Business models in urban logistics

Rosário Macário*, Ana Galelo**, Paulo M. Martins***

Abstract

An efficient urban transport system is essential for sustainable development

in urban areas. Urban logistics is now facing many difficult challenges
due to:
• Increasing urbanization.
• Increasing demand for frequent and just-in-time deliveries in urban
areas.
• Increasing competition for the use of limited urban infrastructure.
• Increasing complexity of the multidisciplinary problems both
encountered and caused by urban goods transport.
On the other hand, the opportunities for dealing with the challenges
have increased in recent years. Not only governments, but also the
private sector and citizens have become aware of the need for sustainable
development and are realizing that it is a common responsibility of both
public and private actors. Because of the complexity of issues involved in
sustainable development objectives, engaging private sector and citizens
in the decision-making process and thereby developing accountable
partnerships among all stakeholders have become important in the
policy-making process.
Fecha de aceptación: 29 de agosto de 2008
Fecha de recepción: 9 de mayo de 2008

Urban logistics, the last link of the logistic chain, is thus a sector of
activity which has great importance for its economic impact and for the
dependencies that other economic activities have on these services.
The current paper makes a conceptual review of some urban logistic
solutions already implemented and identifies the critical aspects for the
design of business models related with urban logistics. Our aim is to identify
and clarify the potential schemes of urban logistics and to understand the
requirements for a successful development of the proper business models
for their implementation within the urban logistic framework.
Key words: Business models, urban logistics, urban goods transport.

* CESUR, Instituto Superior Técnico, Universidade Técnica de Lisboa, Portugal. [Link], Consultores
em Transportes, Inovação e Sistemas, S.A., Lisbon, Portugal.
Correspondencia: Av Republica 35- 6º, 1050-186 Lisboa, Portugal. rosario@[Link]; rosariomacario@civil.
[Link]
** ISEL, Instituto Superior de Engenharia de Lisboa, Lisbon, Portugal.
Correspondencia: Rua Conselheiro Emídio Navarro 1, 1959-007, Portugal. agalelo@[Link].
***ISEL, Instituto Superior de Engenharia de Lisboa, Portugal. [Link]@[Link]

INGENIERÍA
& DESARROLLO
Número 24
Julio-diciembre, 2008
ISSN: 0122-3461
 Rosário Macário, Ana Galelo, Paulo M. Martins

Resumen

Un sistema de transportes eficiente es esencial para el desarrollo sostenible

en las áreas urbanas. La logística urbana afronta hoy en día difíciles retos
debido:
• A la creciente urbanización.
• Al aumento de la demanda de entregas frecuentes y justo a tiempo
en áreas urbanas.
• A la creciente competición por el uso de infraestructuras urbanas
limitadas.
• Al crecimiento de la complejidad de los problemas de competencia
transversal que el transporte urbano de bienes genera y se enfrenta.
Por otra parte, las oportunidades para ajustarse a estos retos han aumentado
en los últimos años. Los gobiernos, el sector privado y los ciudadanos están
más sensibles a las necesidades para un desarrollo sostenible. Debido a la
complejidad de las cuestiones implicadas en los objetivos del desarrollo
sostenible, hoy en día es fundamental hacer que el sector privado y los
ciudadanos participen en el proceso de decisión, y desarrollen un acuerdo
responsable entre todos los interesados.
La logística urbana, el último eslabón de la cadena logística, es por
consiguiente el sector que presenta mayor impacto en la economía debido
a la dependencia de otras actividades económicas de sus servicios.
Este artículo presenta una revisión conceptual de algunas soluciones de
la logística urbana en uso en la actualidad e identifica los aspectos críticos
para la definición de sus modelos de negocio. Se pretende identificar y
clarificar los esquemas potenciales de logística urbana y entender los
requisitos para el desarrollo con éxito de sus modelos de negocios y su
implementación en el contexto de la logística urbana.
Palabras clave: Modelos de negocio, logística urbana, transporte
urbano de bienes.

