Interview: Sustainable last mile delivery for grocers and retailers – e-cargo bikes.com
August 24, 2022
By Julia Swales
E-cargobikes.com was founded in 2017 to establish electrically assisted cargo bikes as the preferred urban delivery platform for grocers and other retailers.
I interviewed James FitzGerald, co-founder and MD of e-cargobikes.com to find out more about how they’re transforming urban logistics by replacing the polluting van-based model.
E-cargobikes.com (ECB) was founded by James FitzGerald and Clare Elwes in 2017. James is an engineer from a motor racing and aircraft design, development, and management background, with decades of experience making racing cars lighter, faster and win. Prior to founding e-cargobikes.com, James and Clare were running a retail business specialising in electrically assisted bikes when they were asked by one of the big 3PLS to put together a fleet of cargo bikes to hire out to their gig economy riders. James and Clare decided they could do better than the 3PL and blend the inherent environmental sustainability of cargo bikes with societal sustainability, by employing people properly rather than following the ethically questionable gig-economy model.
Trials and adoption
E-cargobikes.com’s first contract was with Sainsbury’s to run a trial from their Streatham superstore in South London – a proof of concept, to see what this novel platform’s capabilities and limitations were. It was a great success, all KPIs were met, and it proved that one of ECB’s e-cargobikes could deliver the same, if not more, volume and weight of groceries in the same timeframe as a van, at commercially viable rates and for a fraction of the energy costs. Clearly you can’t load a van’s 600-900kg of groceries on a cargo bike – but they can comfortably carry comfortably 150kg. To match the van’s performance e-cargobikes.com’s model uses a petal system – from the client site they go out in a petal pattern, making anywhere between three and ten deliveries on a route before returning to base to reload and repeat. They typically do this eight times over an eight-hour Cargonaut shift.
A diesel van burns through about 3500Mj of energy to deliver a tonne of groceries. The electric van isn’t the solution as it requires about 2600Mj of energy. The electric cargo bike requires around 270 times less, needing just 13Mj to deliver the same tonne of groceries in the same time frame. In simple terms, to deliver a tonne of groceries a van requires the energy equivalent of 11,300 apples, the e-cargobike just 43 apples.
A significant proportion of the energy cost of van delivery is used for refrigeration, because vans are out for up to eight hours on long daisy-chain routes. A 3500kg van typically makes 20 to 30 drops of c.40kg orders on a route, leaving its depo to drive maybe a mile to make the first 40kg delivery. Then it sets off again, with an all-up weight of 3460kg on another journey of a mile to deliver another order of 40kg, then it sets off again, just 40kg lighter, on another journey of a mile to deliver another order of 40kg and so on… This arrangement is neither environmentally sustainable, nor financially sustainable. Environmental and financial arguments for vans grow weaker still with the increasing demand for same-day and same-hour deliveries, both of which reduce van fill rates and so viability. Using a 3500kg van to deliver multiple 40kg packages in urban areas is akin to a commuter electing to cycle to work on an 900kg bike.
Grocery multiples build some of the most advanced technology into their order fulfilment systems – inside it often feels like you’re standing on the Holodeck of The Enterprise, simply amazing, yet outside the building it can feel more like 1972. This is not necessarily the fault of the grocers, as until now they’ve had no alternative but to build their online offer around the van.
Sainsbury’s saw the manifold benefits beyond pure energy consumption – there is no NOx, carbon dioxide, congestion, parking fines or vehicle end of life disposal to deal with. Building on this trial, e-cargobikes.com engaged with the UK’s big grocery multiples and have been running multi-year contracts ever since.
