7 Virtual traffic: e-commerce, transport and distribution – Digital Futures

7 Virtual traffic: e-commerce, transport and distribution

Peter James and Peter Hopkinson

Introduction

E-business is already changing the movement of goods, components and materials, and could transform it over coming decades.1 These changes raise many importantquestions for sustainable development, including the following.

  • Will residential areas be overwhelmed by fleets of white vans delivering growing volumes of internet-ordered goods?
  • Will internet shopping mean that consumers keep their cars parked and use their extra time at home or in their neighbourhood – or will they find replacement destinations or activities to drive to?
  • Will there be a network of local drop-off and collection points for goods which can't be delivered to homes and, if so, will these be accessible by bicycle and foot as well as by car?
  • When other continents are just a mouse-click away, will there be even more international transport of goods?
  • In a world of virtual organizations and supply chains, where does environmental and social responsibility lie?
  • Can e-business help to reduce the waste and underutilized capacity found in many existing supply chains?
  • Will e-business-optimized supply chains be more vulnerable to disruption?

Some argue that the answers to these questions are very positive for sustainable development. They believe that e-business will increase the efficiency of goods distribution – and thereby reduce prices – as well as dampening demand for freight transport. They also claim that e-business can give disadvantaged suppliers and consumers easier access to markets and goods, and encourage a more community-based distribution structure.

This ‘quieter roads and fuller baskets’ scenario can be contrasted with one of ‘e-road rage’ in which home shopping increases delivery van movements while consumers use their increased vehicle availability to travel more. The result will be increased congestion, and more inconvenience from van movements in residential areas. Pessimists also believe that the increased – and often automated – ordering options created by e-business will result in more geographically-extended supply patterns, longer transport hauls, and increased difficulty in monitoring the environmental performance of suppliers. Later we'll return to these points and discuss the evidence for and against them. Firstly, however, we briefly discuss the characteristics of current logistics activities, and the key variables which influence their environmental and social impacts.

Sustainable logistics

Logistics is of great relevance to sustainable development. It influences people's access to goods and services and creates transport movements. These consume non-renewable energy and other resources, generate noise and vibration, and create emissions of carbon dioxide, nitrogen and sulphur oxides and other pollutants. There are also high levels of wastage in many supply chains as a result of goods in storage and transit.

In broad terms, the environmental and social impacts of logistics are influenced by a number of factors.

  • The amount (weight) of goods lifted and transported.
  • The distance they are transported.
  • The mode (eg air, rail, road or water) and sub-mode (eg articulated lorry, LGV) used to transport them.
  • The loading of the transport unit.
  • The power source of the transport units, and their performance.
  • The nature of the infrastructure (eg congested roads, site footprint and design).

Box 7.1 Criteria for sustainable distribution

The DETR has defined sustainable distribution in terms of a number of outcomes.2 For the economy these are:

  • growth – promote continued economic growth;
  • jobs and prosperity – new and secure jobs, relevant skills;
  • fair pricing – reflect the direct and wider costs of transport;
  • competitiveness – ensure fair and open competition at home and abroad; and
  • choice – ensure a plentiful and cheap supply of goods through an efficient system of goods distribution.

For society they are:

  • safety – improve vehicle, driver and other road-user safety;
  • health – protect the health of the road user and the public;
  • disturbance – minimize the impact of noise and vibration on the public, and minimize community severance;
  • access – promote wide access to markets, goods and services; and
  • equity – ensure that efficient distribution services are available to all, using the user-pays principle.

For environment they are:

  • climate change – contribute to greenhouse gas reduction targets;
  • air quality – meet UK and EU air quality standards;
  • noise – meet UK national and EU noise standards;
  • land use and biodiversity – minimize impacts on the biodiversity of species, habitats and landscapes; and
  • waste management – minimize waste and impact of waste produced.
  • The number of times they are handled (which influences mode, loading and other factors).
  • The storage of goods and requirements for storage (eg duration, location, temperature and climate control).
  • Packaging requirements.

Before considering how these might change in response to e-business, it is important to describe the current baseline. By weight, most UK imports and exports travel by sea, but the gap between sea and air freight is much less in terms of value. UK air freight has grown by around 7–9 per cent a year during the 1990s, and industry forecasts anticipate a similar rate of growth in coming years.3 This is worrying because, per tonne carried, air is the most environmentally damaging form of freight transport.

Within the UK, the most detailed data available are for rail freight and heavy goods vehicles (HGV, over 3.5 tonnes in weight).4 One striking point from the HGV data is that food, drink and tobacco account for one-quarter of total tonne-kilometres, with shipments of minerals and construction materials not far behind. Hence, the impact of e-business on these sectors is particularly crucial.

The national road traffic forecasts

Moving freight by rail or water is less environmentally damaging than by road, and government policy is to increase the relative share of these modes. However, the most recent forecasts predict a 72 per cent increase in HGV traffic between 1996–2031 (approximately 1.6 per cent per year).5 This is mainly due to an increase in the tonnage of freight being lifted (which is closely correlated with GDP growth), and increased handling of goods. The average length of haul is expected to remain constant because of rising fuel and transport costs.

There is less detailed data for freight carried by LGVs (under 3.5 tonnes), or by individuals in their own vehicles. LGVs are mainly diesel-engined and account for only 5 per cent of road freight by weight, but 9 per cent of total road traffic. Their use has been increasing rapidly, causing some disquiet about their impacts in urban and residential areas.6 Government forecasts estimate that LGV traffic will continue to grow at a faster rate than HGV traffic over the next 30 years, but with a declining annual rate of increase.

Recent changes in logistics

Information technology has been a major cause of changes in the distribution infrastructure. Food and other areas of retailing have seen direct store deliveries by manufacturers largely replaced by deliveries to regional distribution centres (RDCs). Suppliers deliver directly to the RDCs, from where dedicated trucks ship consolidated loads to individual supermarkets.7 These have greatly reduced vehicle movements to individual stores and, probably, total freight-kilometres. They have also increased vehicle utilization because consignments can be collected from several suppliers.

However, some of these gains have been offset by the move to outof-town shopping locations, which means that consumers are often driving more in their own vehicles. Some urban shop locations also have tight time restrictions and limited access, which reduce loading factors and fleet flexibility.

Similar consolidation points have been introduced into B2B sectors – for example, auto components. However, these are sometimes accompanied by small warehouses near points of production in order to meet ‘just in time’ delivery requirements. This can result in more frequent movement of lightly loaded vehicles.8

At a European level, a number of importers and suppliers have also reorganized their distribution. They now have a small number of central warehouses serving several countries, with either direct shipping to customers or small warehouses in national markets. Such systems are generally heavy users of air freight.

Underpinning many of these changes is the rise of ‘third party logistics’, which involve external suppliers taking complete responsibility for the logistics function.

There are also moves towards shared use of distribution facilities to reduce costs in the petroleum and retail industries. However, there remains considerable resistance in other areas due to problems with a previous generation of shared use distribution in the 1960s and 1970s.

Despite these changes, considerable inefficiencies in European logistics remain. A German study found that the average delivery time for electrical, electronic and communication products was 29 days within Europe, compared to 11 days within the US and only two in Japan.9 The discrepancy was less marked, but still important, for international shipments. These ranged from 45 days for exports from Europe, 23 days for the US and only 18 days for exports from Japan.

The main reason why international shipping is so much slower – and more expensive – is high transactional complexity and costs. The UN estimates that these account for no less than 7 per cent of the US$6,000 billion annual value of international trade.10 One software company examined the administrative trail for an export consignment of goods and found that it involved 60 phone calls, 50 emails, 30 different types of documents, 21 printed sets of documents, 20 faxes and 30 sets of photocopies.11 Air freight is more advanced than international rail or shipping in streamlining these procedures.