INTRODUCTION

Globalisation and other new market trends have dismantled many of

the barriers that for a long time kept companies from freely developing
their operations. Therefore, companies engaged in new productive and
distribution solutions, embrace multiple agents based in very different
locations. The transportation sector has been called to bridge the growing
distances between these locations, and to assure a continuous supply of
goods between them. Furthermore, the increasing activity of heavy trucks
speeds up the deterioration of road infrastructure, increasing the public
budget efforts in road maintenance. So, the increasing logistic activities
within urban areas are jeopardising the sustainability of such regions.

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 BUSINESS MODELS IN URBAN LOGISTICS

Logistic companies have no incentive in engaging for sustainable solutions,

because the costs they are responsible for are partly supported by the
whole society, as externalities. This raises the need for regulation, so that
externalities are properly incorporated in the activities that are provoking
them. However, public intervention in urban logistics has had so far a rather
narrow scope, being commonly limited to traffic restrictions (e.g. access
times or vehicles’ dimensions). One of the reasons behind this seems to
be the lack of knowledge on adequate tools to deploy effective measures
regarding urban logistic problems. Moreover, there is a strong belief that an
increase of costs in logistic activities would result in a decrease of economic
competitiveness for the companies and, ultimately, of the whole regions.

Urban logistics, is thus a sector of activity which has great importance for
its economic impact and for the dependencies that other economic activities
have on these services. However, the balance is delicate as it also poses
serious problems to the other users of the urban space – congestion, noise,
obstruction of roads and sidewalks, infrastructure degradation, and so on.
These problems have enormous costs for the society, and hinder the overall
urban sustainability.

In order to tackle the problems mentioned above, rationalisation of the

distribution process (from the economic, spatial and temporal perspectives)
is required. This means reducing the flow of goods yet keeping the adequate
level of distribution to satisfy consumer’s needs. As a way to achieve this,
various solutions have been pointed out in several European cities. These
solutions are not only aimed at the transport activity, but at the organization
of the whole logistic chain. In some cases, the implemented solutions were
adopted as “stand alone” solutions, focused on a specific case or problem;
in some other examples, combined solutions were applied, i.e., several
measures were implemented in a combined form, as part of a broad political
strategy for urban logistics.

Generally, the different authors try to group the adopted solutions in

accordance to different criteria [1], [2]. In this work, we decided to group
the measures identified according to their focus of application. This
systematization can be found in Table 1, where they were placed according
to the degree of intervention needed for their implementation (i.e., from
“soft” to “hard” measures):

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 Rosário Macário, Ana Galelo, Paulo M. Martins

Table 1
Measures implemented to solve the urban logistics problems

Type of Measure Examples

Cooperative logistic systems, encouraging night delive-
Legislative and organi-
ries, public-private partnerships, intermediate delivery
zational measures
depots.
Access restrictions according to vehicle characteristics
Access restriction
(weight or volume), conditioning access to pedestrian
measures
areas, urban tolls, periodic restrictions.
Territorial Creation of loading and unloading areas, of load transfers,
management measures and mini logistic platforms.
GPS, track and tracing systems, route planning software,
Technological intelligent transport systems, adoption of non polluting
measures vehicles and vehicles adapted to urban characteristics
(size and propulsion).
Construction of urban distribution centres, and peripheral
Infrastructural
storing facilities, use of urban rail for freight (freight trams),
measures
underground freight solutions.

Some of the measures identified are very ambitious, while others lack
the needed coherence and fail to achieve the goals for which they were
designed. This happens for a number of reasons, like the relative novelty
of the introduction of this subject in the urban management agenda, and
also the lack of knowledge about the implementation processes involved
in urban logistics and hence on the appropriate way to tackle the collateral
problems accruing from these processes.

