Felicia Söderström PERSPECTIVE FROM AN ENVIRONMENTAL PROJECTS WITHIN LAST MILE DELIVERY A CRITICAL REVIEW OF SUSTAINABILITY

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Kandidatuppsatser i miljövetenskap 019-2020

Campus Gotland

Disciplinary Domain of Science and Technology

Uppsala University, Campus Gotland

A

CRITICAL

REVIEW

OF

SUSTAINABILITY

PROJECTS

WITHIN

LAST

MILE

DELIVERY

FROM

AN

ENVIRONMENTAL

PERSPECTIVE

Felicia Söderström

Bachelor thesis in Environmental Science 15.0 c, 2020

Supervisor: Karin Bengtsson, Department of Ecology och Genetics Assistant supervisor: Angela Hultberg, Ingka Group

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The image on the front-page displays: A truck filled with different sizes of parcels. Photographer: Claudio Schwarz

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Den nuvarande studien av tre hållbarhetsprojekt inom sista milen leveranser visar att det är mycket svårt att uppskatta hållbarhetsprestanda inom den sista milen. Det beror på att de har olika utgångspunkter lokalt, görs för olika typer av leveranser och i olika skalor. Om man enbart tittar på fordonet som används för projekten skulle last-cyklar ha minst negativ

påverkan på miljön men för att leverera i alla skalor och områden är slutsatsen att man måste titta på olika lösningar. Studien visar också att alla projekt kan återskapas i olika områden, men vissa skulle kräva mycket stora investeringar om de ska återskapas i andra geografiska områden.

ABSTRACT

E-commerce is a continuously growing business that has expanded over the recent years and more people are buying online instead of offline. With online shopping, the demand for home deliveries is increasing along with it. Last mile deliveries, which is the last part of the supply chain from business to customer, operate mainly in urban areas. Most deliveries use fossil fueled vehicles, and this is problematic for the environment, society and the economy. This leads to increasing congestion and air and noise pollution in the cities with serious effects on people and the planet. Sustainability projects within last mile delivery are very important to be able to reach a sustainable future and decrease the negative impacts of home deliveries. There are many projects done by companies, research facilities, local governments and other stakeholders to find better solutions.

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INTRODUCTION

One of the United Nations sustainable development goals for 2030 is Climate action, and to reach that goal everyone needs to take immediate action (United Nations 2015, Lafortune et

al. 2018). It is evidenced that the increasing amount of carbon dioxide equivalents (CO2e) in the air is a huge environmental issue and a contributing factor to climate change (Solomon et

al. 2009). The CO2e emissions come from many different sources, both natural and man-made but one of the big man-made sources is the transport sector, specifically the transportation of goods (Colvile et al. 2001, Ramanathan & Feng 2009).

In recent years, e-commerce has increased exponentially, and more people are turning to the internet to buy all types of products. In 2014, 45% of consumers in Europe used the internet to shop on one or more occasions and the number have continued to rise. Due to increased e-commerce, there is a greater demand for efficient deliveries and last mile delivery has become an important subject of development (Morganti et al. 2014). Last mile delivery is deliveries from the company to the consumer, known as B2C (business to customer) (Iwan et al. 2016) and represents the last part of the logistics chain (Slabinac 2015). B2C deliveries are executed in different ways. The customer can get their packages delivered to the door, they can have box deliveries where the customer retrieves their packages at a digital box that is located near the customer's home and deliveries to a distributor where the packages are collected by the customer at a distribution center near the customer’s home (Iwan et al. 2016).

The problem that has arisen due to the increased demand for B2C deliveries is that logistics is poorly managed and contributes to negative environmental effects such as CO2e emissions, congestion and increased amounts of air pollution in cities. Due to complicated logistics and increased urbanization in cities, the demand for efficient deliveries is continuously increasing while the cities are poorly built for these types of deliveries. This leads to negative effects on the environment, people and the economy (Slabinac 2015). Due to the increased volume of deliveries and the increasing pressure on the environment, several studies have been done on alternative solutions to the traditional van and the logistics associated with it. The focus of the projects and research has been to make last mile delivery more sustainable, efficient and economical for the environment, companies and consumers (Slabinac 2015).

Sustainability projects within last mile delivery are designed and tested in both the private and the public sector and in recent years research have been done on various innovative solutions. The projects are designed in different ways and are testing different approaches to become more socially, environmentally and financially sustainable. Some projects focus solely on one sustainability aspect and others on several. The projects can also focus on specific parts of last mile delivery for example; a specific vehicle or method of delivery to see how it can be developed and become more sustainable (Olsson et al. 2019).

Background

Climate change

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potential (GWP). For example; 1kg of another GHG like methane gas has higher GWP than CO2 and therefore 1kg of methane gas is converted to 25kg of CO2e (Brander & Davis 2012). GHG is naturally emitted to the atmosphere but the increased amount emitted is warming up the planet due to GHG emissions are trapping warmth within the atmosphere. Climate change and the planet warming leads to negative effects on humans and natural systems such as changing ecosystems, degrading natural resilience and so forth. If humans continue to emit GHGs into the atmosphere this can cause further warming and long-lasting changes into natural systems and climate as well as lead to irreversible negative impacts for everyone. It is crucial to reduce the amount of GHGs that are emitted into the atmosphere to decrease the chances of irreversible changes and continued warming of the planet (IPCC 2015). In 2015, leaders all over the world took on 17 sustainable development goals to reach a sustainable future for humans and nature. This agreement is called Agenda 2030 and the goals are to be reached within 15 years to reach a sustainable future. One of these goals is “Goal 13. Take urgent action to combat climate change and its impacts” which means to decrease the amounts of GHGs emitted into the atmosphere (United Nations 2015).

Transport sector and climate change

Most vehicles in the transport sector use fuel sources which emit CO2 or other types of GHGs into the atmosphere (Barth & Boriboonsomsin 2009). Especially gas and diesel which have a high emission of CO2eduring both extraction and use (Li et al. 2013). In 2019 the transport sector was responsible for almost 30% of EU’s total CO2eemissions. 72% of the emissions occur from road transport (European Parliament 2019). The sector is a big contributor to the climate change and therefore to reach Goal 13 of Agenda 2030 the transport sector must reduce their CO2e emissions to reach a sustainable future (European Parliament 2019, United Nations 2015).

