Consolidation centres: urban myth?

Proof of the success of urban consolidation centres is difficult to find, yet local authorities are lining up to announce their interest in them.

Since the turn of the century, the increasing use of the phrase ‘urban consolidation centre’ (UCC) among local authorities has also reflected a significant growth in plans to build these logistics facilities.

But despite the theoretical benefits that these ambitious initiatives are capable of, there is still a startling lack of evidence to prove their efficacy one way or another.

In fact, their proliferation within local transport plans, seemingly as an environmental panacea, prompted one analyst, who wishes to remain anonymous, to suggest that UCCs were nothing more than a “gimmick”.

This scathing remark is not easily dismissed. According to a transport paper published last summer by the University of Westminster, “to date there has been a lack of evidence-based information upon which potential operators [of UCCs], be they logistics providers or local authorities, can base decisions as to the viability of such initiatives”.

Professor Michael Browne, who helped write the paper, says one problem is that UCC operators struggle to put a value on the reduction in vehicle/km achieved for customers. But of more concern is the funding issue. “To get one started, you need public funding,” he says. “But then can you actually over a certain period of time get it to be self supported?”

For the moment, the answer to this remains unclear – there is little evidence of a consolidation centre being financially viable in the medium- to long-term. But this hasn’t stopped Glasgow and York joining other cities, such as Southampton and Birmingham, in announcing their intentions to look into the potential of developing a UCC to reduce congestion.

UCCs have evolved from the basic trans-shipment centres that emerged 30 years ago to become sophisticated operating centres situated on the edge of cities today. Acting as the middleman between the haulier delivering goods into them and the retailer, construction site, or other business that ultimately receives the freight, they can consolidate deliveries and offer value-added logistics and retail services for the customer. In simple terms, they strive to reduce the numbers of lorries delivering into congested city centres by using one truck to carry out multi-drops.

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Bristol UCC: Bristol launched its UCC as a trial in 2004, making deliveries to retailers in the Broadmead retailing district. It is close to the M4 and M32 and has 5,000ft2 of space. Suitable customers were identified as medium-sized business selling non-perishable goods and non high-value goods. Deliveries are made via 7.5-tonne and 17-tonne vehicles. It also offers value-added services. Initial results showed a 68% reduction in vehicle trips into Bristol city centre for retailers. As well as 5.3 tonnes of CO2 emissions being saved, it has also prevented 840gms of NOx and 11,374gms of PM10 emissions from being released into the atmosphere.

When considering consolidation centres, many quote Bristol’s as a success. It has seen a large drop in vehicle trips into the city centre for the 64 businesses within the Broadmead retailing district signed up to the scheme. And there is the potential for dozens more if negotiations with the developers of a new, huge shopping regeneration project in the city prove fruitful. Ultimately, these negotiations will be key to the scheme’s future success.

Future funding

The city council made the most of available European funding from the beginning and launched the UCC as a pilot, with retailers able to join on a voluntary basis. The trial proved a success and was extended, eventually beyond the end of the time limit imposed by the European Commission’s Vivaldi fund. DHL-Exel runs the operation.

However, the UCC has now reached a critical period where Bristol City Council is reducing its own subsidies each year and success is dependent on retailers paying to be involved in the scheme. The council’s transport planning officer, Tim Hatgood, says: “In terms of the funding, the council helps support it through its revenue budget. The council is happy to subsidise it, but wants to see it falling. It’s a constant year-on-year reduction.”

Hatgood says the exact amount of funding is commercially sensitive, but concedes that currently it is 65% of the total revenue invested. The remaining 35% comes from two sources: one is another European grant, but Hatgood says the majority now comes from retailers.

He adds: “The biggest problem we have in Bristol is participation by retailers on a voluntary basis. The ideal scenario would be similar to that at Heathrow, where there is a landlord. That’s got to be the future. We don’t have any way to force customers to pay.”

Heathrow is possibly the only other retail UCC that can be described as a success, but its situation is unique: as the landlord, BAA insists that the retailers within its terminals use its dedicated consolidation centre. According to Browne’s 2007 paper, it also has set ground rules under which DHL-Exel manages it.

“It appears that imposed UCC solutions are successful only if the imposing organisation is able to control or strongly influence all the players,” the report says. “In contrast, voluntary schemes seem often loosely constituted and made up of variety of players and vested interests. In some cases, these schemes appear to have been established with only limited research and analysis. As a result, in the absence of early success, the arrangements quickly dissolve.”

