.

Abe: That's really interesting in terms of the concept between the bike and the containers. Let's get into some of the more detailed aspects of URB-E in action. You talked a little bit about urban settings. Is this only for dense populations? Give me a sense of the micro-warehouses versus the larger warehouses that we see in more rural areas. What's your dependencies on, this is a good market for us?

Charles: It surprised us a bit but our first deployment of this system was actually in a suburban area out in Burbank, California. It was a lot of single family homes. What we found is - actually this solution is really well tailored for any place you're getting a lot of packages coming in. It doesn't really matter the density of the neighborhood so much as the volume of packages that are flowing. As you know, many of us now are getting a package or two delivered every day, almost and definitely multiple times a week. Even in suburban environments, the way you do it is a little bit different.

You tailor it for each neighborhood or what we might call a delivery zone. If you're downtown, let's say, Manhattan, then we'll have some permanent stations set up where all these containers are delivered from somewhere outside of the city and dropped off. If you are in more of a suburban environment, you may be loading this container out of the back of a strip mall where you have a bunch of stores already that can go fill that container or maybe some people will drop containers off there. The way you set up the weigh stations where all the containers who dropped and the bikes picked them up, may vary and the distance that they carry these packages may vary from like one to five miles.

Most of our vehicles can go about 10 miles on a single charge and they swap batteries so you can really just use them all day but the topology is a little bit different but the application is actually really great all the way from urban to suburban environments. We actually think containers will eventually be used everywhere even in rural spaces, but of course when you're in a rural environment you'll probably use different solutions than these bikes.

Bob: One real quick question, a hub, as I remember when you and I spoke, a hub can be like a parking spot, right?

Charles: Yes, with this setup you're doing all of your packing and your warehousing and everything either at some point of origin, that could be these big distribution centers you were mentioning on the outside of the cities, you can pack the containers there. You can pack the container in the back of a store or something in the city. Once a container's packed, it really doesn't need a lot of infrastructure to support just having those containers at a place where the bikes can meet them.

When we talk about a hub, for us, it could be-- and by the way, all of the equipment's designed to be foldable. You can fit five of our vehicles in a single parking spot when you're storing them. Really our hubs can be set up as basically of any parking lot. We can take over a few spots, put a fence around it, pretty much that works. The reason that we did it that way, is because we found that when you're going into city environments especially very dense ones, and this is especially true by the way, of Europe where city centers were built way before any of the vehicles we used today existed, you really have to fit into the nooks and crannies around the city in order to provide a really efficient delivery system.

We wanted to have a hub set up that basically didn't require a lot of specific support and we could optimize it for the flow of packages versus where we could find enough storage space and electricity and whatever other infrastructure you would typically need for a warehouse.

Bob: Charles, you're the delivery. You're not the retailer or the e-tailer or the wholesaler on the other end. How do you work with your customers? Number one, first just physically, how do they get stuff to you, but also what are the types of businesses or the verticals that are utilizing your services?

Charles: Today we have three different types of customers we work with primarily. We have a lot of e-commerce companies. We actually tend to partner with even a little further down the supply chain. Most e-commerce companies, there's a few big ones like Amazon that do it themselves, but for the most part, most big e-commerce companies end up partnering with what you call a third-party logistics, 3PL, that may operate a warehouse relatively close to each of the cities. They will combine all of the different packages or goods coming from a number of different retailers into one before they actually do the delivery.

We like to partner with customers like that because they already have those packages coming. All they have to do differently is pack instead of palletizing it which they normally do put it into pallets for the last leg. Now they just pack our containers and then they put it in a truck. It's very very easy for all of these e-commerce companies and retailers to adopt our system because they just go into containers. Actually what they've told of us is they found using these containers, they can double the throughput of these facilities which really brings down cost.

The other vertical we'll look at a lot is groceries. Groceries are very high density, you're probably ordering a bunch of things at once out of your local store. Those tend to be packed directly at the grocery store that's close to where you live. Again, it's just containers. Once it's packed, it all looks the same to our system and that's where our two shelf container that's really built for grocery bags is great.

Then the third one that we're actually really excited about is campuses. These operations like a university campus or corporate campus, they may house 50,000 people. They operate like small cities and oftentimes face many of the same constraints on space and they want to get rid of cars and all of that. We find ourselves working with more and more campuses to actually deploy URB-E as their primary means of moving everything around whether it's packages, maybe it's actually catering food, repair materials for when they're going to go do work. It's a really great way for them to just have a universal way of moving stuff around.

Of course, if you already have a customer that's shipping with containers for these e-commerce companies, then they can just drop a container off at that campus and it gets delivered for them. There's a lot of compounding effects of each neighborhood adopting URB-E, each vertical starts to benefit from each other because you're containerizing really that's the main objective

Abe: Charles, last question really interesting that the various locations and applications here - give me a sense of the technology solution versus the human factor because you're still dependent on riders. Number one, the access riders, are they employees of the company's contractors and then maybe looking into the future, do you see a time when you don't have riders and it's fully automated? Give a sense of what you look like today and what you're anticipating in the future.

Charles: For URB-E, at least, we see the opportunity here is-- fundamentally, you're right that today delivery is mostly about a person taking a package from A to B. Really what we want to do is introduce technology that makes that person a lot more efficient. In order to do that, you we build out all of this infrastructure, we have the containerization system. I think one thing we realized is one reason it's been so hard for people to move away from vans and trucks is because you actually get a lot of things for free when you buy those vans or trucks. You get fueling stations and service and storage and insurance and all of that.

When we roll out in a neighborhood, we actually roll out all of that infrastructure; storage, staging, charging, everything and delivery drivers and providers can just access this on demand. They don't have to buy any equipment, they just pay as they go. Then we like to partner with delivery providers who provide the riders on the vehicles. We partner with people who can move the containers back and forth in larger trucks and then we partner with the 3PLs who package it.

Our goal is really to amplify the existing delivery providers, make them a lot more efficient, and in the process, you're delivering this total service to everybody. It's interesting because that could also include partnering with fully autonomous solutions, right? We have companies we're working with on that. We think autonomy is probably over the long run-- I don't know how many times, how often. We seem a ways away, I'll say, from getting autonomous vehicles dropping packages at your door, right?

There's a lot of practical issues there, main one being that most people don't want to be home when their packages are delivered, they want to just have them come when they come. When you think about, say, the Cisco truck that stops in the back of a restaurant and plots of traffic during the day while they resupply, instead, maybe it could be an autonomous vehicle dropping off a container every day, doing real-time supply or maybe, moving these containers between neighborhoods.

There are some really great applications that autonomy can do today quite well, that could really dramatically lower the cost of getting stuff to supply all of the cities we live in. Really excited about that. It's something that we think could happen in the relatively near future. I don't think it will for a long time, I wouldn't say ever, but I think there will be for a long time at a place for that delivery person who shows up at your doorstep and just makes sure that you get that package safely when you want it.

Abe: Charles, really fascinating and obviously as it evolves and develops, we'll be watching this. That is all the time that we have today. Special thanks to our guest, Charles Jolley. Finally, a special thanks to you for joining us on this episode of The Rebound. We hope you'll be with us for the next episode and for The Rebound, I'm Abe Ashkenazi.

Bob: I'm Bob Trebilcock.

Charles: All the best. Thank you.

Speaker 1: The Rebound is a joint production of the Association for Supply Chain Management and Supply Chain Management Review. For more information, be sure to visit ascm.org and scmr.com. We hope you'll join us again.

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