Purpose

The aim of the thesis is to critically review sustainability projects within last mile delivery in order to estimate their environmental impact. The aim is also to investigate the current challenges within the last mile delivery and research if the projects can be scaled up and used in other cities if they are successful.

Framing of question

Issues that provide the basis for the work are the following:

1. What are the major challenges with last mile delivery (environment, economy, social)?

2. How do the projects perform with lowering their CO2e (carbon dioxide equivalents) emissions comparing to conventional deliveries using fossil fueled vans?

3. Can the projects be scaled up and applied to other cities?

MATERIAL AND METHODS

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CO2e emissions. Interviews were conducted with representatives from the chosen

sustainability projects to get required information from the projects and to help answer the research questions. For the thesis three projects were selected after a comprehensive research of ongoing or finished sustainability projects within last mile delivery. The projects had to meet a few criteria to be chosen. First, they needed to be different types of projects with different use of vehicles, depots and strategies. Second, the information about the projects had to be public and third, someone in charge or working for the projects needed to be available for an interview.

Selection of literature to the literature study

The material for the literature study was foremost collected from Google Scholar and Science direct. The material collected from the databases Google Scholar and Science direct was primarily scientific reports. Other material was collected from companies’ websites and verified reports, primarily to collect information about the sustainability projects within last mile delivery.

Design of interviews

The interviews were semi-structured with one person at the time and with a list of questions with the openness to develop the ideas and questions further during the interview. Questions changed and were adapted during the interview depending on the answers and the interviews were not as structured as a structured interview (Denscombe 2014 p.266). The interviews were conducted via Teams or Google Meeting as many of the interviewees were in other countries and as, due to the Covid-19 pandemic, the co-workers in the Ingka Group office, were all working from home. Since the interviews was in real time and with visual contact they were almost like face to face interviews but with a geographical distance. The selection and formulation of the questions was done together with the supervisor at IKEA to make sure that the interviewee would get the data needed to make sure the questions of the report could be answered. The majority of the questions were fact based and specifically asked for more detailed information about the projects and how they are designed. Some questions asked for the companies´ own experience of the project and if they think it is possible to replicate and scale up. The questions were sent out to the respondents before the interview so they could prepare for a one-hour interview (Appendix 1).

The study used interviews as one of the methods as the information available to society about the projects is not as comprehensive as the study requires to answer the research questions. Each interview was designed to match a specific project. Therefore, a questionnaire would not be as thorough as the interviews since they might overlook certain aspects that are specific to a project (Denscombe 2014 p.265).

Selection of respondents

Since the main objective of the interviews was to get detailed information about sustainable last mile delivery projects the respondents would have to have the knowledge the study needed. The respondents that were chosen for the interviews were either in charge of the projects or had worked on them to get a thorough insight in them. To answer the last research question one employee from Ingka group was also selected for interview due to his insights in the current market and delivery systems globally.

Delimitation

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different issues regarding economy and society as well but will not look at how the projects performs from those perspectives.

RESULT

Problems with last mile delivery

With a growing demand for e-commerce and home deliveries the biggest challenge

companies, the environment and urban areas are facing within the delivery services is the last mile delivery (Punakivi et al. 2001). Companies see last mile delivery as a challenge since the demand for quicker and cheaper deliveries is continuously increasing while this is the most expensive part for the company. Consumers are getting more comfortable and used to same day or next day delivery which takes a toll on the logistics, the economy and the employees to manage to deliver in that speed (Bates et al. 2018). The logistics is very complicated and with most deliveries being delivered in urban areas they have to consider the consequences like congestion, lost time and air and noise pollution (Slabinac 2015).

Environment

One of the biggest issues with last mile delivery is the amount of air pollutants it emits during delivery. Since most are delivered by trucks or other cars, mainly from diesel or gas (Bates et al. 2018) the delivery companies are consequently a contributing factor to the climate change and other environmental problems (Dell’Amico & Hadjidimitriou 2012, Ramanathan & Feng 2009). The last mile delivery has some main issues regarding the environment, and these are foremost congestion and noise/air pollution in urban areas (Dell’Amico & Hadjidimitriou 2012). These problems can apply to different Agenda 2030 UN sustainable development goals like “Take urgent action to combat climate change and its impacts”, “good health and wellbeing” and “sustainable cities and communities” as well as other goals (United Nations 2015, Lafortune et al. 2018).The current Covid-19 Pandemic is also expecting to

permanently change shopping behavior and speed up the change from offline to online shopping (Bhargava et al. 2020).

Congestion is a negative result of increasing e-commerce. Since the delivery trucks are using the same streets as private cars and public transportation, they are a big reason to why the cities become more and more congested (Crainic et al. 2004). The result of increasing congestion in the cities is negative for the environment for the reason that more cars are standing still and emitting unnecessary amounts of carbon dioxide and other pollutants into the air like sulphur oxide, particulate matter and nitrogen oxides (Levy et al. 2010, Figliozzi 2011). The cars are also spending more time on the road and fluctuate in speed which results in higher emissions of CO2e and other air pollutants (Barth & Boriboonsomsin 2008). In 2005

emissions caused by congestion were estimated to be 1.2 million tons of nitrogen oxides, 34,000 tons of sulphur oxide and 23,000 tons of particulate matter nationwide in the US (Levy et al. 2010). These numbers have continued to increase since 2005 because of the congestion in urban areas is getting more severe (Zhang et al. 2011). This is also affecting the economy in nations and companies as well as people’s health and safety (Levy et al. 2010).

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2018, Dell’Amico & Hadjidimitriou 2012). With a continued increase in demand for fast, cheap and available deliveries (Bates et al. 2018), there are more vehicles using the roads and the logistics is getting more difficult (Slabinac 2015). More vehicles are driving with less parcels since the customer demands faster deliveries and the logistics are not able to keep up to make sure the vehicles are full. This basically means that companies are transporting air. This also leads to more vehicles on the road and therefore more CO2e emissions (Bates et al. 2018). Other negative effects on the environment are the effect on crops and agriculture where especially agricultural land close to urban areas are negatively affected by sulphur dioxide and nitrogen dioxide. The pollution can also reduce the plants quality of nutrients (Agrawal et al. 2003).

