Logistics businesses bank on digital supply chains for tech innovation

Logistics companies in China are increasingly relying on tech innovation, related to supply chains, to cater to the growing needs of e-commerce and cross-border trade platforms.

Digitalized supply chain, a broader concept for how technologies like cloud-based systems, data analysis, and artificial intelligence have reshaped supply chain operations, is now the top priority for most of the major logistic companies.

“China’s logistic industry is becoming more tech savvy,” Feng Gengzhong, deputy head of China Society of Logistics, said at a recent industry forum in Xi’an, Shaanxi province.

JD Logistics, for example, has teamed up with the Shaanxi government to adopt unmanned aerial vehicles, or drones, for local logistics networks from 2017. Best Express, another major logistics provider, has developed an AI-based net routing algorithm that enables a 5 percent reduction in annual operating costs.

“Digitalization of supply chains will help raise working efficiency, reduce operating costs and enhance working performance,” said Sun Guiyu, vice-president of JD Logistics, at a recent industry forum.

Feng added that the booming digital innovation in China’s logistics industry has provided renewed momentum for the country’s e-commerce and cross-border trade.

According to data released from online research center chinaidr.com, China’s logistics industry earned revenues of 342.5 billion yuan ($53.6 billion) during the first three quarters of 2017, with e-commerce accounting for over 70 percent of the total orders.

“Chinese e-commerce firms have been rapidly increasing their presence in the global market,” said Feng.

JD Logistics, a subsidiary of e-commerce giant JD, invested $306 million in ESR Caymen Ltd, a pan-Asia logistics group, earlier this month, just a week after it acquired a 10 percent stake in Hong Kong-listed China Logistics Property Holdings Co Ltd for $115 million.

JD’s major rival, Alibaba Group Holding Ltd, has poured over $6 billion into the Indonesian e-commerce and logistics sector through investments in Lazada and Tokopedia.

Feng said the increased use of e-commerce in various fields is creating great opportunities and challenges for the logistics industry.

The growing demand for food and fruit online purchases, for instance, has challenged the industry due to special packing and temperature requirements. Cold chain logistics, which also deals with food wastage, is now gaining ground with logistics service providers.

According to Business Wire, an online news platform, many logistics companies are implementing the blockchain technology to enhance efficiency in the supply chain. It also forecasts that the cold chain market in China will grow at a compound annual growth rate of over 13 percent from 2018 to 2022. Healthcare is another example of a sector that has special requirements for delivery time and temperature.

“Healthcare is also one of the fastest growing sectors in Asia-Pacific, and its demand for logistics, like medicine and medical equipment shipping, is rising,” said Karen Reddington, president for the Asia-Pacific sector at global logistics company Fedex Corp.

“Delivery of pharmaceutical materials can be tricky and needs proper deployment of cold chain logistics,” Reddington added.

“In response, we have expanded our tailored solutions for the sector to provide real-time tracking and updates on information such as temperature,” Reddington said.