The measures announced as part of the government's recent sustainable distribution strategy are intended to dampen the forecast increases in road freight, and increase the volumes of rail freight. A number of these measures are aimed at greater application of information technology. For example, delivery scheduling is being encouraged to optimize vehicle capacity utilization, and minimize distances travelled.

To some extent, therefore, e-business may already be taken into account by government thinking; but will e-business create further changes which are not reflected in the DETR's forecasts and policies?

E-business and the supply chain

The founding application of e-business was electronic data interchange (EDI). This uses a dedicated communications link to send orders, confirm receipt and make payments. EDI generates considerable savings over manual alternatives for large volumes of transactions, but has been too expensive for many SMEs.12 The development of e-business based on low-cost, flexible, web-based interfaces is now creating a qualitative change in much logistics and distribution activity. This transformation has three main dimensions:

  • e-commerce;
  • supply chain management and data exchange; and
  • virtual organization.

E-commerce

When e-commerce is defined in a narrow fashion, as an activity concerned with the buying and selling of goods and services, it has four essential elements: ordering, invoicing, payment and order fulfilment. ‘Closed channel’ e-commerce links a single supplier or buyer with its customers – typically through an online catalogue or under a pre-negotiated contract. ‘Open channel’ e-commerce links a range of suppliers and customers through online market places.

B2B e-commerce has been slower to develop and less publicized than B2C e-commerce, but most forecasts suggest that it will eventually account for 80–90 per cent of the value of e-commerce transactions. Such predictions are notoriously unreliable, but in late 2000 many of the leading forecasters were suggesting that the volume of European e-commerce transactions will reach between US$1–2000 billion a year by 2004, with almost a quarter of this in the UK.13

B2C e-commerce

To date, the most rapidly-growing area of e-retailing has been lightweight products such as books, CDs, games and software, which consumers feel no need to touch before buying. As these are of low weight, they generally use existing distribution channels such as courier and postal services, and have only marginal effects on overall logistics patterns. However, they may increase demand for warehousing, increase LGV movements in residential areas, and cause the closure of some shops.

Some start-ups such as in 60, Kozmo and Urban Fetch have also introduced quick (often one hour or less) home and office delivery services for similar goods and takeaway foods in large urban areas. Their main impacts are local, in the form of increased vehicle movements. Although these could be significant if the services take off, high operating costs have created considerable doubts about their viability – resulting, for example, in Urban Fetch abandoning its UK home delivery service.14 The economic drive for tightly defined delivery areas may also raise access issues; in the US, Kozmo has been accused of refusing to deliver to some neighbourhoods with ethnic majorities.

Technology is also creating the option of delivering some products such as music, film, software and documents in electronic rather than physical form. Electronic document delivery is already reducing the growth of courier markets.15 However, while this can produce significant savings in paper and packaging, the low weight of the products means that the logistics impact is relatively insignificant. Increased downloading will also require energy and may increase demand for hardware. Nonetheless, there may be environmental arguments for exempting such downloads from internet taxes, should these ever be introduced.

Home shopping for food and other consumer staples is of potentially greater significance. UK activity in this area has been dominated by existing retailers, with the market leaders picking orders from supermarket shelves. This is estimated to cost anywhere between UK£8–20 per customer, with the exact figure depending upon the cost of picking, the number and location of deliveries, and the utilization of the delivery fleet. With an average £5 delivery charge, most current services are losing money on all but the most valuable deliveries. Delivery to workplaces – which is Waitrose's strategy – is said to be 30–50 per cent cheaper than home delivery because it can be consolidated. However, there may be some employer resistance to the large-scale development of such schemes.

The domination of UK home shopping by established food retailers contrasts with the US, where new entrants such as Webvan have command. They have built dedicated picking centres that have high capital costs but low operating costs, achieved through cheaper locations and buildings – said to be 75 per cent less per square foot than those used by supermarkets.16

A recent Verdict study argues that current leaders such as Iceland, Sainsbury and Tesco will maintain their market leadership in home grocery shopping in the UK.17 It also foresees a gradual move to picking centres as volumes rise, in order to reduce costs and avoid inconvenience to normal shoppers. Some of the centres may be co-located with supermarkets, but most are likely to be developed in low-cost warehousing locations. In some cases, dispersed picking centres may deliver in relatively large vehicles to local centres, from which smaller vans will deliver to homes.18

Box 7.2 The automatic shopping cart

Webvan (www.webvan.com), which recently merged with its largest competitor, HomeGrocer, is the leading US e-retailer of groceries. Its business model is to avoid delivery charges and still achieve higher margins than supermarkets, through using lower rental sites and a high level of automation. It also focuses on routine purchases of branded goods, accepting that people will prefer personal shopping for nonstandardized items such as fruit and vegetables.

Webvan's stores are typically 80–90,000 square feet – twice the size of an average supermarket – and located in warehouse parks. Each site employs up to 100 staff in stocking, picking and delivering goods. Customers order from a database of around 13,000 items, most of which have an image and information about the producer, size, price and (for food) nutritional information. The precise range offered varies by location. So too does pricing, which is determined by competition.

All orders received before 11pm are picked at night in a highly automated process – some of Webvan's warehouses have over 25 miles of conveyor belts. Deliveries are made during the afternoon and evening of the following day. Customers are given 90-minute windows and the company claims that 99.5 per cent of deliveries are on time. Webvan also says that it encourages ‘customer rapport’, especially with those who are elderly or housebound.

There is likely to be more competition for non-food staples such as clothing, many of which may be sourced on an international basis. This may create increased transport. For example, one international mail order company reduces its inventory by fulfilling orders from five warehouses – three in the US, one in Japan and one in the UK. Each warehouse serves its national market, but orders from other countries can be fulfilled by any of them. This can mean that an order from Germany is fulfilled from the US even if the product is available in the UK.19

The three key influences on all forms of home shopping will be: consumer access to ordering channels (PCs, DTV and third-generation mobile phones); delivery charges; and the level of returns.20 Rapid growth is unlikely, especially for consumer staples, until delivery prices approach or reach zero. This is only likely to be achieved with a move to more automated picking, mechanisms to reduce returns, and/or aggressive market expansion by the supermarket chains.

Reducing returns will be especially important. One solution will be to give customers more accurate delivery times (although this can require expensive technology, and is at the mercy of road congestion problems). Another solution is to install drop-off boxes in customers’ homes, although this means overcoming concerns about hygiene and security. Sainsbury is trialling the use of secure boxes for packaged goods, and the housebuilders Laing are installing fixed containers in their new developments. There will also be pressure for more evening and weekend deliveries; this is still in its early stages in the UK, but is rapidly growing in the US. Finally, there is likely to be development of local distribution centres where goods can be dropped if people are not at home.

B2B e-commerce

The main growth in this area is expected to come from electronic marketplaces that link buyers with sellers via the internet. There are now almost a thousand such sites, but these are likely to consolidate in the medium term. E-marketplaces vary in operation, but most provide:

  • access to buyers and sellers;
  • auction or tendering mechanisms for individual contracts;
  • the means of conducting and completing transactions, often including provision of logistics services; and
  • industry-specific information.

In addition to providing an open marketplace, many sites also provide restricted areas that allow sellers to deal with selected buyers. Some are also starting to provide project-management support by providing a central information-clearing house. In the case of packaging, for example, this would include job design specifications, graphics files, amendments, progress data, and approvals. The potential advantage is the reduction of waste and fewer problems stemming from bad communication and out-of-date information.

