Parcel lockers vs. home delivery: a model to compare last-mile delivery cost in urban and rural areas

Abstract

PurposeThis paper investigates the economic performances of two business-to-consumer (B2C) e-commerce last-mile delivery options –parcel lockers (PLs) and traditional home delivery (HD) in contexts where e-commerce is still at its early stages. It analyses and compares two different implementation contexts, urban and rural areas.Design/methodology/approachThis study develops an analytical model that estimates delivery costs for both the PL and HD options. The model is applied to two base cases (representative of urban and rural areas in Italy), and sensitivity analyses are subsequently performed on a set of key variables/parameters (i.e. PL density, PL fill rate and PL annual costs). To support the model development and application, interviews with practitioners (Edwards et al., 2011) were performed.FindingsPLs imply lower delivery cost than HD, independently from the implementation area (urban or rural): advantages mainly derive from the higher delivery density and the drastic reduction of failed deliveries. Benefits entailed by PLs are more significant in rural areas due to lower PL investments and annual costs, as well as higher HD costs.Originality/valueThis paper offers insights to both academics and practitioners. On the academic side, it develops a model to compare the delivery cost of PL and HD, which includes the analysis of urban and rural contexts. This could serve as a platform for developing/informing future analytical/optimisation contributions. On the managerial side, it may support practitioners in making decisions about the implementation of PLs and HD, to benchmark their costs and to identify the main variables and parameters at play.