Economy

The last mile delivery is the costliest part of every delivery, both for the company and the urban areas. Even though last mile delivery usually is the shortest part of the delivery it comprises up to 28% of the total delivery cost (Wang et al. 2016). This is because it is executed in the cities. The urban areas are quite dense and small routes can take a long time due to traffic. The time lost can be very costly for a company but also the unnecessary fuel consumption during the periods of congestion (Levy et al. 2010). The economic burden in the US alone due to congestion was 305 billion dollars in 2017 and had an increase of 10 billion from 2016 (Schneider 2018). It puts an economic toll on the society with traffic delays in public transport and traffic delays for private commuters (Noland & Quddus 2005). There has also been a shift in the consumer behavior regarding deliveries which is that more and more consumers expect free deliveries. This puts an even bigger toll on companies financially due to deliveries being a huge part of a company’s cost structure (Bates et al. 2018). In 2017, the cost of deliveries for Amazon represented 26.4% of the company’s net sales (GS1 2018) and to take away the delivery cost for the customer can affect the company’s economy greatly and other solutions must be found to handle the cost (Bates et al. 2018).

Another problem with the increasing deliveries is the parcels that have to be taken back to the warehouse if the customer is not at home at the time of the delivery. This is costly for the company and bad for the environment (Bates et al. 2018).

The noise pollution that last mile delivery contributes to (Dell’Amico & Hadjidimitriou 2012)

also have a cost associated with it. Although that cost is not paid by the company but by society due to health issues that originated from noise pollution. In 2007 the social cost of noise pollution was estimated to be at least € 40 billion per year in Europe and about 90% of this cost is caused by trucks and passenger cars (Den Boer & Schroten 2007).

Society

The last mile delivery affects not only the environment and the economy but also people and society. Many of the problems connected with society and last mile delivery are connected to effects on people’s health and safety (Den Boer & Schroten 2007, Kampa & Castanas 2008). First and foremost, all the negative impacts on the environment is consequently a negative impact on people. People need a healthy environment to live a good life and ultimately to survive. Therefore, the negative effects that last mile delivery contributes to in the

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Noise pollution is a serious public health problem recognized by the World Health

Organization (World Health Organization 2011). Noise pollution can cause stress, lack of sleep, illness like certain cardiovascular diseases and in the worst-case scenario even have a fatal impact. The most vulnerable groups are children, elderly, the sick and the poor but it is a problem for the entire society (Den Boer & Schroten 2007).

Congestion in roads is also affecting people’s health negatively, especially the increased amount of tailpipe air pollutants that occur during congestion (Levy et al. 2010). According to Kampa & Castanas (2008) these effects can range from nausea and difficulty breathing to as severe diseases as cancer. It has also been shown that air pollution increases mortality and hospital admissions when humans are exposed to it. It can also cause birth-defects and other complications for very young children that can result in many different diseases. The systems that are primarily affected are the cardiovascular and respiratory systems (Kampa & Castanas 2008).

Congestion does not only have a negative effect on people due to the increase of air pollution and noise pollution it provides. It also has another psychological effect due to time lost in traffic and the stress it can cause. Because congestion stops the traffic and creates bottle necks people who are commuting are especially affected by this (Noland & Quddus 2005). It is shown that the congestion will in the near future increase with 21% in the top 100 cities in the world which in turn will add 11 minutes of commute for every driver and passenger every day (Deloison et al. 2020). The travel delays that it contributes to is reducing the quality of life for people. With more traffic in the urban cities, the chance of accidents and other hazards

involving cars and pedestrians will increase with the number of vehicles, but the severity of the accidents can be lower (Noland & Quddus 2005). Last mile delivery is a big part of the increase in congestion and in the top 100 cities in the world the number of delivery vehicles will increase with 36% over the next decade (Deloison et al. 2020). With this huge increase last mile delivery will evidently have a big impact on the negative aspects of congestion (Crainic et al. 2004).

Projects

In the following chapter the three projects that were selected for this thesis will be explained in detail.

Ingka group (IKEA) Shanghai Project

Ingka group has a goal to go 100% electric in 2025 with all their deliveries worldwide. One of the milestones is to reach this goal in 5 cities in 2020. One of the cities is Shanghai in China and they reached that goal early on in January 2019 and are now delivering all their parcels and home deliveries by electrical vehicles to minimize their emissions of air pollutants and especially, CO2e (Zhong, K., personal communication April 7, 2020).

Specifics of the project

This project is a cooperation between Ingka group, a logistic company and an EV (electric vehicles) sharing platform.

The most important aspect of the project’s success is the EV sharing platform from the

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investment themselves for purchasing electric vehicles and developing charging

infrastructure. The platform is also a way for Ingka group to increase and decrease their delivery fleet with short notice which can be needed during weekends or holidays when the demand for deliveries usually increases. With DSTs business plan Ingka group and New Brother Logistics can request more vehicles as late as the day before and the platform can also supply a driver if it is needed and New Brother Logistics just have to supply the route plan. This makes it more cost efficient and flexible and neither New Brother Logistic nor Ingka group has to put in large investments to fulfill a temporary demand.

This also made it possible to shift all deliveries from fossil fuel to electric in a much faster pace than planned since the vehicles and infrastructure was already purchased, delivered and built by DST. If the platform did not exist it would have taken a lot of time, money and labor for either New Brother Logistics or Ingka group to take on the project to build a sustainable infrastructure for deliveries as well as purchasing the trucks.

The platform also provides a digital service where the company and the customer are able to track the trucks to know where they are and when they will deliver to the customer. The digital service also helps the drivers to find nearby charging stations when they need to quickly recharge during the day. With this digital solution they are also able to evaluate driving behavior so they have an understanding of how the drivers can drive more efficiently both timewise and for the environment.

Ingka group in Shanghai have decreased emissions with approximately 1100 ton of CO2e from 360,000 truck deliveries by switching from fossil fueled trucks to electric vehicles (Zhong, K., personal communication April 7, 2020).