Forecasters suggest that B2B marketplaces will account for a high proportion of industry transactions within a few years, and become powerful forces within their sectors. In the auto industry, Goldman Sachs has estimated that e-marketplaces such as Covisint (a collaboration between leading manufacturers) could save US producers more than US$60 billion a year, or $3650 per vehicle.21 At the other extreme, market research for GroupTrade, a provider of e-supplies to small businesses, calculated that it could save UK SMEs an aggregate UK£24 billion a year, the equivalent of 3 per cent of GDP.

Exchanges are also likely to have a significant impact on logistics and distribution itself. One reason for this is provision of instant logistics as a service to buyers. PaperExchange, for example, provides this through a partnership with the US logistics company C H Robertson. Another influence is the creation of online markets in freight capacity. There are now over 250 freight exchanges worldwide, of which approximately 60 are in Europe. One UK-based example is the FreightTrader portal developed by Mars and IBM, which provides an online market for temperature-controlled loads, and which will soon be extended to other areas of road haulage and shipping.22

One effect of both B2B and B2C e-commerce is increased demand for warehouse space. In the US, the market for rented warehousing is now growing by 10–15 per cent per annum, much of it driven by e-commerce vendors.23 Some of the early pioneers, such as Amazon, have developed their own distribution facilities. This includes one of the UK's largest warehouses, a 500,000-square-foot facility which is approaching completion in Slough.

In the UK, e-commerce warehousing is mainly concentrated in the south east, where the surveyors FPP Savills have estimated that e-retailing accounted for two million square feet in 1999, or 10 per cent of the available space. A study by Lambert Smith Hampton has also found that there is now a shortage of suitable sites in several areas of the country.24

Packaging

An important environmental question connected with e-commerce is whether it will increase or reduce the volume and nature of packaging. One argument is that because there is no longer a requirement to influence consumer choice, packaging will become simpler and primarily focused on the protection of goods in transit. Online vendors such as Amazon are also pressuring suppliers to use more simple and less bulky packaging to reduce postage and storage costs. However, an alternative view is that this approach poses a considerable threat to brand identity, such that packaging could become more, rather than less, important as a means of communication between suppliers and their customers. The rough handling that occurs in many e-fulfilment channels – and customers’ propensity to return anything that appears to be damaged – may also mean that packaging increases in weight and volume. Indeed, one consultancy predicts that this trend will create demand for an additional 1.5 million tons of containerboard in the US by 2005.25

Supply chain management and data exchange

The lower costs and easier accessibility of internet-based data exchange can make critical data – such as levels of inventory and orders – available to all players.26 The result, when combined with enabling technologies such as bar-coding and tracking of items in transit, is a ‘glass pipeline’ that allows a much greater collective knowledge of where goods are, and what will be required in future. This reduces the need for extra stock holdings.27

The inventory and cost benefits of this can be partially offset by other developments. There may be a need for more inventory management close to production plants to reduce any risk of disruption, and there may be increased handling costs from delivering smaller consignments on demand.28 Nevertheless, there is still a considerable net reduction in inventory costs which, other things being equal, reduces interest, storage costs and waste. Tesco, for example, recently announced savings of £60m from closer ties with suppliers and consolidation of distribution centres.29

These outcomes are potentially beneficial for sustainable development. The reduced costs can make goods cheaper for customers, and also free up resources for investment in other areas. A reduction in waste levels – which can be as high as 40 per cent of inventory costs in areas such as perishable goods – is also environmentally beneficial. However, the move to just-in-time delivery that often accompanies more integrated supply chains can result in additional vehicle movements. Reduced logistics costs can also create a rebound effect of greater dispersal in supply chains, so that longer distances are travelled. Finally, the tighter connection between the different elements within the chain, and reduced levels of stock, greatly increase the vulnerability to disruption. This was demonstrated by the speed with which the UK petrol blockades of September 2000 disrupted not only fuel supplies but, perhaps more surprisingly, food supplies. This reflects the fact that only limited stocks are held at any one point in the highly-efficient UK food chain.

Whether positive or negative in their effects, glass pipelines are likely to develop further. To date, they have been driven by powerful buyers such as supermarket chains and large manufacturers, who are able to ensure that all their suppliers conform to common standards. However, many other supply chains have yet to achieve this, primarily because it is difficult and expensive to link many different IT systems together.30

Eventually, this is likely to be achieved by the falling cost of software, but in the near future the difficulties may create serious access barriers for many SMEs.

Virtual organization

A broader reconfiguration of business relationships is occurring in many organizations, involving the outsourcing of many activities, and the formation of partnerships and joint ventures to handle others. Many of these relationships are handled partially or exclusively via the internet; so too is a growing proportion of customer service and marketing. Indeed, the archetypal virtual organization is one that has a brand and a website but no physical assets. Instead it relies on a network of sub-contractors and business partners to make and distribute the goods it sells. These may form what consultants Cap Gemini have called a ‘collapsible supply chain’ – one that is established to exploit a short-term opportunity, and then reconfigured or replaced when new opportunities arise.

One common aspect of virtual and non-virtual organizations engaged in e-business is a reliance on what has been termed ‘fourth-party logistics’. Providers of this service take responsibility not only for the movement of goods, but also for activities such as inventory management and product return. For example, Joint Retail Logistics monitors and manages the performance of manufacturers, hauliers and other suppliers to Marks & Spencer at all stages from order to final delivery.

The development of e-commerce has also been accompanied by efulfilment, in which vendors take responsibility for all activities, from taking an order to customer delivery. An interesting UK example is the new Cenargo e-logistics centre at Eaglescliffe, near Darlington.31 This is a 250,000-square-foot combined call centre and warehouse, and it will employ up to 700 people. The centre recently won its first contract, to handle 1.3 million orders a year for Virgin Vie cosmetics. One important criterion for the location was access to broadband communications.

Virtual organizations can also have a considerable indirect effect on logistics. By extending the number and geographic range of business relationships, they are a powerful driver of globalization. The low administration costs of these new organizational forms also means that they are less sensitive to many traditional cost drivers. This was demonstrated in the recent debate about inward investment to the UK, which reached record levels in 1999 despite the high level of sterling. One of the main reasons appears to be the relative indifference of e-business – one of the fastest-growing areas of inward investment – to changes in national currency rates.

Box 7.3 E-commerce fulfilment – just do it

UPS is the world's largest provider of e-commerce fulfilment. The first step in this process was the provision of online tracking of shipments. According to the company, it costs only 10 US cents for customers to check progress via a website, compared to $1.78 if they call a customer service representative.32 UPS now offers a complete e-logistics outsourcing service. Its collaboration with the sports goods company Nike provides an example of how this works. Nike's previous distribution model had involved shipment to a distribution warehouse, and then onward distribution to retail outlets via pallets. However, the development of direct selling through www.nike.com required a separate fulfilment channel, which is completely outsourced. UPS handles all orders – including those using the telephone number on the Nike website – and transmits them to a Nike warehouse. UPS software then arranges the picking, packing and shipping to final customers.

Virtual organization can also exacerbate vulnerability to disruption. In the case of petrol, the major oil companies have increasingly outsourced haulage to third-party providers, who in turn are heavily reliant on sub-contracting to owner-drivers, either directly or through further intermediaries. It was therefore very difficult to make decisions quickly when the crisis hit. The rising oil prices that fuelled popular discontent were also influenced by low levels of oil stocks, which make markets very sensitive to even small fluctuations in supply and demand. One cause of this is organizational changes in refining, as the oil companies have sold a substantial proportion of capacity to independent operators. These ‘financial refiners’ (so-called because they are solely focused on short-term financial returns) can only prosper by reducing costs. One of the easiest ways to do this is to reduce stocks by moving from ‘just-in-time’ to ‘almost-not-enough’ production, in which output responds very quickly to market changes.