Another very important issue relates with the difficulties associated with
modelling urban logistics, given its fragmented character largely caused
by the fact that a significant amount of transport is done on private basis.
It is worth noting that in all experiences reported the main difficulty
in handling urban logistics lies in understanding the associated origin-
destination matrix.
Agents Needs

City Area Product characteristic

Figure 1. Schematic view of the Logistic Profile Concept

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 BUSINESS MODELS IN URBAN LOGISTICS

One of the main objectives of the current project [3] was to test the validity of
the “Logistic Profile” (LP) concept, which we believe will be an important tool
for the Urban Logistic management and a key-element in the conception of a
Urban Logistic Master Plan. The LP concept is based on the hypothesis that it
is possible to identify , for some well-defined areas inside a city, reasonably
homogenous groups of logistic needs, based on three key points: the urban
characteristics of the area, the requirements of the logistic agents (i.e., the
requirements concerning the type of delivery), and the characteristics of the
products being transacted . The LP of a given urban area is thus defined by
the interaction of these three key aspects (Figure 1).

Our hypothesis is that in the areas of the city in which LPs1 can be feasibly
defined, it will then be possible to adjust urban logistic services which will
optimize the consumption of the involved public and private resources (space,
vehicles, etc.), in function of the needs of the different market segments.

Several variables are used to qualify the logistic profiles; these are identified
below (Table 2):

Table 2
Variables used to determine the Logistic Profiles

City area features Product Agents’ needs

characteristics

- Commercial density and homoge- - Fragility - Urgency of

neity – number of shops per block, deliveries
and percentage of different shops - Perishability
(in terms of goods sold) - Frequency of
- Cooling needs deliveries
- Logistic accessibility,– level of con-
gestion on the streets serving the - Amounts to be
area; existence of delivery bays and delivered
level access between the shop and
the parking of freight transport - Timeliness
of deliveries
- Restrictions of hourly and weekly (“After hour
periods of delivery deliveries”)

1
It will only be possible to define a LP of an area if it has a significant group of homogenous
“logistic needs”.

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 Rosário Macário, Ana Galelo, Paulo M. Martins

These variables can be combined in an array of different LPs. However, more

than getting a full comprehensive list of profiles, it is of higher importance
to stress that it is possible to match different logistic services to specific
logistic profiles, in order to optimize the delivery processes. The way this
is done is explained below.

First of all, we need to consider different logistic services, or combinations of

services, aimed at serving different delivery needs. The services considered
here arise not only from the literature review, but also from the observations
done, namely of the experiences implemented or being studied in the city
of Paris. They were selected and designed in a way to serve the study area
(explained below), with the aim of creating services that work integrated as
a system, and so to cover all the logistic needs of the area being served.

The main characteristic of the urban logistic system is thus its high number
of stakeholders and the heterogeneity of their needs, which force a very thin
segmentation of the proposed services, often going below the minimum
scale for economic feasibility.

Bearing in mind what has been said so far, the solutions / services considered
are the following:

• Two hierarchic levels of freight terminals inside the urban territory,

which might act in conjunction with freight yards located outside city
boundaries; the higher level, bigger terminals, shall act as freight hubs,
collecting freight coming from the freight yards or directly from the
producers, and distributing it to smaller level terminals, which shall be
fully integrated within the urban tissue; the exact locations and sizes
of these terminals is to be planned in function of the different logistic
needs of the areas they are to serve; these terminals shall be associated
with delivery services responsible for the “last-mile” distribution; these
shall be performed by “eco-friendly” vehicles, such as bicycles, electric
tricycles and so on, according to the different LP needs;

• Cooperative services like car pooling and car sharing, which can be put
together by groups of agents (e.g. shop-owners) with the same delivery
needs. Deliveries done this way will directly link any of the terminals
mentioned above with the recipient’s’ locations;

• Safe deposit boxes (similar to the so called “drop point deposit boxes”
found in Paris), in which medium sized lockers are placed on key points,

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 BUSINESS MODELS IN URBAN LOGISTICS

like parking lots or freight terminals; these boxes work like normal postal
boxes, in which parcels are dropped and then picked by the recipients
(repair technicians, services or even end costumers); these boxes shall
complement other solutions to be implemented. They do not have the
goal of reducing the number of deliveries, but to minimize the effects
caused by the randomness of small and urgent deliveries, and to avoid
the failure of such deliveries due to the absence of the final recipient;

• Collective and regular services using the facilities used by regular public
transport in non-operating hours (e.g. light rail, tram or underground
networks); none of these types of services was explored in the current work,
due to the absence of such networks in the area chosen as case study.

