Determining the number and location of micro-consolidation centres as a solution to growing e-commerce demand

E-commerce's rapid expansion has transformed consumer shopping habits and business operations. While it offers the potential to reduce customer trips, it has also contributed to increased vehicle kilometres travelled (VKT) by delivery vehicles, resulting in elevated greenhouse gas (GHG) emissions, especially in last-mile deliveries. This paper proposes a spatial approach to address the uncapacitated single allocation hub covering problem (USAHCP) to reduce the VKT by optimising the number and location of logistics hub. In this approach, the spatial features and strategic legislation of metropolitan areas are analysed. Integrating existing models, this location-based approach aims to design a collaborative last mile distribution network by locating micro-consolidation centres (MCCs) in metropolitan areas to service parcel lockers where end customers pick up their parcels. The method is applied to Sydney, Australia, using data provided by the largest courier companies in Australia. The results show that incorporating MCCs in the network reduces VKT due to their proximity to final destinations. Sensitivity analyses are conducted by differentiating maximum driving time constraints and specific times of day reflecting traffic patterns. The results provide significant advantages for logistics stakeholders, notably Transport for NSW, by reducing VKT and GHG emissions. Moreover, the developed method can be utilised by carriers and shippers in their strategic and operational decisions to enhance overall delivery speed and reliability.