Why logistics could be driven underground

Gemma James
posted by Gemma James
30 June 2015

Amazon’s ‘Prime Now’ service promises customers that their goods will be delivered within an hour. So it was somewhat predictable the company would have to find a more efficient way of delivering goods in cities where roads are often gridlocked. In New York City, Amazon has started using the subway to help ensure goods ordered through ‘Prime Now’ are delivered within two hours.

Londoners will be less likely to hop on board with this idea should Amazon introduce it in the UK's capital, as has been suggested in news reports. Concerns over sharing tube carriages with “daily essentials and gifts” could lead to frustration during rush hour when trains can already be hard to squeeze into. While New York offers a 24-hour tube service and has express trains, the timely delivery of goods on the London Underground is less feasible.

However, from September London Underground will be open round the clock, so goods could be transported during the night with little to no disruption. Should this system be implemented more widely than in New York, Dallas and Miami where it currently operates, it could mark an important step towards reducing delivery costs, increasing speed of delivery, and reducing traffic and air pollution. The Post Office employed underground delivery methods years ago in London, so the idea seems feasible.

How would this development impact traditional logistics companies? The logistics sector is seeing more and more innovation as technology and growing internet retailing means more packages need to be delivered at a much faster speed.

Some logistics companies do face a risk of being squeezed out of the market if they fail to evolve. Amazon’s delivery method threatens to take work away from traditional logistics companies, particularly if other dispatchers start using similar arrangements. As roads get slower and more expensive to travel on, logistics companies may need to review their existing business model.

But there are a number of questions that could soothe the minds of business owners: would Amazon using tubes augment the ticket prices on the London Underground and cause protest by the general public? What would happen should there be strikes or delays to the service? Is there sufficient space or funding available to have or create storage and collection points along the tube route? Arguably travelling by road is more reliable and means the company and customer can benefit from economies of scale – hand delivering a few packages by tube is not that cost effective.

However, logistics companies would be wise to watch developments carefully as Amazon continues to think up ways to speed up deliveries, whether it be click-and-collect, drones or the underground system. Underground or overground, delivering is not free. Someone will always be paying a price!

Gemma James is a partner at law firm Mundays

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