Article: Monday, 26 April 2021
Covid-19 and the associated lockdowns have substantially increased the demand for home delivery services, for example in online grocery shopping. Supplying people with basic needs such as food requires efficient and effective logistics operations behind home delivery, to create environmental and financial gains. New research by Dr Niels Agatz and Prof. Daan Stam from Rotterdam School of Management, Erasmus University (RSM) and Dr Yingjie Fan from Leiden University looks at green labelling certain time slots and delivery options that have less environmental impact to see if consumers can be influenced to choose these.
Companies already use green labels in practice. But until now there was no scientific research that systematically studied the effect of these labels in the context of service logistics. So Dr Agatz, Prof. Stam and Dr Fan decided to study the effectiveness of incentives on delivery service time slot choices. In particular, they focused on the use of green labels that specify time slots as environmentally friendly and that intrinsically motivate customers to choose a specific delivery time slot in lieu of price incentives based on extrinsic motivation. This is important because green labels’ intrinsic nature affects costumer choice in fundamentally different ways than price incentives, i.e. discounts on delivery fees. The researchers conducted two experiments and two simulation studies to study the effects of using green labels.
The experiments tested the effectiveness of various types of incentives in influencing service choice behaviour, for example green labels and price discounts on delivery fees. The research team considered a dynamic setting and a setting with time slots with different lengths.
In the dynamic context, the green labels were personalised based on the customer’s location and the already placed orders at the time of order placement. Here the researchers stated that: “In the green time slots a delivery van will already be in your area. So, booking it will help to save fuel and reduce emissions.”
In the other setting, they promoted the use of longer time windows, for example between 13:00 – 18:00, at a discounted delivery rate. That longer window provides more planning flexibility and thus more efficient routes. Based on the outcomes of the experiments, they ran computer simulations to evaluate the impact on the sustainability of the delivery routes.
Steering customer behaviour can help to reduce the vehicles’ miles and associated emissions of the delivery operations by as much as 12 per cent
The research suggests that the impact of green labels on customer behaviour is comparable to commonly used price discounts. The data even suggests that the green labels are more effective as they are related to intrinsic motivation rather than extrinsic motivation. Also, they found that steering customer behaviour can help to reduce the vehicles miles and associated emissions of the delivery operations. These savings can be substantial – around 12 per cent – in settings with low customer density.
The research shows that retailers can improve the sustainability of their delivery operations by influencing customer demand. In particular, that retailers can steer customer behaviour by highlighting which choices lead to more environmentally friendly outcomes. As green labels intrinsically motivate customers, they work in fundamentally different ways than extrinsic price incentives.
It was surprising to see how well the green labels worked compared to discounts on specific delivery times
The researchers shared the initial results with different e-grocery retailers in the Netherlands. Some have started using a green label (for example a green leaf) to promote their longer time windows and others have shown interest in incorporating the dynamic green slots in their slot offering.
The paper has been published in Production and Operations Management (STAR) under the title The impact of green labels on time slot choice and operational sustainability.
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Rotterdam School of Management, Erasmus University (RSM) is one of Europe’s top-ranked business schools. RSM provides ground-breaking research and education furthering excellence in all aspects of management and is based in the international port city of Rotterdam – a vital nexus of business, logistics and trade. RSM’s primary focus is on developing business leaders with international careers who can become a force for positive change by carrying their innovative mindset into a sustainable future. Our first-class range of bachelor, master, MBA, PhD and executive programmes encourage them to become to become critical, creative, caring and collaborative thinkers and doers.
