China Upgrades Logistics as Alibaba Goes Amazon

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.”