This month, the Centre for Smart Warehousing and Logistics Systems (SWALOS) is taking over the Business and Society blog. The Centre is newly established, and brings together researchers in warehousing and logistics operations looking to improve operations management and decision making. We’ll hear how their members are solving problems in the field, and the business and society implications.
Dr Meng Meng is an expert in bike sharing rebalancing and network optimisation. Here she explains the importance of bike sharing systems in our current climate, and how bike providers can operate to maximise use.
The changes brought by the pandemic have altered the way we interact with our cities, perhaps permanently - the outbreak of COVID-19 has made social distancing essential for everyone.
Outdoor exercise has replaced gym sessions, and we walk or cycle with friends rather than go for coffee. Buses and taxis feel risky, so people look for other ways to get around. Cycling, as one of the low-risk transport modes, is the recommended way to make essential trips at present and looks set to continue into the “new normal” post-pandemic. But buying a bike can be expensive. Accordingly, more people are taking advantage of bike sharing systems.
Bike sharing is a transport service which provides users with a public bike for a short time. These bikes are stationed in key locations around the city, with travellers able to check them out (sometimes for a small fee). The development of bike sharing systems has advanced significantly in recent years – going from first generation free bikes (which required users to deposit the bikes back at a specific docking station) to the current fourth generation ‘dockless’ bikes which can be locked and left anywhere within the city limits. Many cities have both these options.
An opportunity to build back better
With fewer people commuting to work, and therefore fewer cars on the road, this is the perfect time to expand and develop this type of green transport solution. The call to ‘build back better’ has been heard throughout the pandemic. Establishing an effective infrastructure for bike sharing will be central to reducing emissions in our cities, improving people’s health and contributing to the fight against climate change. It’s not an exaggeration to say that effective bike sharing systems will enhance the liveability of cities in the long term. However, the current allocation strategy in bike sharing does not follow a systematic process, and so is inefficient.
Oversupply of bikes leads to a waste of resources in terms of money and road space. If bikes are placed in areas that aren’t useful transportation hubs they won’t be used. But how can we decide where to allocate them, to encourage maximum use? My latest research attempts to answer these questions, outlining how bike providers could approach these problems to gain competitive advantage and expand the use of bike sharing. This would benefit the bike sharing companies, and ultimately the people of the cities using these systems.
How should bikes be allocated?
For each bike provider, the primary goal is to dominate the market before others competitor enters into it. In these circumstances, the market leader should allocate the bikes in locations where they can be distributed as quickly as possible. My research uses ‘supply chain network theory’ to show that the best allocation point for quick distribution of bikes is at the location (or ‘node’) with the highest connections in the network. This means that bikes should be placed at the nexus of roads and paths – the area that has the greatest variety of routes to different parts of the city. We would establish this ‘node’ via optimisation.
As a competitor, how can you enter the market and attempt to take on the market leader? The objective of the market follower is to take the market share from the market leader. The allocation strategy for these companies is to first use the same allocation positions as the market leader, and then introduce various incentive methods to attract riders, e.g. price competition, service improvement. This can be understood using leader/follower relationship where the follower usually prefers to follow the leaders strategy in an attempt to win some of its custom. This scenario also applies to the market leader who want to win back lost market. However, it is difficult to grab market share from the leader when using the same allocation strategy, due to brand loyalty.
Given all of this, how can market followers attract more riders than their competition? Most bike sharing services have similar features in terms of bike quality, how to use (in terms of payment and how to pick up/drop off) as well as cost. With little to distinguish most offerings, the feature that distinguishes any one bike provider is the convenience of bikes – that is, whether the operators can provide enough bikes for riders at one time. The number of bikes allocated in one area is a delicate balance, as unused bikes would be a waste of money and take up space in a city. However, after operating for a while bike provider should have a significant amount of usage data that they could use to calculate demand. At this point the market follower should allocate the bikes in larger batches than the market leader.
My previous work on bike sharing systems has looked at other ways for bike providers to be competitive and attract riders, while also improving the allocation of bikes throughout the network. My team and I proposed that a novel pricing strategy would help manage the supply of bikes – financial incentives could be used to encourage users to cycle bikes from areas of high supply to areas of low supply. I hope to extend this work in the future by optimising the number of bikes in each allocation, as well as finding an optimal pricing strategy for market leaders and followers.