The current paper makes a conceptual review of some urban logistic solutions
already implemented and identifies the critical aspects for the design of
business models related to urban logistics. The research builds on a previous
work commissioned by the Science and Technology Foundation of Portugal
(FCT), referred in [3], which analyses an area inside the city of Lisbon,
identifies its logistic problems and assesses the benefits of introducing new
delivery solutions, based on a concept called “Logistic Profile”, developed
within the scope of the project.

The results achieved in the pilot study were rather encouraging and show
that an improvement of the current situation is possible, if the proposed
solutions are implemented, and if adequate urban logistic services are feasible.
Consequently the natural follow up is to understand the requirements for
a successful development of each type of business models for the urban
logistic sector.

So, the goal of this paper is to identify and clarify the potential schemes
of urban logistics and to understand the requirements for a successful
development of the proper business models for their implementation within
the urban logistic framework.

2. STATE OF THE ART OF URBAN LOGISTICS

The growing dimension of the negative impacts of the urban logistic activities
has been capturing the interest of a growing audience: governments,
population and, naturally, scientific community. Nonetheless the body of
knowledge of this research area when compared with others, like urban
passenger transport or even long distance freight transport, is still rather

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 Rosário Macário, Ana Galelo, Paulo M. Martins

incipient. The recent nature of this research field is not the only reason for
this state, urban logistics presents a set of characteristics that makes its
study rather difficult.

Firstly, there is a general lack of reliable and complete statistic series, and
without knowing reality it is not possible to draw effective tools. Secondly,
urban logistics is highly dynamical and made of a complex web of interacting
agents with different purposes and characteristics. Moreover, urban logistics
share and compete for the urban space with other activities, such as private
utilisation. Therefore, the complete study entails the incorporation of all
agents and their corresponding relationships. Thirdly, urban distribution
is commonly an integral part of larger distribution schemes that go beyond
the urban regions’ borders. Companies have to transport their goods to
and from locations that often are within urban regions. Since they plan
their distribution schemes globally, urban logistics patterns often reflect
the characteristics of those schemes and not necessarily the urban area’s
characteristics.

Therefore, the scientific community is having major difficulties to develop

tools and techniques as effective as in other fields like urban passenger
transport or even long distance freight transport.

Furthermore, the field of research in urban logistics still shows strong signs
of being in mature, as for example the inexistence of a universal accepted
definition of urban logistics. For all these reasons the still rudimentary set
of modelling techniques available is quite understandable.

The first author to make a complete review of the existent models and tools
was Ogden in 1992 (quoted by [4]). This author also presents the main
characteristics that an ideal model should present, namely, to consider
the elasticity and volatility of demand, to be able to handle with several
ways of transport, to incorporate other flows different from goods, to be
dynamical and universal [5].

The most common model in use is the well known 4-step model, used for
analysing passenger traffic. However, this model presents some relevant
limitations that reduce its applicability. Firstly, in this model the urban freight
transport is considered as a percentage of all traffic and not considered
independent [6]. Secondly, there are major differences in the structure of the
supply and demand between passenger traffic and freight traffic [5]. Thirdly,
the motivation underlying people’s mobility is totally different from that

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 BUSINESS MODELS IN URBAN LOGISTICS

originating freight transport. Fourthly, the people’s mobility patterns are

completely different from freight transport. Nonetheless, the 4-step model
offers a reasonable framework to start modelling in urban logistics.

