4.1 – Stakeholders Relationships in City Logistics

Author: Diana Sanchez and Dr. Thomas O’Brien

Stakeholders are key actors articulating city logistics through their decisions and actions. They include the coordinators and distributors of freight at the last mile, the managers of the infrastructure, the regulatory agencies that often control access and the consumers themselves. More important than knowing who they are is how they define their interests, how they exert influence as stakeholders in the logistics system, and how we know when that influence has been effective. The experience of COVID-19 as an example has demonstrated that, while not all stakeholders have equal influence, all play a critical role in the efficient and safe distribution of goods and management at the curb.

a. Understanding Stakeholder Relationships and Implications

Efficient and sustainable supply chains consist of stakeholders that work together, share data, and communicate with one another. Collaboration establishes transparency among stakeholders, allowing them to share relevant data and make informed decisions. Stakeholders are harmed when supply chains break down and prevent goods from being transported efficiently or delivered on time. Supply chains face challenges due to fluctuating consumer preferences that are a reflection of broader economic trends. However, established and diverse stakeholder relationships contribute to resilient supply chains that help ensure changing market expectations are fulfilled. For example, the novel coronavirus (Covid-19) created an unforecastable global surge in consumer demand for personal protective equipment (PPE), causing suppliers to exhaust their supply chain network in an effort to fulfill orders. As a result of delayed PPE deliveries, healthcare employees were impacted by working in unsafe conditions.

A stakeholder is an individual or organization tasked with the responsibility to ship, transport, fulfill, or even consume freight and who is motivated to utilize physical infrastructure and personal and professional relationships to realize the objectives of their freight-related activity. Numerous stakeholders convene to decide and determine urban logistic plans in response to growing, contracting, or constant residential and commercial demand for goods. There are numerous user motivations and varying objectives that identify and categorize stakeholders into four primary groups: Consumers, Infrastructure Managers, Planners and Regulators, and Distributors.

  • Consumers consist of stakeholders that create demand for freight within a city.
  • Infrastructure Managers are stakeholders concerned with the maintenance of physical infrastructure and public assets utilized by consumers and distributors who transport goods.
  • Planners and Regulators consist of stakeholders involved with developing regulations and seek to maximize mobility in response to planning concerns and transport externalities.
  • Distributors are stakeholders responsible for the physical movement of freight and utilize urban space and infrastructure to transport goods.

Communication and transparency are critical components of stakeholder interaction in order to maximize urban mobility planning, operations, and efficiency. However, while understanding the role of a diverse set of stakeholders is beneficial to Urban Transport Systems (UTS) planning as it reveals motivations about behavior, the participation of diverse interest groups also creates challenges because of the complex interaction between them. Stakeholders also exert influence in different ways. For example, business elites, planners, or politicians wield different kinds of power through markets as well as planning and political processes.

Stakeholder involvement is critical. However, asymmetric stakeholder influences across the supply chain prevent parties from engaging in decision-making procedures. Increasing stakeholder involvement in transportation planning may increase the diversity of problems and solutions considered in UTS design. When diverse stakeholders are involved in decision-making procedures, they bring awareness of a new set of problems and suggestions that were not previously considered. Stakeholder coordination allows for transparent information to guide decisions, improve forecasts, better predict lead times, and anticipate price fluctuations. Channel integration is a strategy to enhance stakeholder coordination. It is defined by the set of business processes and activities that incrementally impart economic value to products or services as they move from origin to the final destination. It is created by information tools that serve to reduce uncertainty and variability along the supply chain. For example, in order for a company to make a decision, the presence of a logistics analyst, forecaster, marketer, and distributor may be needed to consider various avenues and definitions of business success.

b. Defining Stakeholder Profiles

Stakeholders have various objectives and goals, vary in market influence, and play a unique role in the supply chain. Despite wide differences, it is possible to identify four main stakeholder categories, each broken down into smaller groups.

Consumers

The supply chain is initiated by consumers who create demand for freight. Freight remains primarily a derived demand. In 2018, 13 billion parcels were shipped in the United States. The delivery of freight serves numerous purposes with the principal being commercial and residential demand. Commercial freight demand is created by manufacturing, construction, wholesalers, retail stores, restaurants, schools, and offices while residential freight demand is created by homes. Commercial freight is generally ordered in bulk and fulfilled utilizing trucks; residential freight is delivered through parcel shipping. However, in certain situations, residential freight may require bulk orders, and commercial freight may require parcel delivery services. Freight activity can be driven by Business-to-Business (B2B) or Business-to-Consumer (B2C) demand and in increasingly complex combinations as in B2B2C activity.

