Investigating the financial viability of urban consolidation centre projects

Urban consolidation centres (UCCs) are a popular measure in city logistics. However, many UCCs strongly rely on government subsidies and are granted a short life because of their inability to reach financial sustainability. Despite the interest from both the practitioners and the research community in this city logistics scheme, there are a limited number of quantitative contributions that investigate the financial viability of UCC schemes. This paper provides a comprehensive theoretical framework for testing the financial viability of UCC cross-docking and consolidation operations and applies it to a specific case of a UCC servicing Brussels. Major cost categories are identified and human resources are pinpointed as a major cost category. The paper demonstrates that profitable operations are in theory possible but that profits are highly fragile and subject to efficient use of resources. The paper identifies a series of operational metrics that drive the profitability of UCC operations and highlight that the efficient organization of distribution operations has a major influence on its financial viability. Finally, the paper discusses the influence of the size of vehicles and service area on the UCC profitability.