EFFECTS OF e-BUSINESS ON LOGISTICS AND URBAN

FREIGHT TRANSPORTATIONS

Jarkko Rantala

Senior Researcher, D. Sc. (Tech.), Department of Business Information Management and Logistics

Tampere University of Technology, P.O. Box 541, 33101 Tampere, Finland

Keywords: e-Business, Supply chain management, Transportation.

Abstract: Information society has been anticipated to have many effects on the demand for transport. The effects of

the information society have been assessed to be relatively complicated, indicating on the one hand a

generative and addictive effect and on the other hand substitution and modification effects. Information

technology and its many applications such as electronic data transfer has accelerated the globalisation and

integration of markets and given rise to more complicated and sophisticated supply chain solutions. Many of

these tendencies are likely to support longer transport distances, higher delivery frequencies, faster

deliveries, and smaller delivery sizes. Electronic business models have strengthened these recent logistics

trends although in principle e-business solutions should lead to cost-effective and environment friendly

supply chains.

1 INTRODUCTION

The importance of electronic commerce is on the

increase in almost all areas of trade and industry.

The development of information technology has also

influenced the work patterns and structures of

electronic retailing affecting both travel behaviour

and distribution structures. In this research paper the

focus is on e-business solutions, supply chain

solutions and freight transportation part of the whole

research project.

A few decades ago information technology was

anticipated to have a mainly substitutive effect on

the demand for physical transport. Communications

technology was expected to reduce the demand for

passenger travel and make distribution transport

more effective. At the moment there is relatively

little empirical evidence of the substitution effects of

information technology. On the other hand the

information society and its various ICT applications

have been found to have a generating and modifying

effect on the demand for physical transport. (Kärnä,

2001) In general, the information age seems to have

a more diverse and complicated effect on the

demand for physical transport than was suggested at

the beginning of the fast development in information

and communications technology (ICT). Although

empirical findings are to some extent contradictory,

it is very likely that the information society affects

travel patterns and distribution structures, as well as

land use and regional development.

In this study some recent findings of the effects

of the information society on the transport demand

have been collected and analysed with reference to

both the need for personal travel and urban freight

transport. The anticipated changes in travel demand

by 2020 have been examined with three different

social scenarios in Tampere Region (305000

inhabitants) in Finland with a regional traffic model.

The scenarios studied are Virtual Society, Eco-

Society and Experience Society. As a baseline

scenario the study also included a business-as-usual

scenario for a transportation system. These different

scenarios have been utilised as input data for the

transportation generation model, transport system

development and destination choice variables.

From urban freight delivery systems point of

view delivery traffic has a major influence on

congestion and air quality in central urban areas.

Delivery traffic accounts for a relatively small

amount of the total vehicle mileage, but it has a

significant role in the negative effects of transport.

The share of commercial vehicles is on average 10-

20 % of the traffic flow. Delivery traffic in the urban

areas consists mostly of grocery retail, wholesale

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Rantala J.

EFFECTS OF e-BUSINESS ON LOGISTICS AND URBAN FREIGHT TRANSPORTATIONS.

DOI: 10.5220/0001819305630566

In Proceedings of the Fifth International Conference on Web Information Systems and Technologies (WEBIST 2009), page

ISBN: 978-989-8111-81-4

trade and the construction industry. (Ogden, 1992;

Ministry of Transport and Communications, 1999)

The main rush hours of grocery deliveries are at the

same time as the passenger traffic rush hours,

between 7 and 9 a.m. (Ministry of Transport and

Communications, 1999). An important consequence

of the development of logistics, electronic commerce

and telecommunications is the consolidation options

for deliveries of different suppliers, which can lead

to higher load factors and less vehicle mileage.

Consolidation entails planning the logistics services

to respond to the customer demand and consumers’

consumption habits.

The structure of economic life, urban form, and

the demand for delivery transports has recently

undergone changes which have been anticipated to

continue. The changes are partly due to changes in

the logistics structure, for example JIT (just-in-time)

warehousing and supply chain management

strategies, which have decreased warehousing and

increased delivery frequencies. Electronic commerce

has been anticipated to increase the delivery

frequencies and direct them partly to end-users,

which implies new challenges for delivery planning.

Changes in the operating environment increase the

complexity of delivery models and also shorten their

lifespan (D’Este, 2000).

The supply chains of products have traditionally

been planned to have on direction; the purpose has

been to integrate the process from raw materials

acquisition to the final product delivered to the end-

customer. Several approaches have been developed

for this purpose, for example SCM (Supply Chain

Management), ECR (Efficient Consumer Response),

and the networking strategies attached to these

approaches. Nowadays an assessment of

environmental effects is part of almost all production

processes and many companies have developed

environmental management systems to be able to

evaluate environmental effects comprehensively.

The concept of green logistics includes

environmental impact assessment in each part of the

supply chain and completes the logistical chain with

reverse logistics including recycling and reusing

flows of products, by-products and, for example,

packaging materials. The purpose is to reduce

transport demand with, for example, by planning the

packages and distribution channels and taking the

market area into account in locating the production

facilities. Green logistics is geared towards the

development of environmentally friendly products

and production methods. (Wu and Dunn, 1995)

The increased use of information technology in

logistics and leaner production and warehousing

strategies has increased the customer requirements

for time, precision and flexibility of deliveries.

Growing accuracy and time requirements may

increase the demand for vehicle mileage and lead to

customised deliveries, where a small delivery batch

is transported directly to the customer. Increased

requirements may therefore increase the

environmental effects and costs, especially in the

distribution chain of the retail grocery trade, where

the share of transport-related environmental effects

is already relatively high.

