Although Golden Week ended two weeks ago and factories across China have reopened, the disruption the holiday sets in motion is now working its way toward U.S. delivery networks, and it is arriving with peak season in its path.
Suryansh Jalan, chief business officer at last-mile delivery platform FarEye, warned that a reopened supply chain is no guarantee the downstream network has caught up, with delayed volumes arriving in waves rather than via a planned uniform flow.
Jalan asserts this bullwhip effect can make or break a retailer’s holiday, in which ill-prepared merchants can be caught in a tug-of-war where they have either too much or too little inventory in any given product.
“It either means you’re going to suffer on experience because your customers are going to be disappointed and they may not come back, or you’re going to have elevated costs to try to figure out an ad hoc alternative [to replenish inventory],” Jalan told Sourcing Journal.
Peak-season carrier strategy is already shifting in response, with retailers widening their carrier bases against holiday surcharges and capacity limits at the large national carriers, instead going directly to regional carriers that previously would have been subcontracted by the top delivery incumbents.
With technology standardizing the delivery experience across the larger pool, Jalan said that national carriers account for less than 50 percent of fulfillment for retailers and manufacturers partnering with FarEye.
“Five years back, I would be dependent on a DHL or a UPS to communicate with my end customer to ensure the delivery is on time, the experience is good, and the reach is there,” said Jalan. “But today, as a business, I want to own that experience. I want to own that communication. In many cases, I want to own the delivery plan to be more efficient.”
The framework Jalan laid out starts with the traditional discipline of planning buffer inventories around important and high-risk SKUs, which limits stockout risk without loading the business with redundancy costs.
Situational awareness forms the second stage, built from real-time visibility, weather and incident data that shorten the time between a disruption and an operator sensing it in time to act.
The third stage, Jalan said, uses digital twins that simulate scenarios across more variables than a human team can work through, producing action plans in hours rather than weeks.
“You are able to pump that into a digital twin that mimics your physical world and comes out with different scenarios for you as a human to take a call on. Should you prioritize on cost? Should you prioritize your premium customers that may cost a little bit more, but you really can’t miss their SLAs?” Jalan told Sourcing Journal. “Things that would have taken a week, two weeks, three weeks to come to a decision and then take action, we see now businesses being able to make that decision overnight.”
According to FarEye’s recently released Eye on the Last Mile research report, median last-mile costs rose 12 percent year on year. Much of that growth sits outside their control in fuel prices and labor availability.
Jalan’s breakdown of the delivery cost inflation attributes only 5.9 points to those infrastructure increases, with the remaining 6.1 points coming from operational inefficiency such as penalties, surcharges, detention and reattempts.
Jalan raised the cost-to-serve point himself during the discussion of carrier volatility.
“Most carriers would not be able to tell you which shipments are subsidizing for the others in their profit-and-loss statement (P&L),” said Jalan. “Just being able to know that cost to serve and build that into your model, the business value for them really comes from deciding which order should they be protecting, which promises do they need to keep versus which they can deprioritize. Having that pulse of cost to serve at a shipment level really helps in carriers making those decisions faster.”
AI adoption is the fourth and final trend on Jalan’s list, with the experimentation-to-execution gap remaining the widest problem he identified. Two out of three business operators are trying an AI implementation—which is up 50 percent from the year prior—but only 14 percent are taking one into live operations.
Jalan expects that figure to climb over the next 12 months, and he predicted that nearly 40 percent of last-mile decisions will be made without a human within the next five years.
“We already see some parts of that coming in today, but we see a large push,” said Jalan. “We feel the B2B delivery market is going to be the first market that will see a fully scaled autonomous commercial delivery network.”