Viable business models for city logistics: Exploring the cost structure and the economy of scale in a Swedish initiative

Abstract

This paper addresses the challenge of achieving profitable city logistics initiatives. A case study examines the financial continuity of one such initiative in Sweden by exploring its cost structure, the relative importance of its revenue variables, and the variables that determine the economy of scale. The results show the potential of obtaining a viable business model and provide new insights into the economy of scale for city logistics. The paper presents a detailed cost-benefit analysis of the implementation of a six-month pilot programme for a city logistics initiative. The initiative combines the consolidation of transportation of goods for both private enterprises and municipalities, and shows that the relationship between goods volumes and profitability is not linear, but rather follows a logarithmic shaped curve. A sensitivity analysis highlights the impact of goods volumes and pricing on the financial performance of the business model.