During the Streatham trial Sainsbury’s senior management took the time to walk ECB through their operation, not just the delivery piece, but also upstream processes in their fulfilment system, giving ECB an invaluable insight on grocery multiples’ entire operations. To understand the highly complex and competitive nature of the sector they walked superstore aisles in the small hours to observe first-hand teams of pickers assembling the ‘next day’ orders, noting how moving the tinned tomatoes nine inches closer to the pasta can shave fractions of a second off the picking process. If you’ve 9000 pickers up down the country walking supermarket aisles from 3am and 6am, as many of the big grocers do, and you run that example and other similarly small improvements through a year of costs, it results in huge financial savings. This was a pivotal moment for James who was very familiar with measuring lap times in tenths or hundredths of a second but had no idea this was happening inside grocery operations – it’s like Formula One but with a purpose. James was immediately hooked.
Design of e-cargobikes
Based on this experience and other studies ECB developed a detailed understanding of clients’ precise needs, after which James began the process of designing a new logistics platform built around the e-cargobike – one he believes will transform home delivery in towns and cities across the world. James expects his modular Veri-cargo™ system to do for e-commerce what the shipping container did for global trade. Items in a typical home delivery order might be handled as many as 12 times before reaching the end customer. Versi-Cargo™ reduces these handling instances by up to 80% which not only saves money on handling, but also enables the major grocers to combine next day, same day, same hour, big basket and small basket on a single delivery platform. James believes this is key to the future viability of home delivery because the delivery cost grocers bear – and the environmental cost we all bear – are inextricably linked to drop density. Consolidating the full spectrum of customer order types and timings onto a single versatile delivery platform can triple drop density – it’s akin to telco and media companies’ ‘triple-play’ channel consolidation. This revolution is about to take hold.
The current flock of commercially available e-cargobikes have evolved from those designed for domestic use and so need significant re-engineering to withstand the tough last-mile environment, where they are subjected to the UK’s potholes and speed humps 18 hours a day 364 days a year. In the Netherlands almost all families use cargobikes, to take the kids to school, dog to the vet, gather groceries, but they’re not built for ‘industrial’ use. The problem here is that the cycle industries business model is dependent on their product failing regularly and requiring costly parts and labour to keep them on the road – using fragile lightweight frames and parts on a cargobike whose all-up weight often exceeds 250kg is silly, fitting a fancy fragile brake lever that saves 5g is madness.
This is where ECB’s in-house engineering capabilities come into play, they made good use of Neasden’s infamous potholes for research purposes. The Merc Sprinter is an engineering marvel – it can run for 40,000 miles between services without so much as a wash – ECB’s design approach to Versi-Cargo™ is no different to that of Daimler Benz’ or Boeing’s, using Dassault’s Systèmes state-of-the-art FEA fatigue simulation software to run millions of Neasden miles in matter of days, so they know the vehicle is dependable and safe. Tesco et al are never going to ditch all their vans until there’s a safe and reliable alternative. ECB will launch their revolutionary new system with selected partners in Q1 2023.
E-cargobikes.com chose intentionally to address the most challenging branch of logistics – the grocery sector with its strict cold chain constraints. Their passive low-energy solution has been tried, tested and certified by multiple clients and their testing labs, so they can keep goods cold for three and a half hours and beyond.
Managed service and dedicated workforce
E-cargobikes.com provide a managed service, co-locating key aspects of their solution at client sites. Having management, rider supervisors and technicians on-site ensures daily operations run smoothly, and performance data can be shared in real-time with the client. This also enables ECB to support clients working towards operational improvements. “They really value the co-location element of our service, they know they’re in safe hands, that quality and performance is ensured, this has been pivotal to our winning multi-year multi-site contracts. Success requires trust, collaboration, and teamwork”.
E-cargobikes.com have a blended workforce, a combination of fully employed PAYE riders and those on worker status – it’s the rider’s choice. E-cargobikes.com was the recipient of the Ashden award for Clean Air in Towns and Cities in 2020 and last year won the Living Wage Foundation’s Employees’ Choice Champion Award. Riders are offered a free benefits package, provided with all equipment and their Cargonauts are given extensive training both on the road and in the customer facing aspects of the job – their riders are the clients’ brand ambassadors. The cargobikes can be branded, all food safety standards are met, rider safety is ensured, and high service level performance is maintained. E-cargobikes.com understand that by employing people fairly and paying at or above the London Living Wage they have less churn and can therefore maintain the highest standards of customer service.
