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Why Urban Warehouses Are Good For Autonomous Vehicles

A colorful illustration showing a birds-eye view of a city with a white Argo autonomous vehicle SUV in front of an orange multi-story warehouse.

As more warehouses are built in urban and suburban communities, autonomous vehicle use could become a new kind of solution for deliveries.

Multi-story warehouses in densely developed urban areas are common in Asia, but fairly new in the United States. The first multi-story logistics facility in the United States was developed in Seattle in 2018. The trend is catching on and three New York City boroughs – The Bronx, Brooklyn and Queens – have more than a dozen urban warehouses operating or in development. Other multi-level warehouse projects are underway in San Francisco and Las Vegas.

And with these new kinds of warehouses come new kinds of delivery options, according to Travis Feuerbacher, Senior Business Development Manager at Argo AI, a Pittsburgh-based autonomous vehicle technology company.

These urban warehouses cost about 30 percent more to build than the sprawling, single-level warehouse facilities typically found in rural and suburban areas. But higher construction costs – and the higher rents that result – are offset by lower transportation and logistics costs. Adoption of autonomous vehicles will drive down the costs of that critical last-mile and what Feuerbacher calls “the urban middle-mile.”

“Drivers are increasingly hard to find in the tight labor market,” said Feuerbacher. “You’re saving the overhead of finding, training and retaining drivers.”

The “urban middle-mile” is the space between manufacturing hubs and warehouses and places that store goods to be delivered closer to their destinations. But it’s not the final mile bringing those goods to consumers. Sometimes these facilities are urban warehouses or mini fulfillment centers. AVs can shuttle goods in smaller quantities than trucks, offering more flexibility and customization, as well as 24/7 shipping.

“You need a method to dynamically move products around to respond to consumer demand.”

Even before the pandemic, consumers were turning to online shopping for everything from cars to coconut milk. In Manhattan, 15 percent of households got a package delivered every day, according to Ann Melissa Campbell, a professor of business analytics at Tippie College of Business at the University of Iowa.

The global pandemic dramatically accelerated the shift to e-commerce — online spending in 2021 was 50 percent greater than 2019. That means more packages on more stoops. In New York City alone about 2.5 million packages are delivered daily. And these customers are increasingly demanding, expecting next-day and same-day delivery. The logistics of delivery have never been more challenging.

To fulfill consumers growing expectations of speedy deliveries, products must be stored as close to customers as possible, something which is extremely difficult to accomplish for retailers with a large assortment of inventory. That’s where AVs can add value, moving goods around on demand, all without customers knowing what’s happening behind the scenes. Perhaps most importantly, an AV doesn’t waste time looking for a parking spot. A study co-authored by the University of Iowa’s Campbell found that an AV-runner delivery system can reduce the completion time of delivery to all customers by up to 77 percent.

Feuerbacher expects similar efficiencies in critical “urban middle-mile” deliveries – products shipped from warehouses to retailers or dark stores (stores that only offer online purchase pickup) but that only serve delivery to ensure the brick-and-mortar stores meet the expectations of consumers expecting to find what they want, when they want it and where they want it.

“It’s really difficult for retailers to store enough of all those different products to support any fluctuation in demand,” Feuerbacher said. “Unless you have a lot of inventory on hand and a lot of space to store it, you need a method to dynamically move products around to respond to consumer demand.”

AVs can do that. Ford Escape Hybrid SUVs equipped with the Argo Autonomy Platform are delivering groceries to Walmart customers in pilot programs in Austin and Miami. Such a system could be used to shuttle inventory from one store to another, deliver goods from an urban warehouse to nearby stores, haul returns from stores back to a distribution center or any combination of missions.

“The point is to have the vehicles constantly in motion,” Feuerbacher said, “constantly providing value to the retailer.”

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