In response to the growing emphasis on environmental sustainability and the demand for eco-friendly transportation solutions, companies are increasingly investing in the adoption of electric vehicles (EVs) for both linehaul and last mile delivery operations. In this paper, we focus on EV adoption for last mile delivery, primarily due to two compelling reasons. Firstly, the shorter distances, urban settings, and frequent stops that are inherent to last mile delivery align closely with the current range and efficiency capabilities of EVs. Secondly, as urbanisation and e-commerce surge, last mile delivery has become a critical and dynamic sector, where the implications, advantages, and challenges of EV adoption are particularly pronounced.
Across the globe, there is a growing momentum to boost the usage of electric vehicles for last mile delivery. Aligning with significant global sustainability goals, 2030 appears to be an electrifying turning point in last mile deliveries for industry giants like Amazon, UPS, and DHL. Companies like Australia Post (with Australia’s largest electric delivery vehicle fleet and Net Zero target by 2050) and Woolworths Group by setting their sights on 2030 for a momentous transformation to an electric-powered delivery network, are making 2030 a promising year for this transition in Australia as well.
As the prospect of 2030 draws nearer, electrifying last mile deliveries presents a compelling vision, aligning with the urgency of global sustainability agenda. However, turning this vision into tangible reality requires careful orchestration of multifaceted considerations.
Revamping the roadmap: the imperative of revisiting supply chain strategies
Shifting cost dynamics
Transitioning to an electric vehicle (EV) fleet introduces substantial changes to a company's cost profile and operating structure. The initial investment costs are considerable, encompassing sourcing of the electric vehicles, establishment of the charging infrastructure, and upskilling of the workforce to effectively manage these EV assets. While this upfront expenditure can be significant, it is often offset by mid to long-term cost savings. Operating costs are also transformed, with maintenance expenses decreasing due to the inherent simplicity of EVs with fewer moving parts. Additionally, companies must account for fleet upgrading costs and the procurement of clean energy to power their vehicles, both of which can impact their financial outlays. Beyond this, the shift to EVs carries tax implications. These may include the absence of traditional fuel taxes for EVs, and relevant tax incentives and credits offered by governments such as deductions for charging infrastructure, accelerated depreciation, and energy-related credits.
Sourcing and fleet ownership strategies
This shift in cost dynamics may prompt companies to reconsider their supply chain and operations strategies across multiple dimensions. Sourcing strategies, traditionally designed for internal combustion engine (ICE) fleet, require a fundamental shift to identify reliable EV and battery suppliers, and charging infrastructure providers. The transition to EVs might also prompt potential shift in fleet ownership strategy. Traditional ownership models may evolve to encompass leasing or subscription services to provide companies with flexibility in staying attuned to rapid technological advancements.
Outsourcing and operations strategies
Similarly, operations strategies must adapt to manage the EV fleet efficiently, from supporting a seamless transition to operating the EV fleet, focusing on maintenance practices, skill development, optimising energy usage, and fleet upgrades. For instance, if a company had previously outsourced its ICE fleet to a third-party logistics provider, a pivotal question arises: Does the same outsourcing strategy align with the establishment of their EV fleet, or does it compromise their control and influence over this transformative shift? Or consider the case of crowdsourcing, a strategy that has gained traction in the last mile delivery arena. The assumption of a seamless transition to EVs within a crowdsourcing context warrants careful consideration. While a company maybe progressing towards its EV fleet, the broader crowdsourcing pool may lag behind in their own transition to EVs.
Powering the future: unlock last mile delivery success through collaborative alliances
The imperative for collaboration
Partnerships and collaborations have always been seen as pivotal in ensuring sustainable outcomes for supply chains. However, their importance becomes even more pronounced when transitioning to an electric vehicle (EV) fleet for last mile delivery.
A web of interconnected factors collectively impacts a company’s journey of transitioning to an electric last mile delivery. These factors, or dependencies, encompass various elements such as vehicle availability, charging infrastructure, technological advancements in batteries, energy management, and regulatory frameworks. Each element relies on the others, creating a complex ecosystem where changes in one area have ripple effects throughout the system. As these dependencies exert their influence, companies are presented with an imperative: establishing strategic partnerships and collaborations. By fostering collaborations with charging providers, energy stakeholders, local authorities, manufacturers, and suppliers of EVs, businesses can effectively navigate the multifaceted challenges introduced by the EV’s complex ecosystem.