One potential advantage of e-business outsourcing is that it makes it easier to share distribution facilities, thereby increasing capacity utilization. As well as joint use of warehouses and transport, this can involve more fundamental changes. Some forecasters predict that there could be a move towards downstream assembly, filling, and labelling. This means, for example, that orange juice could be shipped in bulk to a local warehouse which would then fill and label own-brand cartons for a number of supermarkets. Depending on the stage at which it occurs, shared use can also reduce the need for land and warehousing, and improve the utilization efficiency of goods vehicles.

E-business in three sectors

To illustrate the variety of ways in which e-business can impact upon logistics, Tables 7.17.3 provide a summary of initiatives in three supply chains.

1 Documents – chosen as a significant driver of air freight and LGV transport, and as an area with potential for substituting electronic for physical distribution.

2 Food – chosen as the biggest single freight category, and also the one in which the effects of e-business have been most discussed, especially for home shopping.

3 Petroleum – chosen as a representative bulk goods sector.

We have also provided a broad-brush assessment of whether the developments appear to be positive for sustainability (denoted with ‘+’), have no apparent effects (denoted with ‘N’) or may have negative effects (denoted with ‘–’). Those that have mixed impacts, or are contentious (for example, globalization), are indicated with ‘?’. The concentration of available data on environmental impacts means that these are analysed in greater depth than social impacts.

Two broad conclusions can be drawn from Tables 7.17.3:

1 Although most discussion of e-business and sustainability has focused on B2C areas such as home shopping, the greatest impacts of e-business on logistics are at upstream B2B stages.

2 Many e-business initiatives appear to be positive for sustainable development. The potential negatives often concern second-order effects which are difficult to forecast (for example, increased transport due to falling logistics costs) or contentious (for example, the development of more globalized patterns of production and consumption).

Table 7.1 E-business and the document supply chain

 Supply Chain ComponentsSustainability Impacts (+ve/-ve)
OriginationCentralized, online image banks accessed by multiple document creators (eg national subsidiaries participating in a worldwide product launch)Avoids physical transport of files, duplication of storage and wasted output from the use of old images (+)
 Internet-based file transferAvoids physical transport of files (+)
ProductionCreation of documents from direct customer input to a websitePersonalization reduces waste of unwanted material (+) but low cost may encourage more printing (–)
 Online auctions/tenders for print jobsUtilizes spare capacity (+) but extends reach (?)
 Online project management of document production process (coordinating originators, printers, print buyers etc)Reduces printing of erroneous output and inefficiency due to poor communication (+)
DistributionDistribute and print – files transmitted for local printing distributionAvoids transport of printed material and supports localized print and employment (+)
ConsumptionContent read on screenCan potentially avoid printing (+) but cheap internet distribution may lead to more copies being printed by relatively inefficient local printers (–)
 Content downloaded to e-books/newspapers etcAvoids materials, printing and transport impacts of physical product (+) but may stimulate further globalization of media sector (?)
 Personalization of printed outputs, making people more likely to read themPersonalization can reduce waste of unwanted material (+) but low cost may encourage more printing (–)
OrganizationEmergence of communication ‘solution providers’, providing a one-stop service for all stages of the product chainNo obvious environmental implications (N) but might encourage global distribution strategies (–)

Table 7.2 E-business and the food supply chain

 Supply Chain ComponentsSustainability Impacts (+ve/-ve)
OriginationOnline auctions for foodstuffsCan reduce waste of unsold items and increase the income of local producers by cutting out intermediaries (+) but extends market reach (?)
ProductionProduction driven by real-time downstream scheduling/purchasing decisionsReductions in inventory waste (+) but may move to just-in-time delivery (?)
DistributionOnline supply-chain management systemsStimulus to air freight (13% of imported UK air freight is fruit and vegetables) (–) but reductions in inventory waste (–)
 Shared use of warehouses and/or transport fleetsAvoids duplication of resources and increases capacity utilization (+)
 Warehouse-based filling and packagingCan reduce inventory waste and potentially reduces supplier movements (+)
 Fleet optimization using vehicle trackingSupports reverse logistics and can improve energy efficiency through route optimization (+)
 Online markets for unused distribution capacityIncreases capacity utilization (+)
ConsumptionInternet ordering with direct delivery to homeVan delivery of multiple loads environmentally better than individual car trips (+) but may increase evening/weekend deliveries (–) and cars may be used for other purposes (–)
 Use of local drop-off centresReduces LGV traffic in residential areas (+) but benefits depend on proportion of pick-ups by car (?)
 ‘Info-mediaries’ aggregate demand from consumers and solicit automated bids from suppliersSpecialized knowledge could be positive if sustainability is a high priority, but may not be (?). Will make supply-chain initiatives more difficult (–)
OrganizationPossible competition between supermarket-based models of existing players and attempts of new entrants and grocery manufacturers to develop direct delivery systemsPotential for plethora of lightly-loaded distribution networks (?)

Table 7.3 E-business and the petroleum supply chain

 Supply Chain ComponentsSustainability Impacts (+ve/-ve)
OriginationOnline trading of crude oil and derivativesExtends existing well-developed market so no obvious changes (N)
 Online markets for unused bulk tanker capacityIncreases capacity utilization (+)
ProductionOnline trading of refined oil products and derivativesMay increase capacity utilization through easier ability to sell output (+)
 Production driven by real-time downstream scheduling/purchasing decisionsNo obvious implications (N)
DistributionOnline markets for unused midstream/downstream distribution capacityIncreases capacity utilization (+)
 Info-mediaries aggregate business customers and solicit automated bids from suppliersSpecialized knowledge could be positive if sustainability is a high priority, but may not be (?) Could make supply chain initiatives more difficult (–)
 Real-time data exchange with both upstream and downstream and resulting optimization of operationsIncreases capacity utilization (+)
 Dedicated product movers provide a one-stop service to oil producersSpecialized knowledge could be positive if sustainability is a high priority, but may not be (?)
ConsumptionInternet purchase and direct delivery of products, eg lubricants to consumersFew trips undertaken solely for this and may fragment delivery loads (?)
 Development of multi-use sites combining retailing with other functions, eg local drop-off hubMay reduce returns (+) but favours car-based transport (–)
 ‘Gas bots’ searching forcheapest local services of fuel, with global positioning satellite (GPS)-based road directionsReduces cost (+), but may lengthen journeys (–) and reduce ability to introduce environmental factors into purchasing decisions (–)
 Online account information and settlementNo obvious implications (N)
OrganizationDevelopment of virtual oil companies, purchasing from separate producers, product movers, refiners and filling station chainsIncreased efficiency (+) but may be more difficult to develop supply chain initiatives (–)

Implications of e-business for sustainable logistics

There has much general debate about the relationship between e-business and sustainable logistics. The following sections examine some of the most common propositions which have been made in the literature.

E-business and logistics: some common assumptions

By making supply chains more efficient, e-business can significantly reduce prices and thereby create considerable environmental and social benefits

The improved information flows created by e-business have already helped to make supply chains more efficient. In the US, for example, the average stock turn was 8 a year in 1995 but reached 13.2 in 2000.33

The net effect was a record fall in the inventory-to-sales ratio. Cheaper and faster-moving inventory management often translates into significant reductions in waste levels, and increased utilization of capacity. The environmental benefits of these may increase as the volume of B2B transactions grows.

On the other hand, when e-business results in a fragmented supplier base it might reduce opportunities for efficiency gains from supply-chain integration. Efficiency gains could be offset by demand for high-speed delivery, which is costly and makes it difficult to achieve high vehicle utilization. Reductions in costs could also mask greater environmental and social externalities; increased use of transport is an obvious example. Another is the potentially adverse effect on producers, such as small farmers or local businesses, whose incomes are reduced or working conditions made worse.

