PFI:BIC - Smart CROwdsourced Urban Delivery (CROUD) System

Northwestern University, Evanston IL

Investigators

Abstract

This Partnerships for Innovation:Building Innovation Capacity (PFI:BIC) aims to develop a crowd-sourced urban delivery (CROUD) system that promises an efficient, greener, urban delivery service system. The rise of e-commerce is rapidly changing the landscape of retail business. By 2017, online sales will account for more than 10% of this $4.5 trillion industry, according to a 2014 U.S. Census Bureau report. To stay competitive in this growing market, retailers are under enormous pressure to quickly deliver the goods to their consumers at low prices. Large asset-based carriers (e.g., UPS and FedEx) are not particularly cost-efficient for express local deliveries in urban areas, essentially because their distribution networks are designed to transport through hubs rather than directly between customers and retailers. This inherent inefficiency is aggravated by mounting demand for same-day delivery--widely considered the Holy Grail for e-commerce at present--that requires more frequent dispatch and in turn increases transportation cost. Recent arrival of tech giants such as Amazon, Google and Uber in this battlefield attests to the tremendous opportunities and challenges in the urban delivery industry. Ironically, there exists a large volume of unused capacity in the transport system. For one thing, because the urban delivery industry is highly fragmented, consolidating its capacity is often difficult. Another underutilized capacity exists in millions of private passenger vehicles on the road with empty trunks that could be used for delivery. Addressing this lack of adequate coordination between demand and supply holds the key to solving the express urban delivery challenge. A promising solution, enabled by recent advances in wireless communication and mobile computing, is crowd-sourcing technology that has been successfully applied in passenger transport (e.g., Uber and Lyft). The overarching goal of this project is to develop and evaluate a CROwd-sourced Urban Delivery (CROUD) system. With CROUD, consumers will enjoy faster, cheaper and more reliable delivery service. The retail industry will see a stronger consumer demand. The delivery industry will improve its profitability and reduce its environmental impact, while employing a highly mobile and efficient workforce. The project will also educate next generation entrepreneurs by providing training opportunities and materials for upgrading curricula in multiple disciplines. The scientific contributions of the project span across several disciplines, and they are closely interconnected in supporting a human-centered smart CROUD system. First, the project will lead to pricing mechanisms that focus on matching consumers with couriers under varying market conditions. The use of matching models is novel in pricing analysis for two-sided markets, such as thouse found in CROUD systems, and it promises insights in other markets. Second, the project will help understand and predict behaviors and choices of humans in a CROUD system, a field completely new to behavioral econometrists. New econometric models, calibrated with behavioral data collected in this project, will be built into management strategies to enhance the consumer-courier-technology interaction in the system. Third, the proposed research will develop smartphone-based motion detection methods that are uniquely suited to track and interpret the activities of couriers. Finally, the project will create computational tools to facilitate collaborative delivery among couriers and to optimize routing plans based on real-time information. In doing so, new formulations, algorithms and insights will be generated for challenging problems in operations research and computational economics such as network design with relays, real-time vehicle routing considering transfer and environmental impacts. This project will be led by Northwestern University through its Transportation Center (NUTC), with three researchers from two departments: Department of Civil and Environmental Engineering and Department of Managerial Economics and Decision Science. The primary industry partner is Zipments Inc. (small business, New York City, New York) and the other primary academic partner is the University of Illinois at Chicago (UIC) (non-profit research university, Chicago, Illinois). Two broader context partners will also join the team. They are Center for Commercialization of Innovative Transportation Technology (non-profit research institution operated within NUTC, Evanston, Illinois) and Center for Supply Chain and Logistics management (non-profit research institution affiliated with UIC, Chicago, Illinois).