Comparing electric vehicles with fossil fuel trucks used in Shanghai

According to Ingka group there are not too many differences in capacity between a fossil fueled truck and the electric fueled truck used in Shanghai within the last mile delivery. The filling rate and loading efficiency are unchanged between the two and therefore one truck using electricity can still carry as many packages and orders as a fossil fueled truck. Though there are some limitations to the electric trucks the results from this project have proven that these limitations do not affect the deliveries as much as expected. One of the biggest

limitations of an electric vehicle is the range and the time it takes to fully recharge the truck. If the truck only delivers within a special zone the truck can usually manage on the overnight charge and do not have to recharge during the day. If the truck needs to recharge it usually only needs an 1-1,5 hour charging to manage the whole day and during this time the driver can take their lunchbreak. Therefore, Ingka group estimates that these limitations have a smaller impact on the deliveries and that the positive outcomes from an Electric vehicle outweigh the limitations. The positives of the electric truck compared to the fossil fueled truck is first of all that it is not emitting any CO2e while operated in the cities. The electric truck also follows new and future restrictions in cities where environmental zones are being upheld and looking at the continuing trend of more policies around fossil fuel it makes the electric vehicle easier to use in cities (Zhong, K., personal communication April 7, 2020).

Charging infrastructure in Shanghai

The charging that is used for the electric trucks is only quick charging that takes about 3-4 hours to fully load the trucks battery. They have hubs where the trucks are charging during the night close to the stores and warehouses. 80% of the charging of the electric trucks is done in the hubs overnight and only 20% is done in public charging stations during the day.

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will probably cost more, but it will use less energy to get there. DST and the third-party charging company have charging stations almost everywhere, so it is seldom the trucks need to use a public charging station (Zhong, K., personal communication April 7, 2020).

Economy

In the DST business plan the parts that costs are:  Electric vehicle leasing.

 Charging services of the electric vehicles.

 Value added service e.g. a mobile application for delivery track and trace, charging station accessibility, route planning efficiency and maintenance.

The government policies are changing towards the benefit of the environment with environmental zones where diesel cars are not allowed to drive, increased subsidies for electric vehicles and so forth. Therefore the costs that are put on this project today might save money for Ingka group in the future because they are following the new regulations with environmental zones and other restrictions.

A problem from an economic prospective right now is that the prices of fossil fuel is going down and that is not positive for the electric vehicle market (Zhong, K., personal

communication April 7, 2020).

Summarizing the project

The project was reachable in a shorter timeframe than planned thanks to the existence of the EV sharing platform offered by DST. Without the platform the change to a 100% electric fleet would have taken more time and been much more complex and costly. The project has

decreased IKEAs annual CO2e emissions by approximately 1100 ton of carbon dioxide per 360,000 truck deliveries and they are hoping to expand this project to all of China. Ingka group is not sure that the EV sharing platform could be replicated right now in Europe due to its very niched business model but hopes that it can be duplicated in the future in other markets and they are right now trying to find a way to introduce it in North America (Zhong, K., personal communication April 7, 2020).

DPD Westminster – All-electric micro-depot

DPD is a courier express parcel service company working all over the world and in 2018 DPD opened their first all-electric micro hub in Westminster London. The micro-depot will deliver all last mile deliveries within that area with electric vehicles and have two all-electric Fuso eCanter 7.5t vehicles that will take the parcels from the London depot to the micro-depot. The micro-depot is delivering in a very high-density area which results in a high driver

productivity. This means that some vehicles drive less than five miles a day and with the electric vehicles this results in parcels delivered with zero emission (Fowler 2018). The reason behind the opening of the micro-depot was the change to ultra-low emissions zones that were being implemented in London, as well as reducing the carbon emissions from the deliveries (DPD, personal communication April 24 2020).

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different kinds of electric vehicles for different types of demand in delivery. The most common vehicle they are using in the Depot is a Nissan eNV200 but they are also using cargo-bikes and other electric vehicle solutions.

The Fuso eCanter truck delivers parcels from the London city depot that is located further away to the Westminster micro-depot. Then the smaller electric vehicles pick up the parcels from the micro-hub to deliver in the closest area. Since the range of electric vehicles is a challenge compared to fossil fueled trucks it is important to plan the routes strategically for the vehicles to manage the whole day on their overnight charge (DPD, personal

Charging infrastructure

The DPD drivers are mostly self-employed and own their own vehicle and DPD helps to install charging points at their homes so they can charge their vehicles overnight. They also get financial help from the government to install the charging points, so they eventually only have to pay 200 pounds for the charging points after help from DPD and the government. Here the vehicles charge overnight and this usually is enough for the whole working day the next day. If they need to recharge during the day, they have charging points in the micro-depots and can also use London’s charging infrastructure. The central parts of London have a well-developed charging infrastructure but if the vehicles need to go beyond to more remote areas it can be harder to find sufficient charging infrastructure which can be a challenge for DPD in their plan to expand this concept to other areas of London and the UK.

The electricity DPD is using for their own charging points, were some of the vehicles also charge overnight is 100% renewable electricity and they also have solar power on the micro-depots that can be used for the charging. Storing the electricity has been an issue since the vehicles are used during nighttime when the sun has set. Therefore, DPD is looking into battery solution since they want to utilize more solar power. For now, they are cooperating with a supplier that can guarantee 100% renewable electricity is used for the charging points and the rest of the micro-depot (DPD, personal communication April 24, 2020).

Comparing electric vehicles with fossil fueled trucks in London

The main challenge with the electric trucks is the range and the price of the trucks. The Westminster depot is built in a location where the range should not be an issue but as soon as they have to move further out it is harder to work on one overnight charge. Delivering the parcels to the micro-depot is also a challenge since there are few large all-electric trucks on the market in Europe, and the ones that exists are very pricy and are sometimes not available for right hand driving. For now, it would be very hard for DPD to go fully electric in more areas since it would be extremely costly for them as well as inefficient since the size of trucks they usually use are not available. They do plan to have more than 600 electric vehicles all over the UK in the end of this year and have a requirement on all depots to at least have 10% electric vehicles in their fleet (DPD, personal communication April 24, 2020).

For DPD, since they mostly have self-employed drivers, a challenge has also been that they have to hire drivers that already have or can install charging points in their home which can be quite hard for people who live in apartments. Therefore, they have to think about who they employ.