A final issue is whether price reductions could stimulate higher consumption, which many would consider to be unsustainable. Tangential evidence that this might happen is provided by a recent McKinsey study, which notes that one UK retailer selling both online and from shops found that the combination of both media increased total purchases by 10 per cent. It also noted that the average value of customer purchases from leading e-retailers is up to 20 per cent more than their bricks-and-mortar competitors. However, it is uncertain whether this represents a shift in consumption, or a net increase. McKinsey itself attributes the findings to a greater percentage of premium products, the bundling of products and services, and easier cross-selling in e-retailing.34

One area in which e-retailing does seem to have increased the overall market is books. While this expansion is not solely due to price – online retailers may tap some latent demand by offering easier access than existing stores – it seems to have been an important element. Of course, books are different from other products, and many people will see an increased demand for knowledge as a very positive, and thoroughly sustainable, outcome. However, current experience is sending some early, if faint, warning messages about the impact of e-business on future levels of consumption.

E-business can provide easier access to markets for suppliers in remote or disadvantaged locations, and easier access to goods for disadvantaged consumers, and therefore helps to overcome regional and national inequalities

There are many examples of this. For example, www.fromages.com was created to sell artisan-produced French cheeses and now exports 95 per cent of its sales, usually within 24 hours of receiving an order. There are similar examples in developing economies; Indian farmers have used the internet to check prices in regional markets, which can be much higher than those offered by local merchants.35 They are now bypassing local outlets and transporting their produce directly to regional markets. Although this means longer hauls, the prices they can obtain are sometimes 50 per cent higher.

The question is whether this will be anything more than a niche phenomenon – one which is sometimes replacing relatively eco-efficient bulk shipments with other, more transport-intensive, forms of consumption (as may be the case with www.fromages.com).

Electronic home shopping can reduce the demand for travel and associated environmental impacts

Complete replacement of car-based shopping trips by internet ordering and van-based delivery could certainly reduce distance travelled – by 70 to 80 per cent according to one simulation.36 However, complete replacement is unlikely as consumers could use the spare time and vehicle availability to make other journeys. The limited survey evidence of consumer responses to home shopping has found that they reported less car use. It would be useful to validate this through larger-scale studies. One point to note is the finding from some US teleworking studies that initial reductions in car travel are partially offset over time by the stimulation of new driving.37 This results from people moving further away from the workplace, or making short trips from home to shops during lunch breaks.

The retail sector also has a strong interest in diverting time and cost savings into further shopping. People shop not only to buy specific goods, but for a variety of other reasons such as social interaction, excitement, and the creation and maintenance of personal identity. Many forecasters predict that future stores will place more emphasis on these factors.38

A business model that consigns low-margin staples to internet ordering and delivery, and replaces them with higher margin goods on the shelves, would be very profitable for retail chains. Indeed, this is already emerging in embryonic form in the US, where the strategy of at least one home-shopping company has changed from seeking to replace supermarkets, to concentrating on staple items. It accepts that its customers will continue to visit supermarkets for fresh and speciality items. It is also possible that the internet might produce an ‘unbundling’ of multiple orders that, for convenience, were previously made from a single location. This could mean that a single car trip is replaced by a number of van deliveries, leading to an increase in delivery units.39

On the supply side, Sally Cairns has identified six key factors that are likely to influence the environmental impacts of home shopping.40

1 Returns, which create the need for additional journeys and delivery of replacements (and which constitute a potentially higher proportion in home shopping because of the absence of any physical contact with goods before purchase).

2 Cost structures. The impacts vary according to whether these reflect the full environmental costs of the transport used, and – more specifically – whether they encourage deliveries of small value and weight at non-congested times.

3 Delivery locations. Home storage units, local pick-up points and shared distribution channels could reduce returns and the movements of delivery vehicles.

4 Vehicle use. The impacts vary according to the mode used and, for road vehicles, the extent to which they use conventional or alternative fuels, have advanced engines and emission control systems, and are well-driven and maintained.

5 Routing and scheduling optimization. This may be based on sophisticated software systems and accurate GPS data to track vehicle locations.

6 Load consolidation. This involves the sharing of distribution facilities and delivery vehicles, increasing utilization and reducing vehicle movements and the amount of warehouse space required.

The importance of the two latter variables is demonstrated by a Swedish research project that examined all the deliveries made to 15 shops, restaurants, schools and day nurseries, and compared them to an ideal pattern involving trip optimization and shared use of delivery vehicles. They found that the latter could produce a 39 per cent reduction in distance travelled, a 42 per cent reduction in the number of vehicles used, and a 58 per cent reduction in number of journeys. The work is now being extended into the central shopping area of Uppsala with the involvement of Skandi System, a local haulage company.41

Two aggregate forecasts of the transport impact of electronic home shopping have recently been reported. In the UK, the economic consultancy NERA has estimated that home shopping will reduce car-based shopping travel by 5 per cent by 2005, and 10 per cent by 2010.42 This outweighs a forecast increase in delivery traffic of 0.25 per cent by 2005 and 0.5 per cent by 2010. The study also estimates that the greater diffusion of IT within the freight sector (route planning, freight exchanges and so on) will lead to a 17 per cent and 19 per cent reduction respectively in goods vehicle mileage by 2005 and 2010.

A recent study in The Netherlands by the Dutch road haulage association TLN has estimated that 11.5 per cent of total retail sales – approximately 3.5 million tonnes of goods – will be purchased online and home delivered by 2005. In urban areas of The Netherlands, this will often replace cycle or foot trips, which are the two most frequent modes of transport for shopping. The net effect is forecast to be a 17 per cent increase in road vehicle movements over the next five years.43

The two studies indicate the sensitivity of the outcomes to the assumptions made. Until there is more empirical evidence on how customers respond to home shopping, and which delivery patterns suppliers use, it is impossible to validate or disprove either proposition.

E-business creates an opportunity for a more community-based distribution structure and a reversal of the move to out-of-town development that has occurred over recent decades

The high cost of distributing goods to homes – both because of low population densities in residential areas and high levels of returns – is the Achilles heel of B2C e-commerce. One solution would be a nationwide network of drop-off points, used when people are not at home or as the primary distribution point, with the incentive of lower charges. There are a number of options for the physical location of this network. Existing premises which may be used include superstores, shopping centres, convenience stores, filling stations, post offices, mail sorting centres, public transport nodes, community halls and schools.44 It has also been suggested that purpose-designed facilities could be built in business parks, and at major employment sites, drive-in shopping centres and park-and-ride sites.

Box 7.4 The e-post office

The Post Office's e-fulfilment service aims to use its existing infrastructure to offer e-commerce vendors and customers a wide range of home delivery and local collection choices. These include the ability to specify alternative collection points (so if no one is at home the next location will be used), and the use of a local post office as a collection, payment, returns and ordering centre. This may require an extension of opening hours to allow people to collect before or after work, or at weekends. The Post Office is also looking at the prospect of using post offices and warehouse facilities to consolidate orders for local pick-up or home delivery.

One striking feature of many of the collection discussions to date is that car access is a primary criterion. While this is obviously important, especially for bulky goods, no equivalent attention is paid to cycling or walking as alternative means of collection. There has been little discussion of community distribution models aimed at minimizing vehicle movements, particularly in residential areas. These would give people the option of collecting lighter consignments by cycling or walking to a neighbourhood drop centre. The economics of such schemes would depend on delivery cost savings when compared with home drop-offs. One possibility is that they could become local meeting places, providing an alternative means of fulfilling the social functions of shopping.

The increased ordering options that e-business provides to both business and consumers will result in more geographically-extended supply patterns, and therefore higher transport-intensity for goods

There is considerable evidence that this is happening at a global scale. The best objective indicator is the high rate of growth in air freight, which is being partially driven by e-business. The growing sophistication of specialized supply-chain management by importers and exporters, and the creation of online markets in most sectors, is likely to strengthen this trend.