Infrastructure managers

The physical infrastructure and infrastructure maintenance of a city are critical for the mobilization of goods and residents. Roads, local streets, rails, ports, airports, power infrastructure, and state highways are physical assets that comprise urban infrastructure. Infrastructure maintenance can be performed by private companies or government departments, such as waste management, or managed through specific job functions including infrastructure managers, parking authorities, city planners, and private developers. These managers use enforcement means to ensure infrastructure assets are properly used in support of freight and residential mobility or negative impacts are mitigated.

Planners and regulators

Regulations organized at the local, state, and federal levels influence urban freight mobility. Rules and regulations, policies, and standards negotiated through bilateral and multilateral trade agreements may also influence the cost of goods and the ease with which they move through the supply chain. This affects demand as well as the policies of trading partners, which may affect the availability and supply of goods. Different government levels focus on varying concerns, while regulations vary per location according to the needs of a city. Externalities associated with an increase in urban freight mobility can be balanced. Regulations may be designed to directly influence the behavior of consumers or distributors and help to ensure the safe movement of goods.

Distributors

Distributors are composed of multiple players that move freight from one location to another for freight to reach its destination. Distributors work in response to freight demand, utilize infrastructure, and comply with government regulations. Distributors mainly include freight consolidators, third-party logistics providers (3PLs), parcel delivery, freight forwarders, drayage trucking, common carriers, private carriers, receivers, and shippers. Workers and the labor they provide allow distributors to fulfill orders.

c. Freight Demand and Stakeholders

Freight demand generators directly impact other stakeholders and influence decisions. For example, an increase in consumer demand as a result of an increase in e-commerce leads to increased levels of congestion which may result in:

  1. Calls for government intervention to regulate congestion on distributors.
  2. Calls for infrastructure maintenance to ensure adequate conditions of physical infrastructure.

Urban infrastructure management is critical for vehicle and pedestrian mobility. For example, daily use of physical infrastructure by consumers may result in the need for infrastructure maintenance. Excessive infrastructure use, such as a congested highway, may call for government involvement to either repair infrastructure or better mitigate traffic and increase utility for consumers and distributors. Maintenance and enforcement are critical to maintaining access to space dedicated for freight and emergency vehicle activity and enforce consequences for freight operator non-compliance with regulations. For instance, infrastructure management in Southern California has been agile during the 2020-21 pandemic to accommodate business needs, such as dedicated curb space for outdoor dining.

Government regulation impacts consumers and distributors. For example, the federal regulation Hours of Service limits the number of consecutive hours a truck driver may drive. Using an Electronic Logging Device, truck drivers are able to monitor how long they have been driving before taking a mandatory break to deliver freight. While the goal of the regulation is to improve road safety for all commuters, the tradeoff results in longer delivery times.

Distributors fulfill orders demanded by consumers, transport goods utilizing infrastructure, and comply with regulations. Infrastructure management and labor are critical for efficient operations. For example, communities may restrict trucks from utilizing certain streets due to weight restrictions, and commercial retail stores may issue designated drop-off zones and times for deliveries.

Increased activity of e-commerce and online shopping are driving factors in all distribution. One factor contributing toward the growth of e-commerce is The Amazon Effect, described as the disruption of physical retail stores and promotion of online shopping. Amazon accounted for 37 percent of the United States e-commerce retail market in 2017 and is projected to account for 50 percent of the United States e-commerce retail market in 2021. While Amazon controls a large e-commerce market share, many businesses have incorporated online shopping into their business strategy in an effort to reach a larger market of consumers, provide alternative shopping methods, and compete with competitors. More recently, businesses have been motivated to incorporate e-commerce as government-mandated lockdowns require retail stores to close in an effort to reduce the spread of Covid-19 during the pandemic.

Understanding stakeholder relationships and interactions are critical to better negotiate challenges that arise. New technology, policy agendas, and social climates are variables that impact stakeholders, allowing them to influence global supply chains and their local communities. Communities are connected through an ecosystem of stakeholders that collaboratively move goods and information through societies. As a result of stakeholder interactions, forums that engage new stakeholders and understand the roles, responsibilities, and incentives will benefit and help communities respond to future challenges.


Bibliography

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