Microhubs: The next step in urban transport of goods | NTT DATA

Tue, 29 June 2021

Microhubs: The next step in urban transport of goods

More often than not, we blame the overuse of personal cars, delivery trucks and other vehicles for the saturation we see on the streets but in reality, many things factor in. The rise of online shopping and same-day delivery services led to a record increase in the volume of goods transportation in addition to other logistics flows such as the hospitality industry which reaches 5-6 deliveries a day per establishment, making it one of the main causes for traffic congestion in most cities.

And it’s not just our habits that have changed but also our behaviour as consumers with more of us choosing home delivery instead of convenience centers or lockers. In Spain for example, 86% of online orders are delivered at home, adding traffic congestion, noise pollution, and greenhouse gas emissions to already crowded urban areas.

In this complex setting, microhubs have become a popular solution that can alleviate some of the challenges that urban transportation is facing, working as logistics facilities that gather goods at a location near the final delivery point (1km to 5km from the final destination). So how can a network of microhubs help mitigate one of the most pressing problems of today’s society?


Microhubs: making urban deliveries more efficient

Climate change reforms worldwide are imposing measures that force governments to lower emissions across all industries. Countries like Spain are introducing new laws that tackle this issue. The Spanish government has issued a law that pressures cities with more than 50.000 inhabitants to develop low-emission zones before 2023. How do microhubs fit into these initiatives?

First of all, as small urban warehouses of around 350m2 located in strategic places near high-intensity distribution points, they can optimize urban logistics operations, allowing the final recipients to be served quickly and efficiently using light and sustainable modes of transport. Therefore, they can lower the volume of traffic significantly by centralizing deliveries which ultimately leads to a lower volume of delivery vehicles.

Second of all, microhubs help solve one of the main challenges of the delivery process: the last mile. By combining the advantages of physical storing spaces such as micro-fulfillment centres or integrated pick-up points, and those of a centralized cloud-based network management platform that allows balancing demand and making operations more efficient, microhubs set out to optimize and increase logistics efficiency of the last mile. As a testament to its efficiency, the Spanish government developed an anti-pollution program based on microhubs for its busiest city and the nation’s capital, Madrid. The ‘Madrid 360’ plan is planning to foster the development of a microhub network that will enable a last mile distribution in the center of the city through clean vehicles. This network will come as a complement to already implemented solutions such as points of convenience centers or lockers and will not replace them.

However, the benefits of a microhub network aren’t only related to lowering the number of vehicles in traffic and consequently, the emissions. With a more optimized delivery process and less transportation on the streets, a network of microhubs will also help make cities more sustainable.

Given the proximity to the final recipients, they are also key factors when it comes to promoting the idea of a collaborative economy where carriers are encouraged to optimize routes and vehicles during deliveries reducing the number of delivery vans and the associated carbon footprint which would lead to unblocking many busy roads.

The need for such a smart microhub network mainly comes from the fact that while urban areas have a rigid, well-defined infrastructure, the population density is increasing every year which increases exponentially the number of online orders and volume of shipments in some specific urban areas. The fact that consumption is more digital and elastic than ever, with record orders being placed on certain days such as Black Friday without any infrastructural limits, is making urban transportation a challenging issue for any country. By optimizing shipments and balancing demand with the help of scalable technologies, a microhub network becomes a viable solution to a very complex issue.

Why is it challenging to implement microhubs?

The success of microhubs resides mainly in its ability to centralize operations so a significant challenge in implementing them is to have a successful collaboration that extends from the  public and private acceptance to the cooperation between carriers.

Another key factor is establishing which are the strategic locations where the demand and density are highest within the city. This can be defined with the help of solutions that leverage new technologies such as machine learning and big data to create demand forecasting and location optimization tools.

However, it would be a mistake to only associate microhubs with optimizing deliveries. In fact,  if they don’t play a fundamental role in the management of returns and reverse logistics in general, as well as in failed deliveries, microhubs can’t be considered to be an efficient and sustainable solution. Their network needs to be positioned as a central hub which manages the challenges of return management and reverse logistics, together with other solutions of the commented product-mix.


Trends and new technologies: the future of microhubs

Microhubs need several advanced technologies in order for both companies and customers to fully make use of their capabilities. Currently, many market solutions use cloud technology and data analysis but what other techniques have the potential to shape how microhubs function?

Blockchain is a good example of a technology that hasn’t been leveraged yet. By adding blockchain to the systems and algorithm of a microhub platform, we would be adding an extra layer of safety and transparency, producing a “unique version of truth” in an already very complex ecosystem accessed by many parties that have different objectives and priorities.

Advanced traceability is another technology that will become more and more embedded in microhub solutions. A platform that, in addition to certifying the quality of the data supplied, allows maintaining intact traceability of all shipments is a key aspect in any microhub network. Other popular technologies such as machine learning could also help redefine the network by acting like a brain, balancing demand and optimizing in real-time all the operations while processing the data it recollects from the hubs. Additionally, advanced technologies can help create multi-agent systems that have the possibility to make automated decisions based on patterns that are created with the help of machine learning and big data based algorithms.


The clash between rigid urban areas and the increasingly higher volume of online orders, to which digital channels with unlimited consumption are always being added, is one of the reasons that explains the boom in the collapse of traffic and the increase in atmospheric pollution. Microhubs are an innovative solution to many of these challenges that are addressed in both European initiatives such as the Green Deal or the Paris Agreement as well as in local governmental programs. Strategically placed interconnected hubs have the potential to significantly lower carbon emissions and relieve overcrowded streets facilitating a more sustainable, collaborative and connected city. These networks are efficient and easily integrated solutions to the Smart City initiative because of the valuable data they provide, helping with one important objective: smarter urban transport networks.

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