Interview: Cainiao Takes Smart Approach to Ecommerce Logistics
Working from home and closures have prompted a rapid increase in e-commerce as global consumers, denied access to malls and department stores, turned to online shopping, some for the first time.
In China, e-commerce was already very high before the pandemic, but according to forecasts by research group eMarketer, around 52.1% of the country’s retail sales will come from e-commerce in 2021, up from 44.8% a year earlier. .
Alibaba has been at the center of China’s e-commerce growth, not only selling goods, but transporting them through its subsidiary Cainiao Smart Logistics Network.
Cainiao’s stated mission is to deliver 24 hours to all of China and 72 hours to all over the world.
Major milestones achieved to date include more than 3,000 logistics partners, processing 16trn of logistics data every day and transporting 250 million items of PPE during the pandemic to 159 countries.
James Zhao, Managing Director of Global Supply Chain Cainiao, joined the company in 2014 after 12 years in a number of product and marketing management roles at eBay, FedEx and TravelSky.
As a platform company, Cainiao does not own or operate any aircraft, but rather works with airline partners: “We have always had air freight service through our global logistics network,” Zhao explains.
Recent examples of this close collaboration have seen Cainiao partner with Hong Kong Air Cargo to launch cargo flights to South East Asia, and with Saudia Cargo for services from Hong Kong to Liège in Belgium.
It also sets up seven “eHubs” in – or near – airports where it can quickly carry out consolidation, transshipment and other activities to maintain the speed of movement of goods.
At the time of the agreement with HK Air Cargo, Zhao said, “As one of the world’s fastest growing e-commerce markets, Southeast Asia is expected to achieve an annual growth rate. composed of 23% to reach 172 billion dollars in 2025. “
He added, “With more cross-border e-commerce products moving from mainland China to Southeast Asia, launching cargo flights through Cainiao’s eHubs will allow us to create a transparent logistics network that will improve the efficiency and reduce shipping time. “
As part of its flexible approach and swift response to emerging challenges, Cainiao has partnered with Ethiopian Airlines to launch a pharmaceutical air cargo service for temperature-controlled drugs from Shenzhen Airport.
Zhao says, “We continue to expand our air cargo network to support global distribution. Our recent partnership with Saudia Cargo will help connect China with Europe and the Middle East. “
Cainiao’s global network will undergo massive expansion to handle the growing volumes of e-commerce in all modes. It already has an eHub near Kuala Lumpur airport (KL), with a second eHub due to open this summer in Liège and a third in Hong Kong.
What will this mean for Cainiao’s distribution capacities and will there be more use of freighters and strategic partnerships with airlines?
Said Zhao: “[We gather] a large amount of goods from inside and outside Alibaba’s economy.
“We collect goods from southern China, for example, and ship them to the Hong Kong eHub, then to Cainiao Aeropolis (eHub) eWTP hub in KL by air for distribution across Southeast Asia. South East.
“In this way, we can benefit from greater agglomeration effects. In this sense, products can be moved globally very efficiently from one eHub to another in a different region, which can then be distributed intraregionally by air or land. “
He adds: “With the Cainiao Aeropolis eWTP Hub (eHub) in KL, one of the seven eHubs managed by Cainiao around the world, we would have set up a global logistics network via a hub and spoke model that increases efficiency and stability through the provision of terminals – end-to-end logistics services.
“The eHub involves multiple partners performing many functions to facilitate cross-border exchanges. They include an electronic processing center based near the KL International Airport, which will function as a customs clearance, warehousing and fulfillment center for the region.
“A one-stop online cross-border commerce services platform that will link the Malaysian eHub with the original one in Hangzhou, thereby facilitating commerce [small and medium-sized enterprises] between the two countries, training programs for start-ups and it also works to support Malaysia’s digital ambitions.
Zhao says KL’s eHub will serve as a distribution gateway in Southeast Asia and strengthen air, sea and land connectivity for greater operational efficiency.
Finally, the eHub will take advantage of smart technologies such as automation, artificial intelligence and knowledge transfer, which will contribute to the overall digital transformation of the industry.
But how does Cainiao intend to develop its relationships with freight forwarders and 3PLs, and who is the ideal business partner?
“Going back to two of Alibaba and Cainiao’s core values, which were about putting customers first and how trust is key to making everything simple, these values can be applied to how we approach business management. relationships as we expand our network globally, ”says Zhao.
“As a digital logistics platform, we take a collaborative approach to bring value to partners.
“We equip our platform partners with an innovative and open data platform that improves efficiency throughout the value chain.
“For our business partners, that is to say business-to-business, we are looking to strengthen our warehouse and trucking network to meet the import and export needs of businesses.
“To achieve maximum efficiency, these warehouses abroad [are] located near ports to facilitate transportation and are able to provide pre-storage, warehousing and container freight station services.
“Partners who support the trucking network will also need to be well equipped with resources such as trucks and container trucks to handle the movement of goods between warehouses and ports.”
Cainiao launched a container reservation service for ocean freight last year, which had an air freight dimension. What has been the success so far for the air freight segment?
“The demand so far has been mainly in container shipping, given the current global container shortage.
“The launch of the container reservation service aims to alleviate the shortage crisis for the benefit of our customers who might otherwise be affected by soaring shipping rates.”
Take the lead
But is there a particular [air cargo] logistics achievements of which Cainiao is most proud of the 11.11 online shopping festival in 2020?
“Looking ahead to the 11.11 2020 online shopping festival, we have chartered more than 700 flights to deliver 90% of packages outside of China, resulting in a 60% reduction in delivery time for more than half. some orders.
“Here, smart order consolidation, where we combine multiple packages from different merchants into one package for shipping, has also helped improve overall delivery efficiency.
“In fact, customers in major European cities such as Madrid, Paris, Berlin and Warsaw were able to receive their packages in as little as three days.”
Zhao continues, “As the event becomes a global phenomenon, we are also seeing an increasing participation of foreign traders who sell to Chinese consumers.
“Last year, we operated charter flights and cargo ships to China to meet growing Chinese consumer demand for these products from overseas. This resulted in a 10% increase in delivery efficiency for more than 300 million goods shipped to China from 84 countries and regions. “
It is clear that Cainiao intends to develop its logistics capacity, not just in air freight, to cope with the rapid growth of e-commerce across the world.