Economy

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(DPD, personal communication April 24, 2020). In recent years there is already a shift

towards start-up companies developing more and more electric vehicle solutions for final mile deliveries but as of now especially the bigger trucks are too expensive for many companies to buy (Fowler 2018). DPD is planning to see a huge save in pounds per mile and the fuel usage of their fleets due to expanding their electric fleet as well as their charging infrastructure. The electric vehicles usually have a lower cost in service and do not need as much

maintenance as fossil fueled vehicles. This is due to the amount of moving parts in an electric truck is much less compared to a fossil fueled truck. They also believe to get future business with their new way of delivering last mile and expanding their electric fleet due to both government and other companies want to be a part of projects leading to sustainable

development. Since the consumers are putting more pressure on DPDs customers to be more sustainable, DPD is also prepared for the shifting in demand and can supply what the

consumers are asking. When doing the change in a sensible timescale they are prepared better to supply the new demand of sustainability and do not have to do the shift abruptly which would probably result in a much heavier economic burden (DPD, personal communication April 24, 2020).

With smaller micro-depots closer to the dense areas in London DPD can use electric vehicles for their last mile delivery in a sufficient way, it benefits them, the society, the environment and the consumer. By using different kinds of electric vehicles, they can plan their routes in an efficient way to make sure that the vehicles do not need to recharge during the day. With both a change in demand and the implementation of zero emission zones it is important to start this change from a business perspective as well as for the environment (DPD, personal communication April 24, 2020).

City of Munich and UPS (United parcel service)– City2share project

The city of Munich and UPS are cooperating in a project called “City to share” that is centered in Munich, with the aim to minimize air pollution and improve quality of life in the city. In this project the focus is to minimize air pollution connected with last mile delivery and reducing delivery tours in the city to reduce trucks in the city and reduce safety risks (Bauer et al. 2018). The project started with UPS using two containers that they delivered by a truck into a certain place in the city. The containers are a part of the delivery chain, and inside the containers there would be 9 smaller containers filled with parcels that were going to be delivered in the nearby area. When the container had been delivered to the pickup spot, cargo bikes would pick up one smaller container each and then deliver the parcels to the customers via cargo bike. The project has been very successful so far, so UPS has expanded to using seven containers at different sites in the city (Horvath, J., personal communication April 29, 2020).

Every morning UPS is delivering seven containers via trucks in different locations in the city. These containers take up around 2-3 parking spots in space and they are using public parking areas as delivery sites. Therefore, the cooperation with the city is very important so they are able to use this space. Every container contains 9 smaller containers that easily can be

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containers are also situated in very dense areas, so the bikes usually do not have to go further than around 800-900 meters from the containers to deliver all the parcels.

The bikes batteries are mostly charged at UPS and they are delivered to the bikes every morning along with the containers. Therefore, the bikes do not have to be stored close to a charging spot like other electric vehicles, for example vans and trucks. If the cargo bikes have to go further than the 800-900 meters from the containers they will have to recharge or change battery during the day, otherwise they do not have to recharge during the day or only one time per day. Usually they can manage on the one charged battery they get in the morning.

Right now UPS is using 24 cargo bikes in the city to help and deliver the parcels within last mile delivery (Horvath, J., personal communication April 29, 2020). These cargo bikes have replaced 20 trucks and therefore reduced the number of trucks used in the city as well as reduced their carbon emissions (Bauer et al. 2018, Horvath, J., personal communication April 29, 2020).

One of the challenges UPS is facing with this project is when the city2share project finishes if they still can use the public parking spots or if the permit no longer will be valid (Horvath, J., personal communication April 29, 2020).

Munich and UPS agree that this project has been very successful and UPS has also chosen to expand from the agreed on two test locations to now utilizing seven locations. They also believe this kind of business model can be easily scaled up and replicated by other companies and cities as long as they can work together to ensure the locations of the drop off zones for the containers. They also believe that if companies work together, they can use the same drop off spots for their parcels. The cargo bike project has managed to reach the goals to lower the carbon emissions and the use of trucks in the dense areas of the city (Horvath, J., personal communication April 29, 2020).

Critical review of Sustainability projects from an environmental perspective Comparing vehicles

At this moment, the most used vehicle in last mile deliveries is a fossil fueled van or truck (Bates et al. 2018) and both gas and diesel have a huge impact on the environment from the CO2 emissions they emit (Helms et al. 2010). Currently more companies are looking into more sustainable options, like electric vehicles and cargo bikes (Olsson et al. 2019). These other options have both positive and negative impact on the environment but overall inflict less harm towards our planet in most cases (Bauer et al. 2015, Helms et al. 2010).

According to Bauers et al. (2015) research done in Switzerland for passenger vehicles; fossil fueled vehicles and electric vehicles are emitting different amount of carbon dioxide

according to their life-cycle assessment. The life-cycle assessment accounts for all

environmentally relevant flows like emissions, energy, waste, natural resources and material that are involved in the process of the production of the vehicle until the end of life of the vehicle (Bauer et al. 2015). It is a continuously changing market and since these numbers are from 2015 they have probably changed since then. The life-cycle assessment that Bauers et al. did in 2015 showed that:

 A gasoline driven vehicle emits 300 g CO2e per driven kilometer when accounting for the whole lifecycle. Compared to other options this is the highest emitting vehicle (Bauer et al. 2015).

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Hagen et al. (2013) did a case study that showed much lower numbers of CO2e emissions coming from cargo bikes:

 Cargo bikes emits 21 g CO2e per driven kilometer in their life-cycle. The life-cycle assessment also accounted for physical activity of the driver and the increase of food the person may have to consume due to the extra physical activity (Hagen et al. 2013).