“Designing and producing a new e-commerce delivery platform is not easy, but it’s not nearly as complex and time consuming as building and maintaining a team of terrific riders. Over the years we’ve built a robust on-boarding program that delivers what we and our clients’ need and it’s easily scalable to meet client demand forecasts.”
Costs of e-commerce
There are a lot of sunk costs and vested interests in van delivery platforms, so as you’d expect there’s considerable resistance to changing the status quo. But consider the standing charges of having 3000 diesel vans parked adjacent to town and city supermarkets or dark stores – the sums are huge. Beyond the costs of land and vehicle leases are maintenance costs, running costs plus a growing raft of taxation intended to discourage fossil fuel powered vehicles.
Replacing diesel with electric fleets isn’t the solution – not that this matters too much as so few are being built. Electric vans do help reduce local air pollution, but they don’t make sense in congested urban areas and they don’t solve the problems of brake and tyre dust. They are of little help in addressing global climate change because they still burn through a huge amount of energy, approximately 2600Mj – or 8500 apples to deliver that tonne of groceries.
Supermarkets online home delivery channels are margin erosive, it costs far more money to deliver goods to your house than they can possibly charge, and in most cases their online home delivery channel takes sales that would have been in-store. In-store, their gross profit could be anywhere between 30% and 45%. If they deliver it, that comes down to around about 8% which doesn’t come close to covering costs. They’re asking for a solution. E-cargobikes.com claim to have provided that solution for them.
Threats and Disruptors
Another recent threat has been the numerous rapid delivery companies that have popped up before and since lockdown. These are very heavily subsidized by optimistic shareholders as they compete for market share and are all working at a loss. “You’re getting £15 worth of groceries delivered and they’re billing you £10 for it including delivery! It’s question of last man standing, and we have already seen some fall. It’s very difficult for major national grocers to compete in such a disruptive and fast changing arena, some of them have decided to go out and do a rapid delivery service using one of the gig economy operators, but by doing this they sacrifice breadth and depth of range, quality of service and hugely valuable branded doorstep experience.”
The rapid service companies will slug it out until one or two survive then as their prices will begin to climb as they seek to recoup losses they will be less of a threat. But one shift in consumer trends is here to stay: the demand for same day, and then for same hour delivery is gathering speed. You can’t use a van for same day deliveries, it is not agile enough, so instead the rapid delivery sector opts for a scooter or bicycle. “The legal limit of a rucksack on the bike rider is 15kg and around 20kg on a scooter. If your average order weight for the big shop – the bread and butter of all the big grocers – is over 40kg you’ll need to send out two or three bike or scooter riders to make one delivery. That’s never going to be cost effective, because your biggest cost is the manpower. It doesn’t stack up. We offer the national grocery chains a solution that is not only agile enough to enable them to compete with and outperform the rapid disrupters – but one that is also cost effective and maintains that all important brand identity.
Changing mindsets, barriers to change
Middle and senior management of logistics operators, whether that be in-house from main retailers, or third party 3PLs, are averse to change. “If you’re charged with procuring capacity to deliver 10 million tons of groceries a year, you want a solution that’s proven, tried and tested and are unlikely to adopt a solution that involves retiring the van fleet and selling the parking lots – yet this is precisely what’s needed if the big four are going adapt to current and future trends, and address the climate change crisis– it needs Board level vision and intervention.
The challenge for e-cargobikes.com is to demonstrate their capacity to scale up rapidly to meet demand for a grocery home delivery market that is worth £2bn in the UK alone. Academic studies suggest that up to 50% of vans on the road could be replaced by cargo bikes. There is a lot to play for.
Source: Transport Intelligence, 22nd of August 2022
Author: Julia Swales