Recently, other modelling techniques have been developed, which can be

clustered in three groups: gravitational models, like some models used
in passenger transport, input-output, or spatial equilibrium of the prices
[4]. Alternatively, models can be grouped in function of their level of
analysis: disaggregated, if the focus of analysis is the individual action of
each agent, aggregated is they are more focused on the specific group of
agents. The disaggregate models can be further classified: behavioural if
they take into consideration only one dimension, inventory if they take into
consideration multiple dimensions [5]. Identically, the aggregate models
can be further classified in function of the unit of analysis: based on the
products, if calculations are based on the flow of goods; or based on the
vehicles’ trips when the focus are the routes and vehicles needed to fulfil
the demand on each route. Increasingly, researchers are combining different
models in order to compensate the limitations of one with the other (see,
for example, [7]).

In the last decade, a new concept ha been brought to the fore, by Taniguchi
et al. [8], the concept of City Logistics. This concept claims that the resolution
of the current urban logistic problems can not be solved by a single solution,
but only by the combined implementation of a set of solutions, like for
instance: cooperative urban distribution systems, construction of urban
logistic platforms, control of the weighting load, making use of the public
transport system (metro and tram), etc. Under the umbrella of City Logistics
several existing models have been adapted to modelling urban logistics
distribution, such as, just to mention some: vehicle routing and scheduling,
dynamic flow simulation, logistics terminal location models, simulation,
multi-agent systems, and network models.

Recently, Hensher et al. [5] have proposed a new type of models that take
into consideration the rational character and behaviour of the agents and
the dynamic nature of the logistic systems. In Europe, the European Union
funded research programme BESTUFS developed, aiming at enhancing the
knowledge on urban logistics.

The development of simulation models allowed, in turn, the development

of tools to support the decision process in the logistic activity. The best
known of these tools are:

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 Rosário Macário, Ana Galelo, Paulo M. Martins

• FRETURB, which has been developed in France by the Laboratoire

d’Economie des Transport, is able to analyse and evaluate scenarios,
calculating the total number of vehicles generated by each region.
Amborsini et al. [9] present a practical application of this tool.

• WIVER developed jointly by IVU Traffic Technologies AG and PTV AG,

computes the total number of trips generated by each source (e.g: stores
and commerce) and segments the trips in function of the economical
activity and type of vehicle. This tool has been used in the European
Union founded project REFORM (1998).

• VISEVA has been developed jointly by Technische Universität Dresden

and PTV AG, upon WIVER. This tool included a model of system dynamics,
allows including the effect of time (see [10] for a practical example).

• The NATRA tool has been developed upon an extensive survey made on
the region of Stockholm. This tool is able to calculate the flows between
the various areas considered in the study.

• Finally the Technical University of Delft has developed the very complete
GOODTRIP tool that calculates the flows, the traffic generated by those
flows and the respective impacts. Boerkamps, J. et al. [6] present a
practical application of this tool.

Summing up, the impacts of urban logistic activities have only been felt
over the last years.

It is out of the scope of this paper to present a full review of business models
state of the art, or even current practices, which entail too many realities
and business practices that are beyond our goals. Nevertheless, the survey
made shows the existence of many papers and magazine articles directly
linked to firms and business models and plans.

This type of application does not match exactly with the framework being
proposed by the authors under the opportunities entailed by urban logistics
environment. The urban reality is global and complex, with several actors/
agents interacting at different stages, as it was seen before. There are also
spatial and operational proceedings specific over geographic space, time
and business (and decision) space, accreted by administrative and legal
non-homogeneous realities.

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 BUSINESS MODELS IN URBAN LOGISTICS

On the next sections of this paper the Business Model concept is presented,
major tensions and difficulties are identified and main conclusions about
the applicability of business model to urban logistics are presented. Future
research directions are also identified.

3. BUSINESS MODEL

Both words, business and model, by themselves have a specific meaning.