E-trade would of course be less transport intensive if more goods were shipped by sea and rail rather than air and road. However, e- commerce usually demands highly flexible supply chains, whereas rail and sea transport are the least flexible modes, with high infrastructure costs and a reliance on regular volume. This inherent disadvantage is compounded by the limited application of e-business within the rail and maritime sectors. The latter is particularly slow in adopting the electronic documentation that could reduce costs and waste and, more importantly, increase speed, reliability and customer confidence.45 The slow pace of e-business also impedes the development of intermodal transport, which is only likely to grow substantially with the development of centralized info-mediaries who can provide an integrated tracking service over all transport modes.

Online ordering will increase the number of suppliers and reduce average order size, making it harder to persuade supply-chain members to behave responsibly in environmental and social terms

Over the last decade, the general trend in supply chains has been to work with fewer suppliers. However, the development of B2B marketplaces makes it easier to source products from a larger number, and wider geographic range, of suppliers. This is especially true of the maintenance, operating items, and commodity components that form the bulk of B2B purchases by value. The limited evidence available suggests that this phenomenon is occurring. For example, one Digital Futures partner that moved to online procurement increased its supplier base almost tenfold as a result. The main reason for this appears to be the high transaction costs of the previous system when finding the optimal supplier for every individual item.

Competition authorities are beginning to be concerned about the potential impacts of B2B marketplaces, and it is likely that new forms of regulation will be developed for them. It is important that this regulation takes environmental and social considerations into account because, on present trends, B2B exchanges may make it more difficult to consider these in many purchasing decisions. This is particularly true of indirect goods and services that have limited visibility and no immediate connection with the environmental or social parameters of the final products. Price is likely to be the predominant factor in these purchases.

There is also more specific concern about the impact of B2B exchanges on logistics. Trade bodies fear that these may further increase the extent of sub-contracting and draw in more suppliers from outside the UK, who may have lower costs for fuel and other factors. One anxiety is the vetting of even more complex sub-contracting structures for safety considerations. Another is the issue of liability.

The organizational and personal ties between customers and suppliers may also be weakened by B2B exchanges, making it difficult for individual customers to exert informal pressure for improvement. The best means of overcoming these forces is likely to be some kind of pre-qualification procedure for environmental and social performance. An alternative or complementary option would be to require buyers to provide environmental and social information about the goods they are selling, perhaps based on standardized parameters. Both these activities could be undertaken by the online certification agencies that are starting to emerge. However, the cost-reduction focus of exchanges and their users, and the dangers of violating free trade regulations, may constrain market-led initiatives, meaning that some kind of policy intervention could be required to achieve ‘green e-certification’.

Conclusions

The relationship between e-business and logistics is in its early stages, so it is difficult to make definitive judgements. However, Table 7.4 presents some provisional conclusions about the impacts of e-business in terms of the DETR's criteria for sustainable distribution.

One important distinction is between first- and second-order effects. First-order effects are those that result directly from the application of e-business, for example in supply-chain integration or home shopping. Second-order effects represent the response of business and consumers to these first-order effects; examples include the extension of supply chains because of cheaper logistics, or the use by consumers of car capacity that had been freed up by electronic home shopping. A broader second-order effect concerns the effect of easier access to cheaper goods on the overall levels of consumption and transport. It is also important to distinguish between one-off changes – such as reductions in waste from better management of supply chains – and continuing effects, such as the long-term influence of delivery and collection infrastructures after they are built.

There are many positive first-order effects that have been created by e-business. It seems likely to increase distribution efficiency, reduce waste, increase capacity utilization, and cut costs for consumers. It creates access to broader markets for many small producers, especially in remote regions; and there is scope to reduce environmental impacts by substituting electronic for physical distribution in some areas.

The negative effects on sustainability include greater use of air freight, extra LGVs in residential areas, and the increased demandfor warehousing. The extent of the latter two impacts will partly depend onthe degree of shared use within buildings and delivery fleets. Another key uncertainty is what consumers will do with any vehicle capacity freed up byhome shopping; if this is used for replacement journeys, it could produce anet increase in transport.

Table 7.4 E-business and the DETR's criteria for sustainable distribution

 Supply Chain ComponentsSustainability Impacts (+ve/-ve)
Environment
Climate change+ Reduced emissions from increased efficiency and growth of electronic distribution
 – Possible adverse effects from increased handling, length of haul, use of air freight, and use of electricity for internet technologies
Air quality+ Reduced emissions from increased efficiency and electronic distribution
 – Possible adverse effects from increased handling, length of haul, use of air freight and use of electricity for internet technologies
 – Increased local impacts around airports and urban residential areas
Noise– Increased by growth of air freight and possible adverse impacts from greater LGV traffic in residential areas, especially at evenings and weekends
Land use and biodiversity– Increased demand for distribution space
? Possible changes in volume and pattern of car travel
Waste management+ Greatly reduces inventory obsolescence and other waste within the supply chain, and makes it easier to find users for unwanted goods and materials
 + Facilitates reverse logistics and waste take-back
 – Some increases in waste due to unpredictable demand, shortening product life cycles and increasing the return of goods
 ? Possibility of reduced packaging
Economy
Growth+ Significant positive impact due to greater distributive efficiency and expanded trade (on conventional criteria)
Jobs and prosperity+ Growth creates more jobs in distribution and other sectors
– Jobs may be insecure
 ? Pattern of employment may change
Fair pricing+ Air-cargo economics greatly influenced by absence of duty on aviation fuel
 ? Also issues of whether road-vehicle users pay the full cost of their impacts
 + Better information for customers, bringing costs down
Competitiveness+ Distribution costs potentially more transparent; more could be done to enhance the competitiveness of shipping
Choice+ Online ordering, and the increased efficiency and reach of distribution, will reduce prices and extend the variety of goods
Society
Safety+ Positive effects of increased information, eg on vehicle choices
 − Effects of increased traffic in residential areas
Health− Increased use of LGVs may have health impacts in some urban locations
Disturbance? No likely reductions in HGV traffic and increases in air-cargo and LGV traffic, with more traffic in residential areas and at evenings and weekends
Access+ Online ordering greatly expands opportunities
 − Limited by the digital divide and possible red-lining of urban home delivery routes
Equity+ Efficiency increased, and wide availability
 − User-pays principle not in place for air cargo

Second-order effects are even harder to predict. There will clearly be economic benefits from e-business-driven reductions in logistics costs. Disadvantaged countries, regions and social groups potentially could benefit from improved access to goods and services. The development of B2B marketplaces could also provide a new gateway for integrating sustainability into supply chains, but could equally result in even less emphasis on sustainability than at present. There might be an increased average length of haul in response to falling distribution costs and easier transactions; and the increased possibilities of global availability with cheap delivery could provide a major stimulus to unsustainable consumption.

Some of the effects of e-business are already anticipated in the government's sustainable distribution strategy, and the forecasts that underlie it. This is particularly true of the supply-chain integration and inventory reduction that e-business enables. Some of the unanticipated developments should also be positive – in particular, the fact that B2B marketplaces make it easier to sell unused logistics capacity.

Yet there are other developments that could seriously undermine current policy assumptions. There may be more frequent deliveries by less heavily-loaded vehicles, making it more difficult to achieve the government's aspiration of increased volume utilization. There could also be a substantial increase in LGV traffic, which would counter forecasts that the rate of increase will slow in coming years. There could also be an increase in the already-high growth rate of air freight. This would have a disproportionate impact on sustainability, both directly (through emissions, noise and energy use) and indirectly (through its influence on broader structures of supply and demand).