IPCC (2007) defined the increasing demand for

freight transport as one of the most important target

areas in the reduction of carbon dioxide emissions

from transport. The energy consumption of transport

has been predicted to increase, especially in aviation

and shipping. As the globalising markets and

logistical trends promote the increase of

international freight transport demand, information

society applications also affect the energy supply

and climate change objectives.

2 FINDINGS

Changes in the business environment and production

structure affect the demand for goods transports.

Manufacturing industries are mostly transport

intensive business areas, where a cost-effective and

reliable transport system is one of the most

important requirements. Electronic data transfer and

the fast development of information technology have

markedly affected the business environment in the

last ten years. This development offered an

opportunity to use and improve increasingly

effective business control systems and increased the

amount of real-time information and therefore more

dynamic business processes.

As the markets and operations of companies are

becoming more global, production and logistics

structures are planned on a new basis. Production

processes have also become more focused as

companies retain the same number of plants but

increase the degree of plant specialisation.

At the moment there are several potential

business models in e-commerce. Usually companies

use Internet-based services as electronic shops. E-

commerce solutions are used increasingly as

effective marketing channels. Business-to-customer

solutions have attracted a lot of attention in recent

years, but they still have a relatively small, although

increasing, role in the market. The use of business-

to-business solutions are more advanced and trading

between companies has partly moved to the Internet.

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Although long term contracts are mostly made in a

traditional way, the physical orders and planning of

supply chains have been transferred into electronic

form. This trend has increased real-time operations

and made business processes more dynamic in

enterprise networks.

Electronic business models have strengthened

the recent logistic trends for smaller delivery

entities, higher delivery frequencies, and more

demanding requirements of punctuality and

reliability in transport chains. Transport distances

have a tendency to increase, partly because e-

business does not usually need as multi-level a

delivery structure as traditional distribution

channels. In principle, e-business solutions should

lead to cost effective supply chains, but usually, due

to the focus on service level by fast deliveries, e-

commerce is increasing the demand for fast freight

transports. If e-commerce is to be a more common

way of shopping among consumers, it may also have

various effects on delivery systems and freight

transport demand in urban areas.

The introduction and growth of e-commerce has

also been seen to increase demand for land use due

to the establishment of new transhipment points in

the form of distribution centres. The information

society also partly supports a shift towards road and

air freight transport modes due to the requirements

for fast delivery times and the extension of the

geographic areas of supply and distribution.

Therefore e-commerce can be anticipated to

reinforce longstanding trends for transport growth.

3 CONCLUSIONS AND FUTURE

RESEARCH

In this study the transport demand effects of the

information society were studied with a scenario

approach and a regional four-step model in the case

area of Tampere Region in Finland. The changes in

the urban form and travel demand were studied by

using three different social scenarios defined in a

earlier study Changes in urban form and transport

demand in Finnish cities by the year 2020 (Heinonen

et al., 2000). The scenarios applied describe the

possible social conditions and the development

leading to it during the period 2000-2020.

The three scenarios studied were virtual society,

eco-society and experience society. Virtual society is

a scenario for virtual mobility and satellite urban

form. Eco-society is a scenario for environmental

awareness and dense urban form and experience

society is a scenario for car dependence and

fragmented urban form. As a baseline scenario the

study also included a business-as-usual scenario for

travel behaviour, land use and transportation

systems. Demand forecasts were made for 2020.

Consumer preferences also have a leading role in

the demand for deliveries. To some extent ICT can

help manage growth in urban deliveries. In virtual

society the demand for delivery transports is at the

same level as in the baseline scenario due to

increased lorry mileage.

In eco-society distribution structure changes and

demand for delivery transport decreases. In eco-

society business solutions are changing relatively a

lot compared to the other scenarios. Delivery

mileage per inhabitant is smaller than at present and

the energy consumption of deliveries is down by 3.4

% compared to the baseline scenario in 2020.

In experience society delivery demand increase

remarkably, by 25 % compared to the baseline

scenario in 2020. Delivery generation in the

information society can be managed better than in

experience society, where the increase of delivery

demand leads to unsustainable delivery transport

amounts. Increased delivery mileage in this scenario

leads to 9 % greater energy consumption. The

increase in delivery transport demand increases the

congestion on the main street network and thus also

affects the delivery schedules and punctuality. A

marked increase in delivery demand in this scenario

would require considerable infrastructure

investments.

The energy consumption of transport in virtual

society and eco-society is smaller than in the

baseline scenario in 2020. in virtual society reduced

travel and only slightly increased delivery transport

demand lead to 1 % lower energy consumption than

in the baseline scenario. In eco-society substantial

investments in public transport supply and changes

in the delivery structures lead to 2 % lower energy

consumption than in the baseline scenario.

The development in experience society is quite

different, as energy consumption as well as the

amount of transport-related exhaust gases is

approximately 10 % greater than in the baseline

scenario. Thus both virtual society and eco-society

comprehend more sustainable development from the

perspective of climate change and energy issues in

the transport sector.

This research indicate that e-business solutions

may have significant effects on freight transport

demand and also supply chain system-wide

planning. E-business solutions contain a lot of

information for effective planning of supply chain

EFFECTS OF e-BUSINESS ON LOGISTICS AND URBAN FREIGHT TRANSPORTATIONS

565

including delivery systems, but the e-business

operators and portals have to just focus on supply

chain operation in addition to advanced ICT system

development.

The next phase of the research process is to

focus more detailed in supply chain planning and

delivery systems in e-business services and

solutions. One basic approach is also to clarify real

customer needs and expectations for deliveries of e-

business and e-commerce, which form the basis for

supply chain management in this business area.

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