The life-cycle assessment that Bauer et al. (2015) and Hagen et al. (2013) did is accounting for a mixed use of energy sources (Bauer et al. 2015) but according to Helms et al. (2010) electric vehicles differs quite a lot in emissions depending on where the electricity comes from. Electric vehicles that drive on electricity from coal have a larger negative impact on the environment compared to a vehicle that drives on electricity from renewable energy. The vehicle driving on electricity from coal can also have a larger negative impact in CO2e emissions compared to fossil fueled vehicles (Helms et al. 2010). More recent research done in China show that electric vehicles without controlled charging with energy from coal in China emits 20% less than vehicles powered by gasoline. Controlled charging is when the vehicle is charged during the night or hours when the electricity grid is not as active and uncontrolled charging is when the vehicle is charged whenever during the day or night. If the charging is controlled the electric vehicles emits 4,5% more CO2e than a gasoline driven vehicle but this depends on what region in China the energy comes from. This is mainly because of the difference in coal prices and the energy networks. In the regions where the price of coal is quite low it is mainly because they have low-efficient technologies and therefore the production of coal emits higher amounts of CO2e in those areas (Li et al. 2016). To move even further, according to Knobloch et al. (2020) they find that electric vehicles in total reduce the global emissions in all scenarios and will continue to emit less CO2e with the reduction of use-phase emissions and the development of more renewable energy sources (Knobloch et al. 2020).

Gas and diesel have a high human toxicity potential (HTP) that can negatively affect humans. “HTP represents the potential impact on human health due to emissions of toxic substances such as heavy metals and hydrocarbons” (Bauer et al. 2015). This is occurring in the whole supply chain, from the extraction and production of the fuels due to fugitive emissions to when the vehicle is used because of the tailpipe emissions. The electric vehicles also have a very high level of HTP due to the current mix of electric sources that are being utilized in Europe. A lot of energy comes from coal and power plants and during that production of energy toxic substances are released. The mining of metals for the battery and other part of the electric vehicles also contributes to high HTP. Fossil fueled vehicles and electric vehicles both can have a high level of HTP during the production and use of the vehicle. Energy sources are changing in Europe and more countries are turning to renewable energy or other solutions other than coal so electric vehicles are planned to have a decreasing amount of HTP in the future (Bauer et al. 2015).

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life-cycle assessment of 21 g CO2e emission per kilometer might not be representative in comparison to other vehicles (Hagen et al. 2013, Gruber et al. 2014).

Reviewing the projects

For the Shanghai project the main objective was to change their fossil fueled fleet to an 100% electric fueled fleet. They succeeded to implement the project in a shorter time than planned because of the EV sharing platform. The project is a finished solution for Shanghai although since it requires an EV sharing platform it is not a finished solution for other cities and countries unless they have a similar business model in place (Zhong, K., personal communication April 7, 2020).

China is currently using mainly coal in their production of electricity in the country (Ou et al. 2010). In 2018 59% of Chinas total energy consumption came from coal (China power team 2020). The electricity used for the vehicles and the charging stations comes mainly from coal since that is the main source in China (Zhong, K., personal communication April 7, 2020). Depending on where in China the coal that is used for electric vehicles comes from it can both emit more or less CO2e compared to a gasoline vehicle. Due to the fact that Shanghai is in the east region of China both controlled and uncontrolled charging emits less than the gasoline vehicles. If the charging is uncontrolled it emits around 20% less CO2e compared to a gasoline vehicle (Li et al. 2016). Coal is expected to still be a huge part of Chinas energy consumption in the future, but they are looking into more clean coal technologies as well as other energy sources that are better for the environment (Ou et al. 2010). If China goes towards an even more mixed energy use and more towards renewable energy sources the amount of CO2e emissions would drastically decrease (Helms et al. 2010). In 2015 China accounted for around 33% of the total global wind market and continues to implement and use more renewable energy. The Chinese government have a commitment that 15% of their total energy consumption will come from renewable energy by the end of 2020 (Tu et al. 2019). According to McElroy et al. (2009) China could supply a lot of the energy demand in 2030 with wind power. The wind plants are increasing but coal and other fossil-fueled energy sources is still planned to supply a lot of the demand. If Ingka group could make sure to use only renewable energy for their electric deliveries in the future the CO2e emissions would be almost solely from the production of the vehicle (Helms et al. 2010, McElroy et al. 2009, Tu

et al. 2019).

The Shanghai project is using an EV sharing platform, this means that they do not need to own their own fleet and can also change the number of vehicles used in a short period of time. They can both decrease and increase their fleet depending on the demand. So instead of buying vehicles that will not be used the majority of time due to lower demand, the EV sharing platform can accommodate the current demand and other companies can use the same vehicles when Ingka group do not need them and vice versa. The result of this is that a

smaller total number of vehicles will be used between different companies (Zhong, K., personal communication April 7, 2020). With a smaller number of vehicles being used

between different companies the emissions created from the production and end of the vehicle will be less, since less vehicles are being used (Helms et al. 2010).

For the DPD project with the all-electric micro-depot they are using renewable energy in the depots. But a lot of the vehicles are charged at the drivers own home, and there DPD cannot control what source the energy is coming from. Therefore, it is not 100% renewable

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(Bauer et al. 2015). Compared to the Shanghai project where they are only using electricity from coal at the moment, the DPD project is most certainly more sustainable (Zhong, K., personal communication April 7, 2020, DPD personal communication April 24, 2020, Gielen

et al. 2019). The biggest difference reviewing the DPD project and the Shanghai project is mainly the size of the projects and the source of the energy used in the vehicles. For DPD they are only utilizing electric vehicles were the micro-depos are located, for this example the Westminster micro-depot. The Shanghai project is in a much larger scale (Zhong, K., personal communication April 7, 2020, DPD personal communication April 24, 2020). Both projects are replacing fossil fueled trucks and other vehicles with electric vehicles but since they are using different energy sources the environmental impact of the Shanghai project is higher than the DPD (Gielen et al. 2019). The DPD all-electric micro-depots also utilize other types of electric vehicles like cargo bikes which have a much smaller impact per delivery on the environment. According to the case study that Hagen et al. (2013) did the cargo bikes only emits 21 g of CO2e per kilometer. Compared to fossil fueled vehicle that is 279 g CO2e per kilometer less and compared to an electric vehicle powered by a mix of energy sources it is 189 g CO2e per kilometer less (Bauer et al. 2015, Hagen et al. 2009).The electric cargo bikes are mainly charged at the depos and is therefore also mainly using renewable electricity (DPD, personal communication April 24, 2020, Hagen et al. 2013).

As mentioned above the cargo bike might not be able to replace a delivery truck and its capacity. To replace the capacity the delivery company might have to utilize more than one cargo bike to get to the same capacity and filling rate of the delivery vehicle (Gruber et al. 2014). But the use of cargo bike in the project that DPD is working with is better in general for the environment due to its much smaller CO2e emissions during the lifecycle (Hagen et al. 2013).