It is important to remember that the situation could change rapidly. For the next few years, any growth in home shopping will be based on the existing infrastructure of supermarkets (for order picking) and, to a lesser extent, distribution channels (parcels carriers and collection points). However, there is a critical level – probably between 5–10 per cent of total retail sales – beyond which there are likely to be significant changes. These will include the increased development of picking centres, the closure of some supermarkets, and the creation of new distribution channels, possibly including purpose-built drop-off and collection networks. New distribution systems are likely to rely on car-based collection, and could therefore undermine the government's longer-term objective of reducing car dependence. There is also a danger of a plethora of different distribution points creating confusion for customers and excessive vehicle movements.

Our general conclusion, then, is that both the scenarios identified at the beginning – ‘quieter roads and fuller baskets’ or ‘e-road rage’ – could come to pass. Hence it is too early, despite the obvious first-order benefits, to give e-business the green light as a creator of sustainable logistics; but equally, there is not sufficient evidence to argue that it should be impeded. The current signal is amber, with some warning signs that the second-order effects could be at variance with sustainable development. Now is the time to take precautionary action to ensure that e-business is compatible with the government's sustainable development objectives.

Recommendations

Business

What can business do to respond to this amber warning? It can be assumed that competitive forces will lead many companies to take advantage of the positive eco-efficiency benefits created by e-business; but dealing with the more complex environmental and social challenges can be problematic because of the organizational fragmentation that e-business creates. Nonetheless, possible action points for companies include the following.

Do more to measure and monitor the transport and wider sustainability implications of e-business decisions

It is clear that substantial moves towards e-business will have great environmental and social significance. They will result in many activities that were previously carried out in-house being outsourced, generating new patterns of environmental and social impact. However, substantial discussion of this topic seldom (if ever) occurs in corporate environmental or social reports. When it is considered, it suffers from a lack of consistency and standardization. It would therefore be desirable for companies to engage with appropriate expert and representative bodies (for example, the Global Reporting Initiative) to provide guidelines on how e-business issues should be treated. More information is also essential to obtain an accurate picture of each company's sustainability footprint.

Pay greater attention to the environmental and social performance of e-business and e-fulfilment suppliers

It is also likely that e-business will displace a growing proportion of the environmental and social impacts created over the life cycle of goods and services. It is therefore important that companies pay careful attention to the sustainability performance of their e-suppliers, such as e-fulfilment services or B2B exchanges. This is particularly important given that such services often operate in ‘internet time’, and are under great pressure from increasingly sceptical capital markets to provide short-term performance.

Government

In the case of government, action is needed in the following areas.

Improve the knowledge base

In order to provide early warning of adverse trends, it would be helpful for the DETR to collect more detailed data on the volume and characteristics of air freight and LGV traffic. Increased knowledge of the transport behaviour of car-owning home shoppers and the impact of e-marketplaces on vehicle utilization would also be desirable, as would better monitoring of the impact of e-business in the construction and minerals industries, which generate a large proportion of freight tonnekilometres.

Tax fuel for air freight

The growth of air freight demonstrates that e-business is changing patterns of production and logistics. This is the most environmentally-damaging freight mode, so it is important that it is not subsidized in any way. Unfortunately, aviation fuel is currently exempt from taxation, which sends a misleading signal about its true costs. Introducing or increasing fuel taxes is not a popular political option, but it is vital that the government continues its policy of pressing for international agreement on this issue.

Examine trends in home-based distribution and experiment with new options

It would also be desirable for the DETR to undertake a detailed examination of the potential for local distribution channels and their transport implications. This should be a prelude to the preparation of a planning guidance document for local authorities. There is also scope for local experimentation with the introduction of multi-use collection points that are accessible to pedestrians and by bicycle, as well as by car.

Introduce tighter controls on freight vehicles in residential areas

It seems inevitable that there will be an increase in overall LGV traffic in residential and urban areas, especially at evenings and weekends. The parking, pollution and safety implications of this could become an issue for many people. One possible solution would be to introduce a system of residential certification for vehicles and drivers, so that only those in possession of a certificate would be allowed to drive in designated areas.

Examine the future demand for, and the likely location of, warehousing

E-commerce is also encouraging demand for warehousing. Already there is a shortage of large warehouses in parts of the UK, which may emerge as an impediment to economic development. This is also another issue to be taken into account in traffic planning.

Give greater policy support for shared use

The problem of warehousing also raises the question of whether policy should be more supportive of multi-use distribution facilities – for example, through preferential treatment of planning applications or tax concessions (such as partial exemption from business rates). These could reduce van movements and the land requirement for warehousing. Multi-

use facilities may also make it easier for smaller producers to gain access to markets.

Increase the application of e-business to rail and shipping

Water and rail are, in general, the least environmentally-damaging transport modes. However, they are less developed – particularly in the case of marine shipping – than air and road freight. It is important that this imbalance should be addressed by examining opportunities to substitute electronic for physical documentation, and introducing inter-modal tracking systems for freight in transit.

Increase access to home shopping for the housebound

There is one group for whom home shopping is definitely likely to be more sustainable; those who are housebound because of age or disability. Some of these will already be shopping indirectly, through car journeys by relatives or home helps, and are unlikely to increase their personal or indirect journeys as a result of home shopping. Internet access could also improve their quality of life by enabling them to feel more in control of their lives and less isolated. Trials should be undertaken to demonstrate the feasibility and value of home shopping for the housebound. Should these be successful, consideration should be given to subsidizing home shopping, which may well be cheaper than employing home helps to do it and would free their time for other, more productive, tasks.

Regulate B2B exchanges with regard to environmental impacts

Finally, competition authorities are beginning to pay greater attention to the potential role of B2B marketplaces. On current forecasts, these will become an intermediary in many transactions, and will therefore have great influence on buyers and sellers. They could become either a new obstacle to incorporating environmental and social factors within supply chains, or a new mechanism for collating and transmitting sustainability information. To date, discussion of B2B exchanges has focused on their ability to reduce costs, and it is questionable whether market forces alone will make sustainability a more critical factor. Hence, some form of policy encouragement may be required. The embryonic nature of these exchanges makes it unlikely that action will be required for some years, but it would be worthwhile for the government to monitor the extent to which they take sustainability into account, perhaps in collaboration with the EU.

Notes and references

1 The term ‘e-business’ includes e-commerce, but also encompasses other kinds of electronic interaction such as exchange of data. ‘Logistics’ is the management of inventory stocks and movements within the supply chain – it incorporates not only distribution of produced goods and services but also upstream movements of raw materials and management of inventory during transit.

2 DETR (1999) Sustainable Distribution: A Strategy, London

3 Lobo, I and Zairi, M (1999) ‘Competitive Benchmarking in the Air Cargo Industry, Part 1’, Benchmarking, Vol 6, No 2, pp164–190

4 DETR (1997) National Road Traffic Forecasts Working Paper P3 – Non Car Traffic Modelling And Forecasting, London

5 ibid

6 Lex (2000) The Lex Transfleet Report on Freight, Lex and Freight Transport Association, London

7 Foresight Retail E-commerce Task Force (2000) @Your Service, DTI, London

8 Huppertz, P (1999) ‘Market Changes Require New Supply Thinking’, Transportation and Distribution, March, pp70–74

9 Zentrum für Logistik (2000) Trends in Distribution, paper presented to Pira Conference on Electronic Shopping, 26 May 2000; Pira, Leatherhead

10 Croft, J (2000) ‘Overboard! Paperwork on Way Out’, Financial Times supply chain management supplement, 25 October, p6

11 Tyler, G (2000) ‘Taking Centre Stage’, Supply Management, 31 August, pp24–28

12 Angeles, R (2000) ‘Revisiting the Role of Internet EDI in the Current Electronic Commerce Scene’, Logistics Information Management, Vol 13, No 1, pp45–47