Key areas for collaboration and partnerships
As an example, one of the key challenges in transitioning to an effective EV fleet for last mile delivery is the availability and supply of electric vehicles. As more companies and consumers transition to electric mobility, there might be complexities in the supply chain, such as potential shortages of critical components like batteries and semiconductors. This increased demand could strain existing manufacturing capacities, leading to longer lead times and potential delays in delivering EVs to customers. Moreover, the growing competition for raw materials used in EV production, such as lithium, cobalt, and nickel, might result in supply chain bottlenecks and price fluctuations, affecting the overall cost and availability of electric vehicles. Forging strategic partnerships with EV manufacturers early on emerges as a prudent strategy to effectively navigate the potential risks of EV supplier shortages. By establishing collaborations in the early stages of EV adoption, companies can secure a reliable supply of electric vehicles tailored to their fleet requirements, mitigating future supply chain disruptions.
Navigating coopetition
In addition to forming strategic partnerships with EV manufacturers, companies can explore innovative 'coopetition' models, where they collaborate with competitors and complementary businesses in transition to an electric vehicle fleet. Collaborative ventures could involve establishing shared fleets, implementing battery swapping stations, sharing charging infrastructure, and jointly managing maintenance operations. By engaging in coopetition models, companies can not only reduce individual costs but also address common industry challenges, such as creating a denser and more accessible charging network, optimising fleet utilisation, and collectively negotiating for favourable terms with suppliers. These collaborative efforts not only drive cost efficiencies but also foster a sense of shared responsibility for the sustainable and successful adoption of electric mobility in the last mile delivery sector.
Revolutionising the last stretch: rethink your distribution network optimisation
The need for network optimisation
In the context of electric vehicle (EV) fleet, the imperative for network optimisation becomes even more pronounced than in the traditional fuel-based fleet scenarios. Several factors contribute to this increased significance. Firstly, through distribution network optimisation, companies can better manage the challenges of driver shortages and higher wage demands. Second, the scarcity and distribution of charging infrastructure play a pivotal role in EV fleet operations. Effective network optimisation ensures that vehicles are deployed where charging stations are accessible, mitigating range anxiety and unnecessary downtime. Moreover, the efficient use of energy is paramount, given the need to preserve and extend the vehicle's battery life while minimising costs.
Challenges of EV fleet’s network optimisation
Network optimisation in an EV fleet presents unique challenges compared to traditional fuel-based fleets. In the traditional fuel-based context, routing decisions primarily revolve around optimising distance and minimising fuel consumption. However, EV distribution network optimisation encompasses a broader spectrum of variables. Range limitations, charging infrastructure availability, and battery management emerge as pivotal considerations, surpassing the singular focus on fuel efficiency.
Traditional routing optimisation often assumes uniform refuelling or recharge options, whereas EV optimisation requires rigorous planning around charging station locations, types, and charging times. Charging windows become critical, aligning delivery schedules with charging opportunities to ensure efficient operations.
Moreover, the decision between establishing in-house charging infrastructure or utilising public charging stations introduces a strategic dimension absent in traditional routing. Companies must weigh the benefits of control and tailored solutions offered by in-house charging against the potential cost savings of utilising public networks.
The impact of limited range on delivery coverage introduces another layer of complexity. While traditional vehicles may cover extensive distances, EVs may necessitate adjustments in route design to accommodate range constraints, potentially affecting delivery scope, especially in remote areas.
This dynamic shift in optimisation considerations highlights the need for a specialised framework that integrates traditional routing principles with the complex interplay of EV-specific variables. Navigating this complex landscape ensures that distribution networks are not only efficient and cost-effective, but also sustainable, resilient, and prepare for the future of last mile delivery.
