China Upgrades Logistics as Alibaba Goes Amazon

$14M investment in Geek+ is modest but integral start for Alibaba’s $16 billion automation strategy

Robots are turning the manual ‘click-to-ship’ cycle of 60-75 minutes
into a compelling 15-minute journey out the door. —Deutsche Bank

Alibaba emulating Amazon?
Last June the Chicago Tribune splashed out the headline: How Amazon triggered a robot arms race. The arms are Kiva robots, a company that Amazon bought in 2012 for $775 million (and renamed Amazon Robotics); the race is against time, as exponential growth in ecommerce overwhelms faltering logistics systems that everywhere are unable to cope with the massing onslaught of little brown boxes. The abiding hope is for robot-driven automation to succeed where human toil is failing.

See related:Robots and the Great Asian Warehouse Makeover​

Confronting change
As the Tribune summed up the need: “Amazon was the first company to confront the challenge of picking a virtually endless variety of goods from warehouse shelves and combining them in a single box for home delivery.”

Amazon had to do something. The world’s biggest retailer’s website gets 65 million visits each month and needs 173 global warehouses to accommodate the avalanche of orders, which, according to a Sanford Bernstein & Co. report, pick, pack and ship out roughly 1.6 million little brown packages every day.

Multiply 1.6 million by a one-hour click-to-pick cycle and things get scary very fast. That’s why Amazon needed to act.

Three years on (Amazon began populating its warehouses with Kiva robots in late 2014) and 45,000 Kiva robots later, Jeff Bezos’ Amazon has yet to win that confrontation, but it’s winning, because it rightly bet on warehouse automation. Automated operations that Deutsche Bank claims is saving Amazon $22 million in fulfillment expenses per warehouse and more than halving pick-to-ship time (Amazon currently uses Kiva robots in only 13 of its fulfillment centers).

Dave Clark, senior vice president of worldwide operations and customer service, “estimated the addition of the bots reduced operating expenses by about 20 percent.”

Amazingly, “each Kiva-equipped warehouse can hold 50 percent more inventoryper square foot than centers without robots.”

What Amazon is also winning is that sincerest form of flattery—imitation; and from none other than that other kingpin of ecommerce Jack Ma and his online sales behemoth Alibaba.

Ma realizes that Alibaba, just like Amazon before it, has got to do something…and fast! Alibaba Group Holding accounts for more than 10 percent of China’s online consumer spending, reports the Nikkei Asian Review in China’s delivery companies stretched thin as demand soars: “All told, some 31.3 billion packages were delivered in 2016, a whopping 50 percent jump from the previous year and eight times as many as in Japan.”

Miniscule but meaningful
Alibaba’s logistics arm, Cainiao, just put investment money into a Chinese developer of Kiva-looking robots. Geek+ got $14 million (a pittance in the warehouse wars), which may well be just for starters if the relationship is to be meaningful.

Cainiao, having raised $16 billion in investments ($7.5 billion just last September) from the likes of Singapore’s Temasek Holdings and GIC, Malaysia’s Khazanah Nasional Bhd, and China’s Primavera Capital, is out to revamp Alibaba’s (Taobao and TMall) logistics infrastructure and operations. “Cainiao, will nearly quintuple warehouse space it owns now to around 54 million square feet by next year,” reports Judy Tong, the CEO of Cainiao. That’s a space easily big enough to hold New York’s Central Park. Certainly lots of romping room for tens of thousands of Geek+ robots.  

A young company founded in 2013, “Cainiao seeks to give Alibaba a driving role in China’s fragmented package delivery industry. In partnership with delivery businesses, it crunches reams of data on everything from order trends to delivery routes and weather patterns to increase efficiency.”

A realist in the warehouse wars, Tong said in an interview, referring to Alibaba’s ownership of warehouses: “People may think that an Internet company shouldn’t have property but Cainiao cannot just be a pure data company. It has to be an integrated company with data and an efficient logistics network. An app can’t solve the problems of logistics.”

Geek+ is but a small part of Cainiao’s master plan that will stretch out to some eight to ten cities in China. However, its robots could provide a template for Alibaba to use with all of that massive 54 million square feet at play.

Geek+ says of itself: “Geek+ Inc. focusing on Logistics and Warehousing, Geek+ leads the technology revolution, by applying advanced robotics and AI technologies to realize high-flexibility and intelligent logistics automation solutions.”

Although Alibaba is the largest Geek+ customer, there are barely 300 Geek+ robots at work today. The company has developed and deployed two robot models: one capable of moving 2200 lbs. and a smaller 220 lbs. capacity robot. This video shows the Geek+ bots in action (see above):

Geek+ not alone

Geek+ is not the only contender developing Kiva-like robots in China. Kuaicang, a Shanghai company founded in 2014, just secured $29 million (2017) in Series B financing led by Cainiao and SoftBank.  “Kuaicang has a research and development team with close to 100 employees, and more than 400 robots have been sold.” JD.com and Vip.com are customers.

Alibaba’s challenge is larger than that of Amazon: China has over 450 million online shoppers buying stuff that the Alibaba warehouse system can barely get out the door. Moreover, Jack Ma always in growth mode, is looking to expandAlibaba’s reach throughout Southeast Asia as well as to ocean hop right to the shores of the Americas.

That’s a lot of warehouses, DCs and FCs in dire need of automation…and robots. There is a wide-open window of opportunity for logistics robots that may slam shut in China by 2020, but still remain wide open in Malaysia, Vietnam, Thailand, and Indonesia for the long term.

Assuming that Alibaba continues to emulate the Amazon model of automation with Kiva-like robots, and given Amazon’s two-year window (2014) to begin deployments in warehouses, Alibaba would be close to large-scale deployments in the spring of 2019, and then roll out in force in 2020.

Amazon, of course, won’t be just treading water from 2017 to 2020; it’ll want its fair shot at those millions of new Asian online shoppers.

“To be great in e-commerce, you need to be sophisticated inside the warehouse,” said Karl Siebrecht, chief executive at Flexe, a company that connects organizations that need warehousing space to organizations with extra space. “The case for automation is building across the industry.”

As with all arms races: Racing to be great makes for an equally great opportunity for technology to flourish.

See related:$2.7T in Asian E-Commerce Totally Driven by Logistics Robots
by 2020?

2016’s $1T in Asian e-commerce set to double in four years; a looming, mega-logistics challenge that only robot-driven automation can solve

See related:Asian Outlook 2017: Robots, Automation & Industry
Labor costs, global competition, national initiatives, and innovation demands, drive Asia’s investments in robotics to the max for 2017