For the UPS and Munich project the last mile delivery mainly relies on cargo bikes for the B2C. The only part that is not using cargo bikes is the delivery of the container to the inner city, which is delivered by a diesel truck. The diesel truck is the contributor to the most CO2e emissions (Bauer et al. 2015). They are now using 24 cargo bikes which have replaced 20 trucks used in the inner-city area of Munich. Since this is a trial run it is not a finished

solution. They now know that it works with at least 7 container spots but since it is not tested for a larger area it is not yet known how big an area this concept can work for. Due to the project being a cooperation between UPS and the city of Munich, UPS have also gotten permits to use areas that may otherwise be hard to get permits for. Therefore, it is not a finished solution for big scale deliveries yet, but it is proved that it works in a smaller scale in Munich and with smaller parcels that can fit on the cargo bike (Horvath, J., personal

By replacing 20 fossil fueled trucks with 24 cargo bikes the project have minimized their CO2e emissions per kilometer with 5496 g CO2e to only emitting 504 g CO2e per kilometer according to the life-cycle calculations from Bauer et al. (2015) and Hagen et al. (2013). These calculations are not the exact calculations for the exact vehicles used in the projects but provides an understanding of the difference in CO2e emissions from fossil fueled vehicles, electric vehicles and cargo bikes (Bauer et al. 2015, Hagen et al. 2013). Comparing the UPS project with the Shanghai and DPD project in a small scale it has a bigger positive impact on the environment. But since it is only tested in a small scale it is hard to compare the projects from an overall environmental perspective.

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compared to coal or other unrenewable energy sources (Gielen et al. 2019, Horvath, J., personal communication April 29, 2020).

It is not possible to completely compare the different projects from the points they are in now since they are done in different scales, countries and with different starting points. Even if they are finished projects or ongoing projects they are continuously changing depending on the demand, the policies in the country or region, the availability of electric vehicles and the energy sources (Zhong, K., personal communication April 7, 2020, DPD personal

communication April 24, 2020, Horvath, J., personal communication April 29, 2020). If for example China shifts their production of energy to a renewable source the CO2e emissions will drop heavily and almost only emit CO2e in the production of the vehicles (Helms et al. 2010). But because this project is made in China they have to rely on the same energy as everyone else, which is mainly coal (Ou et al. 2010). Here there is also a question of demand. If more companies use electric vehicles to be more sustainable, they put pressure on

government and other stakeholders to invest in better energy sources (Cherni & Kentish 2007).

If looking at no other aspect than the CO2e emissions right now the UPS and Munich project is the most sustainable since they are mainly relying on cargo bikes for the last mile delivery which emits much smaller amounts of CO2e. Though we do not know for sure if they use renewable or unrenewable energy, the cargo bikes use such small amounts of energy that the negative impact on the environment would still be quite small (Horvath, J., personal

communication April 29, 2020, Hagen et al. 2013).

Scaling up the projects

The definition of scaling up is defined by the World Bank “implicit in the concept of scaling up is the need to go beyond business as usual, to embrace new technologies, new institutional arrangements, and new approaches.” (Moreno-Dodson 2005). Others have defined it similar to the World Bank but Hartman and Linn (2008) defined it in a way that is more applicable to this research which is “expanding, adapting, and sustaining successful policies, programs, or projects in different places and over time to reach a greater number of people.” (Hartmann & Linn 2008).

Not all projects can or should be scaled up or done in other geographical areas. Some projects can be very area specific or the business model can be very specific for a company. Some projects might not be successful or only successful because of the starting point of the area. Therefore, it needs to be evaluated if the project should be scaled up at all (Hartmann & Linn 2008). There are also different organizational paths for scaling up and these are: expansion, replication and spontaneous diffusion. Expansion is referring to an organization’s own project that they want to scale up and develop. A replication is when an organization scale up a project that someone else has tested and a spontaneous diffusion is when something is so successful that it spreads between different people, companies or even countries (Hartmann & Linn 2008). For this research the focus is mainly on replicating to different geographical areas as well as expanding and developing those projects.

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financial perspective it could be risky for one company to take on that big of an investment. It could more easily be replicated in a smaller form and more local since it would not require the same amount of investment and the company can use the subsidies from a local level

(Guillard, R., personal communication May 13, 2020).

The DPD project is in a much smaller scale compared to the Shanghai project and the micro-depots are only in specific areas like the one in Westminster. For this project to succeed in other areas the company or organizer must have a cooperation with the local government to find suitable solutions in the inner-city that can work as depots. For the Westminster project DPD for example used an old fire department station that was in the city but large enough to be a depot. This also requires some investment from the company since electric vehicles are still quite expensive and the business model only works in dense areas (DPD, personal communication April 24, 2020). Comparing to the Shanghai project the investment is much smaller to implement the DPD project. For Ingka the project would mostly serve small parcel deliveries the way it is developed now and that would only serve as a small part of Ingkas last mile delivery. A large part of Ingka groups deliveries are much bigger than the parcel

deliveries and require much larger vehicles. This project would only be a small part of a bigger solution if it was implemented for Ingka group (Guillard, R., personal communication May 13, 2020).

The Munich and UPS project is the smallest project in scale, but it could also quite easily be duplicated or scaled up. The most important success factor here is to have a good cooperation with the city to find and get permits to utilize locations where the containers can be dropped for the last mile delivery. As with the other projects it is also a financial investment with buying new cargo bikes and containers that work for the model (Horvath, J., personal

communication April 29, 2020). For Ingka group this project would be quite small scaled and would only carry the smallest of parcels, but the setup is close to a project they are doing in Copenhagen. That setup use collection points instead of cargo bikes delivering the last mile. The collection points move during the day and are brought close to people’s homes so they easily can go and pick up their parcels. To duplicate or scale up the UPS and Munich project all they would have to do is to add the cargo bikes for it to be implemented since they already have projects delivering the first part. It is hard to cover a big scope with the project Munich and UPS are doing but it could be a compliment to a bigger solution or need to be done in a much larger scale to get a good effect (Guillard, R., personal communication May 13, 2020).