13 Grande, C (2000) ‘Electronic Commerce Bulls Exude Confidence’, Financial Times, 26 October, p13

14 Booz-Allen & Hamilton (2000) Last Mile to Nowhere, New York

15 Keynote (2000) Express and Courier Market, London

16 Helft, M (2000) ‘Webvan Goes Shopping’, The Standard, July 3, see http://www.thestandard.com

17 Verdict (2000) Home Delivery and Fulfilment, Verdict, London

18 Foresight Retail E-commerce Task Force, op cit

19 Richardson, H (2000) ‘Virtually Connected’, Transportation and Distribution, March, pp39–44

20 Verdict, op cit

21 Burt, T (2000) ‘Industry Faces Up to Challenge of E-commerce’, Financial Times auto supplement, 14 June, p1

22 Hastings, P (2000) ‘Tender Care for Transport Companies’, Financial Times, 1 June

23 WERC (2000) Warehouse Inventory Turnover, Warehousing Education Research Centre, Miami University, Ohio

24 Lambert Smith Hampton (2000) The Right Connections, Lambert Smith Hampton, London

25 Malinen, H (2000), paper presented to 9th International Containerboard Conference, Miami, 13–15 September, Jaakko Poyry Management Consulting–North America

26 Werner, T (1999) ‘EDI Meets The Internet’, Transportation and Distribution, June 1999, pp36–44

27 Fransoo, J C and Wouters, M J F (2000) ‘Measuring The Bull Whip Effect In The Supply Chain’, Supply Chain Management, Vol 5, No 2, pp78–89

28 Huppertz, op cit

29 Supply Management (1999) ‘Tesco Sweeps Up Purchasing Savings’, April, p9

30 National Research Council (2000) Surviving Supply Chain Integration, National Academy Press, Washington DC

31 Lambert Smith Hampton, op cit

32 Nairn, G (1999a) ‘Vital Links for Customer Satisfaction’, Financial Times electronic business supplement, October 20

33 WERC, op cit

34 Calkins, J, Farello, M, and Shi, C (2000) ‘From Retailing to E-tailing’, The McKinsey Quarterly, No 1, pp140–147

35 Lloyd, M (2000) ‘Magic Box a Lifeline to India's Poor Farmers’, South China Morning Post, May 24, p20

36 Cairns, S (1999) Home Delivery of Electronic Shopping: The Environmental Consequences, ESRC Transport Studies Unit, University College, London

37 Hopkinson, P, James, P and Selwyn, J (1999) The Environmental and Social Impact Of Teleworking, paper presented to the 6th European Conference on Telework and New Ways of Working; Aarhuus, Denmark

38 Pine, J and Gilmore, J (1999) The Experience Economy, Harvard Business School, Boston; Royal Institution of Chartered Surveyors, Vision 21, London

39 Marker, J T and Goulias, K (1999) A Review And Framework For The Analysis Of Household Replenishment And Its Impact On Travel Behaviour And Goods Movement, Pennsylvania Transportation Institute, University Park, Pennsylvania

40 Cairns, op cit

41 IST/Information Society Directorate (2000) Case Studies of the Information Society and Sustainable Development, European Commission, Brussels

42 National Economic Research Associates (NERA) (2000) Motors and Modems Revisited, National Economic Research Associates, London

43 Transport en Logistiek Nederland (TLN) (2000) ‘Nieuwe wijn in oude zakken’ (‘New wine in old bottles’) TLN Research Department, June (www.tln.nl)

44 DTZ (2000) A Research Study into Potential Collection Points, English Partnerships, London

45 Nairn, G et al (1999b) ‘IT and the Maritime Freight Industry’, Financial Times electronic business supplement, 20 October

Response

by Stephen Joseph and Tara Garnett

FromStephen Joseph and Tara Garnett
<info@transport2000.org.uk>
SubjectVirtual traffic

This chapter does an excellent job of demolishing the popular misapprehension that e-commerce will inevitably make everything better. On the contrary, the authors point out that one of the internet's key commercial strengths – its ability to get more goods moving further, more quickly and cheaply than ever before – may also be its Achilles heel, leading to yet more polluting, long-distance goods transportation, particularly by air. Also disturbing is their warning that even where e-commerce can help create environmental gains – less waste, for instance – these savings could simply translate into lower costs, increased production, greater resource use and the penetration of markets even further afield. Left to its own devices, it appears then that e-commerce will simply enable us to destroy the environment in new, improved and ever more ingenious ways.

This said, we are encouraged by the anti-fatalistic stance of the Digital Futures project. Faced with dire warnings of global environmental collapse, it's as well to remember that e-commerce is not a force beyond our control. As far as transport is concerned, we can and should act both to restrict its propensity to increase freight mileage, and to develop that capacity which it does have to benefit the environment.

As far as restrictions are concerned, many of the measures needed to manage e-related traffic are the same as those that Transport 2000 has always advocated. These include the promotion of rail freight, and the implementation of taxation systems that specifically penalize long-distance goods transportation. A tax on aviation is, as the chapter's authors point out, an urgent priority here. We also need to see taxation changes for surface transportation. For some time now, Transport 2000 and others have been advocating weight–distance charging, a ‘pay as you go’ system whereby the heaviest lorries travelling furthest pay the most – an eminently sensible tax that is looked upon quite favourably by many within the freight industry. To these financial measures we might add the need for a better regulated haulage market. At present we have too many hauliers driving after too few jobs, the consequences being artificially low haulage prices and yet more power to the major retailers who can play one half-broke haulage firm off against another.

As far as personal travel is concerned, action to reduce the likelihood of people spending the time freed from shopping journeys on other, equally car-dependent, pursuits can include congestion charging, car parking restrictions, car-free areas and housing developments, more investment in public transport, cycling and walking, and the transformation of our towns and cities into places where shops, services, leisure facilities and workplaces are within walking or cycling distance of people's homes.

Such damage limitation measures are essential. But we also need to adopt more positive ways of meeting the challenges that e-commerce presents. Although the internet has the ability to link businesses and customers across the globe, so hastening the process of globalization, it can also link local producers with local markets, leading to an overall reduction in freight mileage. By acting as a virtual noticeboard or auction space, the internet could map local and regional needs and resources, match ‘wanteds’ with ‘offereds’, and identify gaps where further investment and skills development are needed. It could help to create a fine mesh of networks and connections at the local and regional level, which would keep air freight and long-distance surface transportation to a minimum. Moreover, in rural areas, local producers could also serve as collection points for their local catchment area, providing rural communities with a sustainable alternative to the weekly trip to the out-of-town superstore.

Of course, these networks of local producers will need substantial support if they are to compete against the massively more powerful major retailers. Government must clearly take the lead here. The RDAs also have a useful part to play. Up until now their role has been, as far as we can see, to serve as the meek and adoring handmaidens of foreign inward investment. But perhaps it is time they started to live up to the ‘regional’ part of their names, by helping to develop and support local and regional economies and enterprises.

Transport 2000 is currently developing a project to explore the potential for greater reliance on local production and distribution to meet local needs. Once it is up and running, we hope to work closely with those associated with the Digital Futures project, as well as with a range of other NGOs.

Finally, perhaps we need to look beyond e-commerce and explore the role that information technology as a whole might play in reducing the environmental impact of the goods we manufacture, order and distribute. Some institutions have, over the last few years, worked hard to develop life-cycle assessment (LCA) models, which they can use to assess the sustainability – in terms of energy, resource and water use – of a given product. Such LCA modelling is, however, far from mainstream. Technological advances should mean that ever-increasing numbers of products, including those on any supermarket shelf, can be subjected to this kind of sustainability testing. E-commerce can then perform an invaluable function in disseminating and marketing environmental and social ‘best buys’ to the general public.