It can be said that the term business relates to “the activity of buying and
selling goods and services” and “earning money”. Model relates to “a
representation of something as a simple description of an object that might
be used in calculations”. Thus, we reach a simple understanding that a
business model is a representation of how a company buys and sells goods
and services and earns money.

However, the definition of this expression is not so simple. A review of

the literature using the term business model shows there are sufficiently
broad concepts to embrace different reflections on business models. A
lot of the fuzziness and confusion about business models stems from the
fact that when different authors write about business models they do not
necessarily mean the same thing [11]. At this stage we will try to keep it
simple and admit that a business model is a conceptual tool that contains
a big set of elements and their relationships, expressing the business logic
of a specific firm [12].

The business model should reflect a description of the value a company

offers to one or several segments of customers and of the architecture of the
firm and its network of partners, for creating, marketing, and delivering
this value and relationship capital, to generate profitable and sustainable
revenue streams. [13]. Besides, a good business model answers questions like:
Who is the costumer? And what does the customer value? It also answers
the fundamental questions every manager should ask: How do we make
money in this business? What is the underlying economic logic that explains
how we can deliver value to customers at an appropriate cost?

A good business model remains essential to every successful organization,

whether it is a new venture or an established player [14].

Business models evolve as competitive pressure is put over a firm to pursue

profits through two main means. Firstly, the conquest of new markets by
geographical expansion and/or the introduction of new products, such as

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 Rosário Macário, Ana Galelo, Paulo M. Martins

new technologies or skills, secondly, by cutting costs through the adoption

of new technologies and new skills.

Business modeling is the managerial equivalent of the scientific method

– you start with a hypothesis, which you then test in action and revise
when necessary [14].

When people say “business model,” they’re really talking about three
different kinds of things: components of business models, real operating
business models, and what we call change models.

These aren’t really complete business models at all—they’re just pieces.

Business model components range from revenue models and value
propositions to organizational structures and arrangements for trading
relationships. The components of a business model are: pricing model,
revenue model, channel model, commerce process model, internet-enabled
commerce relationship, organizational form, value proposition [11].

Each may be an important part of a business model, but not the whole thing.
Since the Internet has dramatically impacted the way firms reach customers,
price, and tailor the commerce experience, e-watchers have paid a great
deal of attention to new value propositions, new channel configurations,
and new revenue models. Many have mistakenly called these pieces of
business models.

Operating business models are the real thing. An operating business model
is the organization’s core logic for creating value. The business model of a
profit oriented enterprise explains how it makes money. Since organizations
compete for customers and resources, a good business model highlights
the distinctive activities and approaches that enable the firm to succeed—to
attract customers, employees, and investors, and to deliver products and
services profitably.

A change model goes one step further. It describes how an organization

adapts in a dynamic environment. A change model is the core logic for how
a firm will change over time to remain profitable in a dynamic environment.
Operating business models create core assets, capabilities, relationships,
and knowledge; change models extend and leverage them.

As explained previously the business model has a development plan that

allows designing and realizing the business structure and systems that

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 BUSINESS MODELS IN URBAN LOGISTICS

constitute the operational and physical form the company will take. We can
call this relation between strategy, organization, and systems the business
triangle that is constantly subject to external pressures, like competitive
forces, social change, technological change, customer opinion and legal
environment.

Competitive
Forces
Legal Customer
Enviroment Demand
Business
Strategy

Social Business Tecnological

Enviroment Model Change
Business ICT
Organisation

Figure 2. Source: [13].

Finally, the business model can be seen as the conceptual link between
strategy, business organization, and systems. The business model as a system
shows how the pieces of a business concept fit together, while strategy also
includes competition and implementation.

Strategy

Business
models

Systems

Figure 3. Business model relations with strategy and systems.

Second, business model implementation contains its translation into

concrete things, such as a business structure (e.g. departments, units, hu-
man resources), business processes (e.g. workflows, responsibilities) and

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 Rosário Macário, Ana Galelo, Paulo M. Martins

infrastructure and systems (e.g. buildings, ICT). Business models are subject
to external pressure and thus constantly subject to change.

