The fast-growing Alibaba logistics subsidiary is a unique company – a hybrid logistics data platform and physical warehouse operator with impressive global ambitions, reports Donald Urquhart
Cainiao is on a mission to improve the speed and efficiency of logistics – not just in China, but globally. And this is a logistics company unlike all others, and one that constantly defies expectations.
Established barely six years ago by Chinese e-commerce giant Alibaba, Cainiao Smart Logistics Network Ltd is best described as a hybrid logistics data platform and physical warehouse operator, offering solutions to merchants and consumers in the e-commerce space.
It carries out the enormous logistics task required by Alibaba’s gargantuan volumes not by doing the heavy lifting itself, but by providing a resource-sharing platform and effectively ‘orchestrating’ partner express carriers. This is made possible by a highly developed IT platform which is part of its ‘smart logistics infrastructure’.
Speaking at this year’s IATA World Cargo Symposium in Singapore, Cainiao’s chief of staff and head of strategy and business development, Xiong Wei, highlighted: “From day one, Cainiao’s mission was to serve not just Alibaba, but the whole logistics industry.”
In China, where average daily parcel volumes run at about 410 million (2017), that is no mean feat. Out of the 110 million express parcels a day, some 70 million are handled on the Cainiao platform.
On China’s biggest e-commerce shopping event 11.11, the number of orders on that one day alone increased from 150 million in 2013 to more than one billion last year. But not only are the numbers increasing, the delivery time is shrinking. The time to deliver the first 100 million parcels five years ago was nine days; last year it took only 2.6 days for the first 100 million.
This has been achieved largely through digitalisation, says Wei. “By digitalising the industry, efficiency in the express delivery industry has greatly improved,” he says, citing the fact the average processing cost per package in the express industry has been decreasing at roughly 7 per year (CAGR).
Rapidly evolving trends
The rapidly evolving e-commerce sector in China is facilitating a number of trends that are directly shaping the logistics sector. Consumers are demanding more differentiated services, he says. This include delivery to doorsteps, delivery to lockers on the ground floor of their apartment block, and also delivery to pick-up stations near their homes. And ‘immediate delivery’, or delivery within hours, is also a rising demand from consumers.
The types of solutions customers request from Cainiao are also changing. “Brands and merchants used to come to us only for digital solutions for their online channels, but nowadays brands and merchants are coming to us asking for integrated solutions for their online and off-line catalogues,” he explains.
Another trend Wei notes is the growing need for more automation. Currently there are roughly three million delivery personnel in China. “This industry has seen explosive growth in the last ten years and nowadays we are seeing logistics bottlenecks,” he says.
He notes that on average, each delivery person must deliver between 120-150 parcels every day, just to keep up with current volumes. “If there is to be further improvement in efficiency, there has to be more automation,” he says.
Going forward, Wei says Cainiao’s strategy is very clear: “First we want to digitalise the express logistics infrastructure in China, focusing on the domestic market, to provide digital solutions to brands and merchants so that they can serve customers better by placing inventory at the right time and locations.”
The second step is to provide brands and merchants better access to the global logistics network, helping them to serve consumers overseas better.
“We have provided quite comprehensive services to digitalise the entire industry in China,” he says, pointing to the logistics group’s reliance on e-AWB. “If you look at the electronic air waybill, that has served as the backbone for digitalisation in the industry in China and it will further allow additional collaborations and additional innovation.
“On top of that, we are providing dynamic focus to express companies. That’s how we can support major events like 11.11,” he says, explaining the concept involves managing where and when the parcels should be placed to make inventory control and delivery more efficient.
The company currently connects more than 10 million sqm of warehouse space as it builds “the largest last-mile network in China and around the world”.
“We are providing a network for brands and merchants to provide better solutions to their consumers. In order to do that, we are putting their inventory closer to the consumer.”
Cainiao accomplishes this through nationwide warehouse fulfillment via a hub and spoke system. “We provide a lot of processes, systems and standards for our partners to do the actual operation,” Wei adds.
Automation is also a key aspect. Ahead of last year’s 11.11 event, Cainiao opened China’s largest robotic warehouse. Located in Cainiao’s Future Park logistics complex in Wuxi in eastern China, the warehouse uses 700 order-picking robots to streamline and speed up the order-fulfillment process. Alongside this, Cainiao is also providing services to digitalise delivery personnel.
Another digital solution launched last year helps boost efficiency by placing automated phone calls to consumers to check if they are at home. A seemingly simple thing, but it is evidence of Cainiao’s desire to inject every bit of digital efficiency into the supply chain it possibly can.
Shrinking delivery times
“Speed is something we care about,” Wei says. “Five years ago, the average time for a Chinese merchant to sell overseas was roughly 17 to 18 days. Now it has been shortened to 10 days, and we are working to speed it up.”
The company has also opened bonded warehouses and has customs clearance at all major hubs in China. With more than one million export orders a day, customs clearance is a key issue.
One example of the use of technology in its global logistics network is with customs clearance. Through the use of AI, Cainiao has significantly improved processing time from less than five minutes, to less than five seconds, with 98% accuracy. “With that we can support tens of millions of customs clearances a day,” Wei highlights.
The second part of the company’s strategy swung into motion last year, as Cainiao began working with its partners to fulfill its ambition of creating a global logistics network, starting first with a focus on helping small and medium enterprises sell to overseas consumers.
“We are now looking at our smart logistics infrastructure around the world,” Wei says. “From the beginning of last year, so far we have launched Hangzhou, Hong Kong, Liege and Colombo. And, we are looking to work with different partners to further expand our cross-border infrastructure.”
Now that it has launched the process of building its network of cross-border hubs, the company is also working with overseas companies on customs clearance systems, Wei says.
In its bid to build a super-efficient global logistics network and continually improve on delivery times, Wei adds: “We cannot achieve further improvement alone, so we are looking for collaborations around the world to provide a better global logistics network.”