Last Mile Delivery Lessons: What the U.S. Can Learn from China's Model

What the U.S. Can Learn About the Last Mile of Delivery From Asia — And Where Breakthroughs Lie Ahead

By Chris Crutchley on July 19, 2022
The last mile is still filled with inefficiencies. What can countries like the U.S. learn from China, and how will new innovations play out around the world?

The housebound and bored American consumers of 2020 set off a boom in demand for online retail — but those consumers also unwittingly created a logistical nightmare for the e-commerce industry. 

While consumers were clicking “complete order” on all the gadgets, apparel, and groceries meant to help them through the drudgery of lockdown, e-commerce retailers were wondering how to keep up with demand and keep costs down in the face of an unprecedented spike in demand.

As we now know, this spike in e-retail buying is going strong even after 2020, and e-commerce companies are still trying to figure out how to tighten up their game for the long haul.

Let’s take a look at what U.S. companies are doing to try and improve last mile logistics — and why the solution to their troubles may be found on the other side of the world.

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Why last-mile is so important (and why it's been so inefficient)

One of the greatest potential areas to cut down on costs is called the last mile — AKA the last phase of shipment where a parcel is transported from the fulfillment right to the end customer.

In fact, last mile delivery can make up as much as 41% of the total supply chain costs for a business. Even retailers who are able to tighten up the rest of their supply chain are finding that their last mile delivery schemes are still rife with inefficiency. 

Delays and unforeseen costs run rampant in this part of the supply chain, and for a variety of reasons. These include: 

  • Outdated tracking systems
  • Poor communication between various operators (such as third-party last-mile providers 
  • Inability to make a quick shift to correct changes or routing blockages
  • And countless others, such as those we chronicled in another CBIP blog post

How can these problems best be addressed? To answer that question, let’s first look at how things have played out differently in another nation.  

How has China been able to hack last-mile fulfillment so well?

East versus West: What other countries can learn from China’s last-mile infrastructure

China’s last mile strategy looks vastly different than that of the West. 

China’s fulfillment process is unique in a few different ways, namely:

  1. Many small service centers located in cities
  2. Small vehicles make multiple trips back and forth in a day to deliver parcels
  3. Large parcel pick-up lockers are placed around cities

In the USA, consolidation has traditionally been prioritized for fulfillment processes. There is commonly a large hub outside of the city where things are shipped out in bulk. This takes longer, and the parcels are shipped in a large container truck, so only one trip can be made in a day.

In China, there are around 50-100 service centers in a major city. Smaller vehicles visit these centers numerous times a day for pickups. These are often guys on motorbikes, weaving through traffic to make deliveries across the city.

In addition to that, parcel lockers in China are all over the place. Huge lockers are placed strategically around cities for customers to come and securely pick up their packages. The use of parcel lockers cuts down on everyone’s least favorite notification: no delivery available.

China developed this system out of sheer necessity. The e-commerce market was exploding, and supply chain players had to evolve to keep up. Now, the U.S. and others can look to the Chinese model — along with new methods for fulfillment — to optimize last mile logistics.

Let’s dive into some of the new ideas and technologies that are transforming the last mile logistics game.

RELATED: How Automation is Bringing Warehouses into the Future

How new methods of last-mile are changing the game

Today’s retailers are looking to put new technology to use and rethink their last-mile carrier strategy to improve fulfillment. So what do some of these innovations really look like?

  1. The gig economy approach

Anyone who has used Uber or Lyft is familiar with the idea of crowdsourcing. When it comes to last-mile, the idea is similar: Use an application to find the last-mile carrier you need, when you need them. 

For this approach to work, technology is the crucial ingredient.

That tech comes in the form of algorithms that are set up to improve the system. The algorithm works to balance demand with supply to control prices and connect you with the right carrier based on your needs.

Crowdsourcing carriers for the last mile of fulfillment may not actually be as cost-efficient as hiring an independent contractor, but the flexibility you gain is indispensable.

  1. Rapid order fulfillment

Although your business may not be able to deliver on consumer expectations for 2-day shipping, you can elect to work with a third-party logistics provider who can. 

Logistics operators that use the latest warehouse management systems operate at a level of efficiency that makes uber-fast shipping possible. Remember that offering fast shipping is a great way to win new customers and keep old ones coming back— a 2019 survey of U.S. consumers showed that almost half surveyed were willing to wait 2 days, while only a quarter said they would wait 3-4 days for their parcel to arrive.

  1. Tracking technology

Smart technologies can be used to track parcels and give customers real-time updates. 

Besides keeping customers fully in the loop, these technologies can also allow you to map out shipping routes based on weather, traffic, and other external factors.

  1. Drone delivery 

While this one may still be too early in development to be of practical use, the idea of drone delivery in the last mile is much more than science fiction.

Labor alone accounts for around 60% of last-mile costs on average. With labor costs rising even further recently, it’s not surprising that the industry is casting its eye toward the use of autonomous vehicles.

When you consider industry trend-setting Amazon’s recent investment in autonomous vehicles, it looks like robots could play a more central role in the fulfillment process sooner than expected.

Work with a partner who understands effective last-mile strategies 

If you’re having trouble deciding whether to hire a squad of delivery motorbikes or invest in a fleet of first-generation delivery drones, you aren’t alone.

Making the best decision for your last mile fulfillment strategy is no small task. With all the options listed above, you might feel like you are spoiled for choices, but haven’t the slightest idea on how to begin.

That’s where we come in. As seasoned logistics professionals, we can create a tailor-made plan for your fulfillment, assist in implementing the plan, and provide you with guidance and support whenever you need it.

Why waste your team’s time worrying about how to save money in the last mile? Work with a 4PL that can plan that out for you, including contingency plans for when something goes wrong.

Chat with one of our experts today to learn more about optimizing your last mile operations. 

About Author

Chris Crutchley

Chris Crutchley is CBIP’s director of operations and finance. He has over a decade of corporate finance and operational expertise throughout the Asia Pacific.

In logistics, Chris strives to continuously innovate and challenge the industry’s norms in order to offer clients world-class service that emphasizes clear communication.

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