Business
Process
Infraestrutura

Business
Model

Business
Structure

Systems

Figure 3. Business models translation into four main elements.

4. AGENTS

For a better understanding of the adaptation potential of the business model

concept to urban logistics it is necessary to identify all the stakeholders
involved in the process, and to identify their motivations and separate
interests.

Each stakeholder has a different task within the process of urban logistics,
as is indicated in Table 3 - Division of tasks.

Table 3
Division of tasks. Source: [15].

Parties/stakeholders Function
Division of available space and time
Municipalities (road and kerbside) to different parties
in a balanced way
Police Law enforcement, traffic management
Retail, companies, institutions, construc- Demand and receive goods and ser-
tion areas, inhabitants vices
Producers, trade, wholesale, shippers and Suppliers of goods and services
transporters

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 BUSINESS MODELS IN URBAN LOGISTICS

Space and infrastructure available for transport within the urban area are
limited and has to be shared between many interest groups with diversified
interests. The need for mobility and enhancement of the living environment
is increasingly important in urban areas while transport demand is
continuing to rise. The interaction of rising demand and limited space has
led to declining mobility and increasing congestion.

Although all stakeholders share a common interest in the consumption of

goods, their other individual interests often conflict, as shown in Table 4.
The interests of various stakeholders involved.

Table 4
The interests of various stakeholders involved. Source: [15]

Stakeholders Interests

Residents Good living surroundings, minimal

hindrance of vehicles and trucks,
especially
during night hours. Timely
availability of goods.

Visitors Attractiveness, good shopping

environment, accessibility and
parking space.

Estate managers and developers Profitability

Retail Good shopping environment for

visitors and customers, profitability.

Shippers, carriers and retail Accessibility, attractive local working

environment, adequate infrastructure
for transport operations, cost
efficiency.

Businesses Accessibility, attractiveness.

For a sound and efficient urban logistics policy, the interests of all the various
actors must be taken into account.

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 Rosário Macário, Ana Galelo, Paulo M. Martins

In many domains of the Transport sector there is a strong intervention of

Public Authorities. Virtually everywhere in the safety and environmental
protection dimensions, in the definition and scheduling of infrastructure
investments (even when they are financed by private parties) and in significant
parts of the Transport Services markets, for needs of coordination (dense
agglomerations) or of coverage (low density areas, isolated regions)

Public Authorities have the right to define the rules of the games (preserving
nondiscrimination of providers and of clients), which reduces the degrees
of freedom of companies to design their Business Models. In a common
transport infrastructure business model, the State appears as the client of
a concession contract and sets for initial procurement and delivery.

Other models have existed and some are still developing, mostly defined
by the State in each case:

• Private investment in infrastructure already present for some 150

years.
• Railroads (vertical integration with operations), turnpikes (tolls on
travellers).
• More recently significant increase of franchises (concessions) and Public-
Private partnerships.
• Public command and ownership, but payment scattered over lifecycle,
based on availability and quality of maintenance.
• Separate contracts for maintenance upgrade.
• Traffic Management mostly done by public agencies (different in each
mode).

In the continuation of this work an in-depth analysis of these alternative

models will be developed it is however, out of the scope of the business
concern focused in urban logistics

5. TENSIONS

Urban logistics issues result from a wide pattern of developments in our

society. These include movement toward a post-industrial society, ageing and
individualization, urbanization, and sustainable development. Policymaking
in such a context requires well-designed consultation and participation
processes due to the complexity of issues involved and diverse interests
of various stakeholders.

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 BUSINESS MODELS IN URBAN LOGISTICS

This is particularly the case for policy-making in urban logistics, since

it involves many different parties with diverging and often conflicting
interests who have to share limited urban space. The complex operations
of urban logistics and the variety of problems they cause further complicate
policymaking in this area namely in a theme that hold a great number of
agents.

