Last Mile Innovation: The Case of the Locker Alliance Network

Problem definition: The Singapore government has recently proposed the concept of “Locker Alliance” (LA), an interoperable network of public lockers in residential areas and hot spots in community, to improve the efficiency of last mile parcel delivery operations. This is to complement the existing infrastructure, composed mainly of proprietary lockers and collection points in commercial areas set up by large delivery companies. How do we determine the density and coverage of the LA network to promote adoption of locker pickup in Singapore? What will be the impact on the delivery profile in the central business district, far from the residential areas? Academic/practical relevance: We discuss the operational challenges associated with the problem of public locker installation in a city, following a new smart nation initiative in Singapore. We used data analytics to address the following questions: What are the chances that a customer will choose to pick up the parcel from a locker, over home or office deliveries, based on walking distance (to lockers) and a variety of other features? Without knowing the transit routes of the customers, how do we design the LA network to ensure that the lockers will be well utilized? Methodology: We use a set of locker usage data from a commercial courier company to calibrate a locker choice model to determine the impact of walking distance on locker pickup intentions. We use the current (observed) parcel delivery profile to develop a facility location model for the LA network. We use this model to extrapolate and approximate the true adoption and new delivery profiles when the LA network is built. Results: Contrary to conventional wisdom, our model does not always place lockers near areas with peak parcel volume (in preexisting data) because the LA lockers provide another option for customers to pick up from lockers near residential areas. Furthermore, the model suggests that a coverage of 250 meters is appropriate for the LA network in Singapore. Managerial implications: Commercial parcel locker installation has traditionally focused on hot spots in the transit routes of the citizens in the city. The LA network is the first attempt in Singapore to allow public lockers in residential areas. This paper develops an analytical method to determine network density and coverage based on a locker choice model and argues how useful insights can be gleaned from the model, despite not having the full transit route information of all citizens in the city.