Retailer input
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London construction consolidation centre: This began as a £3.2m pilot study in 2005 and was made up of a partnership between Stanhope, Bovis Lend Lease, Transport for London and logistics operator Wilson James. Initially it operated from a 53,820ft2 facility and processed more than 200,000 pallets of construction project materials per year. The study revealed some barriers to success, including lack of financial incentives, industry fragmentation and a business case yet to be demonstrated. When the trial came to an end, Wilson James reviewed the scheme and decided to move the centre to near London City Airport, in Silvertown. Materials and plant are now delivered to a 64,583ft2 site, which currently services Skanska’s £1.2bn Barts Hospital project and a StructureTone city project. According to Wilson James, it has reduced construction freight-related journeys by 68%, reduced CO2 emissions by 70% and supplier journey times are now just two hours per journey. Since 2006, it has won three environmental awards and a ‘Best Project Collaboration’ award.

Over in Norwich the picture is not quite as rosy. Mindful of the revenue Bristol City Council invests into its UCC, Norwich County Council decided from the outset that retailers must pay to use the UCC. This has resulted in a “challenging” sales process, where the operator of the UCC, Foulger Transport, has had to convince companies of the benefits without them experiencing a trial.

Another issue that has split opinion among councillors is an initiative dreamed up to entice retailers on board: use of the bus and cycle lanes in Norwich only by Foulger lorries making deliveries to retailers signed up to the scheme.

At present, the UCC has two customers on board, with negotiations taking place with two more. Foulger Transport business development manager Graham Mayes says selling the benefits of the UCC have proven difficult: “When we started we didn’t fully realise the time it takes to get to talk to some of the decision makers. I had a meeting last week with one company, [yet] we started talking to them back in August.

“It’s taken about eight or nine months to get to the point where we can sit down and talk about it,” he adds.

Fundamental to many local authorities’ plans for UCCs are the environmental benefits that can be achieved. Hatgood says this has helped in getting retailers involved over in Bristol, but Mayes is not convinced: “Generally it does [work]; people want to be on board with green initiatives, but not if there’s a significant change in service levels or a significant change in cost. At that point the green issue goes right out of the window.”

Another problem is the perceived commercially sensitive information held by a logistics firm running a UCC. If Aberdeen suddenly announces it wants to launch a UCC, but wants existing operators to share information with it on how to run it, who’s going to help? As Mayes says: “How is that knowledge and experience shared? How do you build the awareness and where do you get the expertise from?”

York City Council has become the latest authority to announce its interest in building a UCC, in order to ease the serious congestion problems councillor Christian Vassey says the city endures. He is optimistic of the centres’ green credentials and believes their success relies on a ‘stick and carrot’ approach; allowing UCC customers to publicise the benefits of their environmentally-conscious commercial decisions, as well as a stick in the form of a low-emission zone, or congestion charge, which might encourage take-up and also fund the centre.

Vassey says: “One of the triggers to making this change happen is to make sure that the public at the end of the line can see which retailers have bought into this, and ensure the end user can make choices between those retailers being more environmental and those that aren’t.”

Environmental gains
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Heathrow airport retail UCC: This UCC at Hatton Cross commenced in 2000 as a trial with an initial five-year contract. This has since been extended. It supplies all retail outlets at the airport’s four terminals from a 25,000ft2 warehouse and exists through a partnership between BAA (the landlord) and DHL-Exel. Since 2004 it has been compulsory for retailers to be involved. Results from 2004 show that the centre received 20,000 vehicle deliveries. This resulted in 45,000 store deliveries being made from the centre on 5,000 vehicle trips. CO2 savings of 3,100kg per week were being made in 2004.

Vassey says his driving mechanism is purely the environmental benefits he believes are achievable through UCCs. He admits the presence of UCCs within local transport plans are borne out of a desire by local authorities to “second guess what the latest hot topic is within government” and therefore attract funds.

He also argues that whether a UCC is viable or not misses the point: “Climate change is not waiting for us to get our act together. Tackling climate change is about taking steps. Whether [UCCs] answer everything or not is irrelevant. Quite a lot of what we are doing now is intermediary. It may be they operate for 10 years and then we find a better way to do things.

“What matters most is we start doing stuff. It’s so easy to waste decades talking about stuff and not doing it.”

Westminster University’s transport studies group was also involved in a 2005 report, commissioned by the Department for Transport (DfT) into the use of UCCs. When asked if it had acted on any of the recommendations made in the study relating to their future success a DfT spokesman hints at the government’s continuing concerns: “While UCCs can have local benefits, there are other considerations to take into account,” he explains. “These include the effect on the supply chain from moving traffic to other parts of the network and the type of retail or other area it is servicing. The costs and benefits of operating centres are variable and depend on the ability to channel economic savings back into operating costs.”

The spokesman continues: “It is clear that decisions concerning the development of UCCs have to be taken at a local level and the responsibility rests with local rather than central government. However, where we see there are tangible benefits, we will continue to promote the concept with our industry and local government stakeholders.”