Well-designed consultation and participation processes are essential

components of democratic governance. They are increasingly important
for the implementation of measures achieving sustainable development
objectives, because of the complexity of the issues involved. Co-ordination
mechanisms are needed for confronting and reconciling diverging interests
and points of view among different social groups and stakeholders.

In the perspective of civil society, such mechanisms require:

• Establishing co-coordinated policy frameworks that involve all levels

of governments, both horizontally and vertically.
• Involving citizens and business in an interactive process with
governance.
• Developing accountable partnerships, e.g. public-private partnerships
and sometimes public-public partnerships, through the association of
different levels and scope of government.
• Establishing national and international transparency and consultation
with interested groups in the development and implementation of
policies.

In order to achieve cohesive development under these mechanisms,

governments need to:

• Establish a clear vision of desirable future directions.

• Organize multi-stakeholder forums to translate the broad vision into
specific short term and long term objectives at the national and local
level and to examine available policy options.
• Apply mechanisms for cross-sector policy integration, recognising that
business agents and citizens manage themselves in a rather holistic
perspectives.
• Monitor current trends and identify necessary changes in the course of
action.

Policy-making for urban logistics is particularly complex and difficult due

to the following features:

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 Rosário Macário, Ana Galelo, Paulo M. Martins

• Conflicting and diverse requirements of a wide range of participants.

• Complex and diverse operations of urban logistics and the various
problems caused thereafter.

In many countries, problems of urban transport are dealt with at a local or

regional level. Only a few countries have developed an explicit encompasse
national policy focused on urban logistics. The private sector requires
consistent and fair approaches in policy measures to be applied throughout
their supply chain. Such approaches appear to be difficult where there are
no national initiatives or guidelines to ensure consistency among local or
regional measures.

The different problems identified and logistics solutions adopted provoke

several tensions. These tensions, as emergent conflicts between agents or
intra-agents, can be of three main types.

• Latent tensions, which are detected by the analyst but the friction is not
recognized by the stakeholders/ parts.
• Emergent tensions which are recognized at least by one of the
stakeholders/parts. Conflict escalade apparently suspended. The friction
exists but it’s not triggered by any stakeholder/any of the parts.
• The confirmed tensions which are declared and the friction
consolidates.

For each type of tensions it should be pointed out which variables can change
the play of forces in the tensions map and also identify the challenges at stake.
Those challenges are changes in the balance of tensions due to the action on
variables previously identified. Mapping agents’ tensions is certainly the
first step in any city if the objective is addressing urban logistics and this
can and should be done recurring also to participatory approaches

6. CONCLUSION
.
The understanding of what is a business model and the importance of its
clear definition as a foundation of strategic decisions of the agents is crucial
to achieve an efficient model business in urban logistics.

One must be aware of the fundamentals of Business Law, understand the role
and nature of contracts as the framework for commercial relationships and
be conscious of the dominant practices and innovation streams in business
models in the various transport modes – in infrastructure provision and

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 BUSINESS MODELS IN URBAN LOGISTICS

in operations - as a result of the corresponding factors of value generation

and of risk.

In order to achieve efficient and successful business models, it is necessary

to understand what the priorities are to solve in urban logistics. The first
set of conclusions to be drawn from our exploratory research is:

• No single solution can be adopted for the urban logistics problem;

• Different from the logistic of passenger the freight has a much more
fragmented demand which requires the concerted offer of different
services;
• These services must be complement each other in satisfying the different
requirements of the stakeholders of an urban area.

Business models have already shown their efficiency within the sphere
of private companies and firms. The benefits achieved through its
implementation should also be evident in the logistic field.

The concept of business model can be implemented in a different scope, with

a bigger coverage area, engaging all the subsystems contained in the urban
logistic system. The transferability of the business model concept to the urban
logistic system will optimize the relationships between the different sub-
systems that compose the urban logistics system, minimizing the existing
tensions, promoting the competitiveness and sustainable solutions.

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