1 WCTR 2007 Revival of the cost benefit analysis for evaluating the city distribution center concept? Ron van Duin Hans Quak J esus Munuzuri Delft University of Technology RSM Erasmus University University of Seville 2 5 th International Conference City Logistics 2007 Outline Literature on urban consolidation Literature on urban consolidation Case study Case study Zuidtangent Zuidtangent SHASH SHASH Potential Potential effects effects city city distribution distribution center center CDC CDC Effects Effects CBA CBA - - Experiments Experiments Conclusions Conclusions 3 5 th International Conference City Logistics 2007 Urban consolidation The key concept is that the volume of freight vehicles The key concept is that the volume of freight vehicles travelling travelling within urban areas could within urban areas could be reduced through a more efficient utilization of vehicles: be reduced through a more efficient utilization of vehicles: higher load factors and fewer higher load factors and fewer empty trips empty trips ( (Crainic Crainic et al. 2003) et al. 2003) Policy practice still believe in the concept. Cities like The Ha Policy practice still believe in the concept. Cities like The Hague, Rotterdam, Groningen, gue, Rotterdam, Groningen, Utrecht, Amsterdam & Arnhem have recognized and certified city d Utrecht, Amsterdam & Arnhem have recognized and certified city distributors istributors Considerable Considerable costs costs involved involved with with the the construction construction and and operation operation of the of the transhipments transhipments (Button & (Button & Pearman Pearman, 1981) , 1981) City City distribution distribution centers centers lead lead a a laborious laborious life life (Van Duin, 1997) (Van Duin, 1997) GVZ GVZ or or freight freight villages villages have been have been popular popular as as real real estate estate sources sources ( (Klaus Klaus, 2005) , 2005) Our Our main main research research question question: : Can Can a city a city distribution distribution center center be be socially socially beneficial beneficial from froma a cost cost benefit benefit perspective perspective? ? 4 5 th International Conference City Logistics 2007 Case research: Amstelveen, Hoofdorp, Haarlem, Schalkwijk & Schiphol Amstelveen Amstelveen 179 shops 179 shops Hoofddorp Hoofddorp 154 shops 154 shops Haarlem Haarlem 566 shops 566 shops Schalkwijk Schalkwijk 160 shops 160 shops Schiphol Schiphol 68 shops 68 shops Diepens Diepens & & Okkema Okkema (2005) showed (2005) showed that freight traffic is possible that freight traffic is possible without losing efficiencies for the without losing efficiencies for the current bus services current bus services 5 5 th International Conference City Logistics 2007 3 alternatives Zero Zero- -alternative alternative, current policy measures, distribution structures , current policy measures, distribution structures remain remain Commercial alternative Commercial alternative, commercial exploitable service based on free , commercial exploitable service based on free market principles within the societal constraints & requirements market principles within the societal constraints & requirements, fair , fair price competition price competition Societal alternative Societal alternative, mainly focussed on demands of all stakeholders, , mainly focussed on demands of all stakeholders, Budget neutral, contracting criteria: min. noise, min. emissions Budget neutral, contracting criteria: min. noise, min. emissions & & min. damage on infrastructure min. damage on infrastructure 6 5 th International Conference City Logistics 2007 Potential effects Separation of supply and return flows Time profit shipper -> CDC Bundling opportunities shipper->CDC Shippers Flexibility in deliverance of goods Fleet optimization Carriers Flexibility of delivery Longer lead-times supply of goods Stock reduction at site Entrepreneurs/shopkeepers Reduction of traffic on main roads Province North-Holland Reduction of city maintenance costs Reduction of noise emissions Reduction exhaust Quality improvement of shopping area Municipalities Main Effects CDC Stakeholder Group 0 20 40 60 80 100 120 140 2006 2008 2010 2012 2014 2016 Urban freight in tkm (2006 =100) 7 5 th International Conference City Logistics 2007 CDC operations Profit Profit Price based on average time savings city access roads to Price based on average time savings city access roads to innercity innercity, 25*55 , 25*55 (driver)+25*75(truck) = 55 (driver)+25*75(truck) = 55 euro euro, B2B 18.20 euro/m , B2B 18.20 euro/m 3 3 , B2C 28.50 euro/m , B2C 28.50 euro/m 3 3 Average Average Storage Storage price price 5.50 euro per m 5.50 euro per m 3 (commercial 3 (commercial values values) ) Profit margin 10% Profit margin 10% Costs Costs 20000m 20000m 2 2 , base year 357000 m , base year 357000 m 3 3 , 1250 , 1250 gpd gpd=>4000 max =>4000 max gdp gdp, 145 , 145 euro euro per m per m 2 2 , , connection to access roads pm 600000, maintenance roads 1 mill connection to access roads pm 600000, maintenance roads 1 million ion Labour Labour costs costs: : driver driver+ +operations operations+ +administration administration, 40 , 40 people people, , growth growth 10% 10% leads leads to to labour labour increase increase 3%, average 3%, average salary salary, 1600 euro/ , 1600 euro/month month Truck Truck costs costs: : operations operations, ,purchase purchase, , maintenance maintenance, , fuel fuel, , insurance insurance, 173 , 173 movements movements/week, /week, 1 truck 1 truck