Sustainable journey, sustainable future: tackle the challenge of circularity in an EV world
A sustainable and smart transition journey
A sustainable-conscious transition to EV fleet requires companies to be innovative and adopt forward-thinking strategies. Companies might consider smarter transitioning strategies such as repurposing of their current fuel-based vehicle assets. They could explore ways to adapt and refurbish these vehicles to accommodate electric powertrains or serve alternative roles within the organisation. By repurposing fuel-based vehicles into auxiliary or specialised roles, such as converting their ICE cars to shared mobility services, or even mobile charging stations, companies can extend the utility of their assets while progressively integrating cleaner transportation options into their operations. Also, development of a decommissioning plan for end-of-life vehicles is crucial for ensuring the responsible disposal and recycling of their existing fleet.
Circularity in an EV world
In addition, when companies transition from conventional fuel-based delivery vehicles to electric vehicles (EVs) for their last-mile logistics, their circularity strategy undergoes a significant transformation, accompanied by a unique set of challenges.
One of the significant complications lies in the lifecycle management of EV batteries. While EVs are praised for their lower emissions during usage, the production and disposal of battery components present environmental concerns. Companies must develop robust strategies to prolong battery lifespan, leveraging innovative pathways like reuse, repurposing, and advanced recycling methods. Circular strategies also inspire companies to explore innovative approaches like battery leasing or subscription services, fostering resource optimisation and aligning with the circular economy's principles.
Additionally, collaborating with EV manufacturers offers companies a unique and advantageous opportunity to embrace circularity right from the outset of their sustainable mobility endeavours. By engaging with EV manufacturers during the design and production phases, companies can embed circular principles into their vehicle fleet transformation.
This proactive collaboration empowers companies to influence the selection of materials, manufacturing processes, and end-of-life considerations. By working closely with manufacturers, companies can prioritise the use of sustainable and recyclable materials in vehicle construction, ensuring that components are designed for disassembly, repair, and repurposing. This not only reduces the environmental impact of the vehicles but also lays the foundation for a more circular approach throughout the vehicle's lifecycle.
Moreover, collaboration with EV manufacturers encourages innovative thinking and knowledge sharing. Companies can leverage the expertise of manufacturers to explore new ways of extending battery life, optimising energy efficiency, and implementing cutting-edge recycling techniques. This collaboration fosters a holistic approach to circularity, where both parties contribute their insights to create a more sustainable and resource-efficient mobility solution.
Concluding remarks
As we approach 2030, the electrification of last mile deliveries stands as a pivotal transformation in the logistics landscape, driven by environmental concerns, consumer demands, and industry giants. To actualise the electrification vision for last mile deliveries, a paradigm shift in strategy and operations is paramount. Firstly, an agile revisiting of existing strategies becomes imperative, as businesses navigate the shift in cost dynamics inherent in the transition to EV fleets. Secondly, forming strategic collaborations and coopetition facilitates the seamless integration of EVs into last mile delivery networks. Forming strategic alliances with EV manufacturers and charging infrastructure providers early on ensures a reliable supply, while innovative "coopetition" models reduce costs and promote shared responsibility for sustainable EV adoption in the sector. Thirdly, the foresight to navigate the evolving landscape, coupled with informed decision-making around charging infrastructure and route optimisation, paves the way for efficient and sustainable last mile deliveries. The unique challenges posed by EVs, including range limitations and charging intricacies, require a specialised framework to ensure efficient, cost-effective, and sustainable distribution networks. Finally, a commitment to sustainability and circularity drives the adoption of innovative and forward-thinking transition strategies, such as repurposing existing fleets, developing end-of-life vehicle decommissioning plans, managing the lifecycle of EV batteries, and fostering innovation in EV product design.
About the authors
Tina Northcott is the lead partner of sustainable supply chain and procurement at Deloitte Australia. Tina focuses on operationalising the vision of achieving ethically and environmentally sustainable supply chains.
Hoda Davarzani is a director at Deloitte’s Supply Chain & Procurement practice. Hoda is passionate about supporting her clients achieve a resilient and agile supply chain through an effective supply chain strategy, advanced planning solutions and use of AI in supply chain decision making.
Maryam Masoumi is a manager at Deloitte's Climate and Engineering practice. Passionate about developing circular and socially responsible supply chains, Maryam leverages her expertise in designing strategic and synchronised supply chains to support clients on their journey of supply chain transformation.
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