Spending on urban logistics will more than double by 2020, according to new research by Frost & Sullivan, making it an even more critical industry. They anticipate the global cost of logistics in cities will be $5.98 trillion by the end of the decade, which will change supply chain management.
The research firm predicts there will 35 mega cities, metropolitan areas with populations greater than 10 million people, across the globe by 2025, and 3 out of 5 people will be urban dwellers. The study also revealed each person will have 5 connected devices, giving them the potential to order goods at any time. An expected 25 percent of all retail transactions in countries with high capita will occur online by 2025.
Urbanization and global connectivity, particularly the growth of online retail, will impact freight traffic in cities as the number of daily deliveries to a city will rise. Urban logistics providers have found it increasingly difficult to cope with more traffic in cities, so as the trend of urbanization continues, they will have to find unique ways to deal with congestion. Transport and distribution will see the greatest increase in spending. As urban populations grow, governments will likely be focused on developing sustainable logistics strategies.
"The future will shift towards smarter models of urban logistics," explains Archana Vidyasekar, senior research analyst at Frost & Sullivan. "However, there is no homogenous strategy as each city represents a different picture in spatial pattern, infrastructure and urban setting. Each city looks at unique and customized options with private logistics providers to mitigate risks associated with urban freight distribution."
All of these changes in urbanization will make a big difference in the logistics industry. According to the findings, in the early 2000s, a typical city had a minimum of 150 supply chains, and road transport was the most common delivery method for goods. Frost & Sullivan suggest city planners will make infrastructure accommodations for logistics providers to encourage sustainability.