delivers delivers 5.5 5.5 days days/week, /week, one one trip 2 trip 2 hours hours, , insurance insurance 0.25 per LU, 0.25 per LU, way way of of financing financing 10% of 10% of total total costs costs 1:5 1:3 Fuel consumption 6000 5000 Maintenance/ year 175000 100000 Purchase CAT 5 CAT 3 8 5 th International Conference City Logistics 2007 Effects on public affairs Reduction city maintenance costs: 1% Reduction city maintenance costs: 1% infrastructure maintenance 2 million/year infrastructure maintenance 2 million/year Emissions reductions: 8 km currently, Emissions reductions: 8 km currently, max 3 km inner city and direct delivery max 3 km inner city and direct delivery max 15 km. 1 kg PM max 15 km. 1 kg PM 10 10 300 300 euro euro, 1 kg , 1 kg NO NO X X 12 12 euro euro Noise Noise reduction reduction, , exceeding exceeding 65 65 dBA dBA, , pro pro- -memorie memorie cost cost 0,05 0,08 0,06 0,03 0,03 PM 10 2,47 3,20 3,20 1,74 1,74 NO x Clean vehicle (Euro 5) 0,29 0,47 0,34 0,17 0,17 PM 10 7,28 9,45 9,45 5,11 5,11 NO x Standard vehicle (Euro 3) Rest Truck and trailer Truck Light truck Van Emission grammes per km Prevented Prevented emissions emissions for for each each year year 9 5 th International Conference City Logistics 2007 Effects for commercial stakeholders Flexibility Flexibility of of delivery delivery Time window cost saving, 1 extra hour reductions min 2 persons, Time window cost saving, 1 extra hour reductions min 2 persons, 2x18pd 2x18pd = 11232 yearly, too late arrival in a tour (Holguin = 11232 yearly, too late arrival in a tour (Holguin- -Verras Verras, 2007) , 2007) Reduction of stock at site Reduction of stock at site Stock space Stock space - -> selling space, not specified in CBA > selling space, not specified in CBA Separation of supply and return flows Separation of supply and return flows Current trucks return empty, Current trucks return empty, cdc cdc assume 25% return flows assume 25% return flows Cost Cost reduction reduction by by clustering ( clustering (shippers shippers) ) SC SC before before cdc cdc can can be be organised organised more more efficiently efficiently, 11%. , 11%. Distribution Distribution structures structures will will not not change change strongly strongly, 25% , 25% will will adjust adjust their their chains chains! Overall ! Overall return return will will be be 0.11*0.25 = 2.75% 0.11*0.25 = 2.75% Increase Increase of of flexibility flexibility (carriers) (carriers) Fleet Fleet optimisation optimisation, , deliver deliver before before a deadline a deadline instead instead time time- -window window, min , min savings savings 5% ( 5% (Quak Quak&Koster, 2007), &Koster, 2007), too late arrival in a tour (Holguin too late arrival in a tour (Holguin- - Verras Verras, 2007) , 2007) 10 5 th International Conference City Logistics 2007 Validation 5.5 % 5.5 % U A U A Operational costs Operational costs Other Other nihil nihil U A U A Growth factor Growth factor 0.5 % 0.5 % C A C A Number of employees Number of employees 0.5 % 0.5 % C A C A Salary Salary Personnel cost Personnel cost 2.5 % 2.5 % U A U A Building and Infrastructure Building and Infrastructure Nihil Nihil C A C A Average Fuel price Average Fuel price 0.12 % 0.12 % C A C A Costs vehicles Costs vehicles 0.16 % 0.16 % C A C A Insurance Insurance nihil nihil C.V. C.V. Usage CDC Usage CDC Effect Effect Assumption Assumption Operational costs Operational costs CV = CV = certain certain value value, CA = , CA = Calulated Calulated assumption assumption, , UA UA= = Uncertain Uncertain assumption assumption 11 5 th International Conference City Logistics 2007 Experiments (1) 100.000.000,00- 50.000.000,00- 0,00 50.000.000,00 100.000.000,00 150.000.000,00 m a r k e t s h a r e 5 , 0 0 % 1 0 , 0 0 % 1 5 , 0 0 % 2 0 , 0 0 % 2 5 , 0 0 % 3 0 , 0 0 % 3 5 , 0 0 % 4 0 , 0 0 % 4 5 , 0 0 % 5 0 , 0 0 % 5 5 , 0 0 % 6 0 , 0 0 % 6 5 , 0 0 % Total NetPresentValue Commercial variant incl. profit Total NetPresentValue Commercial variant excl. profit Total NetPresentValue Societal variant 12 5 th International Conference City Logistics 2007 Experiments (2) 10,00 12,00 14,00 16,00 18,00 20,00 22,00 24,00 26,00 28,00 30,00 m a r k e t s h a r e 5 , 0 0 % 1 5 , 0 0 % 2 5 , 0 0 % 3 5 , 0 0 % 4 5 , 0 0 % 5 5 , 0 0 % 6 5 , 0 0 % Price per M3 for delivery B2B Commercial variant Price per M3 for delivery B2B Societal variant 13 5 th International Conference City Logistics 2007 Conclusions CBA provides insight under what circumstances and conditions the CBA provides insight under what circumstances and conditions the city city distribution concept could operate distribution concept could operate It takes into account the multi It takes into account the multi- -stakeholder environment stakeholder environment Commercial success can only be established with a market share > Commercial success can only be established with a market share >30% 30% In case of the In case of the Zuidtangent Zuidtangent it has appointed clearly directions for more it has appointed clearly directions for more detailed research detailed research Evaluation Evaluation of the city distribution concept of the city distribution concept should should not not be be judged judged after after one one year year .the CBA shows .the CBA shows that that a a coule coule of of years years are are needed needed to to make make a a good good evaluation evaluation 14 5 th International Conference City Logistics 2007 Thank you ..and dont forget about the nightlife!!! Some researchers caught into ACTION BE BE THERE THERE!!! !!!