DISCUSSION

There is no question that the last mile delivery is negatively affecting the environment in different ways. It is an area of business that is continuously growing and with the current Covid-19 pandemic it could change the shopping behavior of customers greatly. There are already articles written and data collection that shows that more people are turning to online shopping than ever before (Bhargava et al. 2020). It is very important to work with last mile delivery and develop it sustainably so the issues can decrease or even be completely removed.

The last mile delivery is not only affecting the environment, it also has a negative impact on society and economy as well and these issues are just as important.

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Shanghai project is regarding all deliveries from Ingka group and is done in a very large scale while the UPS and Munich project was made for small scale activity and for smaller

deliveries. Therefore, the comparison between the projects had to be made from a vehicle perspective. But if it could have been analyzed more in detail and in the perspective of scale and usage the conclusion of the second research question might have been different.

It is not possible to take away the emissions completely from the last mile delivery since a lot of the deliveries require delivery vehicles. Even if a vehicle does not emit anything during the usage it emits during its production and from the material use (Helms et al. 2010, Hagen et al. 2013, Brown & Guiffrida 2014). All projects are using electricity as a solution for reducing their emissions but with different sizes of vehicles. Because the electricity come from different sources the vehicles affects the environment differently. The change towards clean electricity is an important change if the world is to reach the UN sustainability goals

(Lafortune 2018). Today there is a Global energy mix but the demand in renewable energy is continuously increasing (Adam et al. 2020) and with that the emissions of electric vehicles will decline (Knobloch et al. 2020). Right now, there are some problems with electric vehicles due to the energy sources and it is not as sustainable as it could be everywhere. But the world is moving towards more sustainable energy sources which will make all these projects more sustainable as well. If China for example used renewable energy the project in Shanghai would be extremely different in CO2e emissions and would hardly emit any CO2e during the use of the vehicles (Helms et al. 2010, Li et al. 2016). All three projects are

moving in the right direction but in different scales and outcomes since they are reducing their total emissions.

All the projects are scalable and could be implemented in other areas according to Guillard (2020). It very much depends on the investment a company is ready to take or if they can cooperate with the local governments (Guillard, R., personal communication May 13, 2020). If the country or city already have a similar business model to the EV sharing platform it could be very easy to implement the project, but due to the fact that this is very niched for the Chinese market at the moment it is hard to find something that can work in a similar way (Zhong, K., personal communication April 7, 2020). Some governments might have subsidies or current projects that can make the replication or scaling up of the project easier like the project the UPS and Munich is a part of that is called “city2share”.

It could also depend a lot on how the city is built and if bigger trucks are even allowed to enter the inner-city areas. Some areas and cities do not allow cars to enter at all and would therefore be hard to replicate these solutions for (Simpson 2015). Even though the UPS and Munich project have electric cargo bikes the range may be an issue if the containers are not close enough to the customers. It also depends a lot on where they are replicated and for what kind of deliveries.

Methodology discussion

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The selection of interviews was done after the projects had been selected since the main objective of the interviews was to collect information about the projects. For an even better understanding of the projects more than one person from the project could have been interviewed so that nothing was looked passed or not answered. For example, an interview with someone more involved with the financial parts would have benefited the third research question about scaling up.

The selected interview persons gave a comprehensive view of the projects and had enough information to provide an understanding. The interview that lacked some answers was with the city of Munich since they were only one part of the project and had more insights to the benefits for the environment than the economic benefits that could be used for the scaling up. The delimitation was right for the size of the paper, but it would have been more developed if other aspects on the projects could have been evaluated as well. For example, the difference in social health, noise pollution and congestion. But to answer these questions connected to the sustainability projects would require a much larger work and more research as well as more detailed information about the vehicles used for the projects.

Conclusion

The last mile delivery has a lot of challenges and issues and it is very important to work towards decreasing these if we want to reach a sustainable future. All projects researched in this thesis are moving towards the right direction and towards a more sustainable future but in different speeds and sizes.

1. What are the major challenges with last mile delivery (environment, economy, social)?

The last mile delivery has a lot of challenges and issues and it is very important to work towards decreasing these if we want to reach a sustainable future. The major challenges are within all sustainability aspects which are environmental, economy and society. For the environmental the biggest challenge is the emissions of GHGs that is contributing to climate change. For the economy it is the cost of congestion both for society and the company and for the society it is primarily the negative impact the emissions and congestion have on people’s health.

2. How do the projects perform with lowering their CO2e (carbon dioxide

equivalents) emissions comparing to conventional deliveries using fossil fueled vans?

All projects are using vehicles which are reducing the CO2e emissions compared to fossil fueled vehicles. Unfortunately, the amount of emissions from the projects depends on external factors that they cannot control. The biggest external factor that affected the emissions is the energy source available in the project area. Therefore, for example; the project in Shanghai could be lowering their emissions to a much larger extent if the energy used did not come from coal.

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3. Can the projects be scaled up and applied to other cities?

All projects could be duplicated and scaled up but with very different incentives and investments from the city or company. Depending on where they are to be duplicated the incentives can be very different. In some cases, it can be easier to implement the project in another area or city due to subsidies from local governments and so forth. If the city or area also have some parts of the project already implemented like the Shanghai project which already had a EV sharing platform in the city it can be easier to duplicate the projects.

To conclude there is no silver bullet, and no one size fits all. Countries are different in maturity, legislation, incentives, available charging infrastructure, etc. Therefore, it is important to utilize different solutions for different markets. Additionally, one market will most probably require different solutions to cover the totality of last mile. The author is of the opinion that a combination of different vehicles, preferably fueled by renewable energy, together with new operational models like the container and cargo bike solutions is needed to handle the entirety of last mile. Most probably we will also see other types of solutions. Last mile logistics is a puzzle, and we need to find all pieces to build a more sustainable future.

ACKNOWLEDGMENT

This thesis would never have been possible without the help and support from Ingka group and especially my supervisor Angela Hultberg that have committed her time and expertise to help me with my thesis.

It would neither have been possible without DPD and the city of Munich that took time for me during the stress of Covid-19 to help me get the information I needed for the projects. Another big thank you to my supervisor Karin Bengtsson that have supported and guided me through the whole process. Finally, a big thank you to my opponent Elin Sjödin and examiner Raine Isaksson for the time you have spent on my thesis.

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