Logistics have played a significant role in the Covid-19 outbreak and the virus is driving a further development of intelligent logistics. By Fifi Kao
Covid-19 aside, why does the logistics industry receive so much attention recently? In a vigorously functioning society, effective logistics services reduce product costs and drive the upgrading of industrial structure and economic development. That is why the Chinese government pays increasing attention to logistics industry.
E-commerce giants completes logistic integration
E-commerce leaders like Tmall and JD.com each build their own logistics departments. Why do they all make such a decision? Here are the reasons.
Firstly, services offered by logistics companies fail to meet the requirements of the e-commerce platform. People who buy on JD.com are all impressed by its highly effective delivery service. Most of the goods can be delivered to consumers’ hands just one day after purchase. This was impossible at the time when JD.com didn’t have its own logistics department. In those days, none of the logistics companies that JD.com partnered with could reach its requirements on delivery speed and quality. Consumers had to wait a long time and then sometimes even received a parcel which was not theirs. Then, JD.com’s founder Liu Qiangdong decided to create a logistics system of his own.
Secondly, e-commerce platforms are eager to be freed from the influence of poor logistics services. To online buyers, the item to be purchased is just one factor for their choice of online shopping platform. Logistics efficiency is also what they attach great importance to. Logistics efficiency decides whether customers can get their goods in a short time or not. If the logistics system doesn’t run effectively, the online platform will definitely receive a lot of complaints and customers may even forsake it once for all, which is a fatal blow to the platform’s revenue. Obviously, logistics plays a crucial role in the profit gain of online shopping platforms. So if the platform establishes its own logistics system, it won’t be influenced by the poor performance of the logistics companies any more.
Thirdly, to have one’s own logistics system is a way to control cost. Every year, large-scale e-commerce platforms pay large amounts to logistics enterprises. So in the long term, it will save cost if they have their own logistics system. Although it is a huge expenditure to establish a self-owned logistics system, the benefits they can get later are huge.
Fourthly, e-commerce platforms wish to complete the supply chain. Logistics is an important part of the supply chain. When e-commerce platforms control logistics, they hold the initiative in the commodity chain.
Driven by Chinese consumers’ huge demands, big data industry sees an over 100% annual level of growth. Intelligent logistics system based on IoT big data is the future of modern logistics.
Technical improvement triggered by intelligent logistics
Based on mobile internet technology, a new logistics mode – “Internet + Logistics” is emerging. Logistics platforms under such a mode are able to realize intelligent matching of vehicle and cargos, real-time tracking of the goods’ status and accurate commodity recommendations. With the development of the big data industry, the registered users and transaction amount of such logistics platforms have doubled. Moreover, with a full application of big date technology, distribution route designing, site selection and storage solutions will all be further optimized.
Let us take instant logistics as an example. Outwardly seen, instant logistics is simply a traditional point-to-point delivery mode. However, instant logistics involves the application of advanced technology such big date, cloud computing and IoT. Date-driven and intelligent allotment are the core competitive factors of instant logistics.
Instant logistics supported by technological advancement solves the problems faced by traditional point-to-point logistics including delayed or unconfirmed delivery. Meanwhile, it reduces cost, increases efficiency and improves service experience. By connecting with new retail stores, front-end distribution system of e-commerce logistics and the supply chain, instant logistics is known as “delivery of the last mile”. The emergence of instant logistics is undoubtedly a breakthrough in the logistics history.
Instant logistics triggers a rapid increase of market demand. It attracts traditional express companies, e-commerce logistics enterprises and city delivery enterprises to join in. The capital market is much impressed by this new logistics mode. Intelligent logistics becomes the evolving direction of the logistics industry.
Since 2019, instant delivery has begun to connect with new retail stores, supermarkets and traditional retail stores. As the lazy economy keeps developing, instant delivery generates C2C business, and also allows for the purchase of things by customers and the delivery of goods to their hands in a short time. It also penetrates into city delivery by connecting with traditional delivery systems, making delivery much faster and driving the evolution of the express market.
Logistics keeps extending its services. In the near future, it may become a basic service of city life and gradually go beyond national boundaries.
Overseas expansion of logistics enterprises
With the steady advancement of the “Belt and Road Initiative” and the fast development of cross-border e-commerce platforms, China’s leading logistics enterprises are beginning to go abroad. With a global vision, they extend their supply chain system to the whole world and actively build logistics bases and warehouses in different countries, thus forming a global logistics network.
For example, SF Express has established business points in over ten countries including Singapore, South Korea, Malaysia, U.S. and launched 14 international air routes. According to the mid-year report of SF Express in 2018, by the first half year of 2019, its international standard express / international economy express services had reached 53 countries. Its international E-Parcel service has reached 225 countries and regions. SF Express established overseas warehouses in USA, Germany, and Estonia. At the end of 2018, SF Express reached strategic cooperation with DHL, the global logistics giant. It acquired the supply chain management services and management team of DHL in mainland China, Hong Kong and Macau and relevant technologies, for 5.5 billion RMB.
Likewise, CAINIAO, jointly built by Tmall, STO Express, YTO Express, ZTO Express and YunDa Express, also speeds up its netting process around the world. So far, the air transport network of CAINIAO has covered 106 air routes, with 225 daily flights on average, reaching over 40 countries and regions worldwide. The cross-border services of CAINIAO have reached 224 countries and regions. It has built a strong transnational logistics network with true global delivery capacity.
JD Logistics targets a global network of supply chain services. It plans to build a two-way channel for China’s goods to go out and overseas products to come in. It shortens the delivery distance by establishing overseas warehouses and realizes global delivery within 48 hours. So far, JD Logistics has built over 100 warehouses in five continents with a 100% coverage of product’s source areas. The construction of overseas warehouses helps to reduce logistics costs, guarantee the authenticity of the products and improve purchasers’ shopping experience.
Logistics enterprises which step into the global markets expand their services far beyond traditional storage, transportation and distribution. They wisely integrate into the supply chain, form partnership with local enterprises, build local distribution network and create two-way logistic channels. It is estimated that many more Chinese logistics enterprises will expand abroad when the pandemic is over.
The logistics in China’s health industry
Medicine logistics plays an important role in this industry as it is closely related to national welfare and people’s livelihood. Medicine logistics need not only to guarantee the supply of medicine and medical equipment to hospitals and community health centers, but also shoulders the responsibility of optimizing the circulation of medical supplies through a rational allocation and scientific management of existing medical resources. Medicine logistics is on the way of reforming and innovating in order to lift efficiency and reduce costs by enhancing the construction of warehouses, transport machines and facilities, and more importantly, adopting internet information technology. The government is beginning to make the relevant arrangements.
In the hotel and spa industry, traditionally, logistics has been solely arranged by the product and equipment suppliers. Now a new mode is appearing which is online purchase + offline experience. As the group sharing economy is booming, hotels and spas also join in logistics-related business. To understand the logistics business, cost management and quality guarantee have become the new topics in the industry. SpaChina interviewed a logistics expert to share more information with you.
Transnational Logistics in the Modern Era
In the 1980s, enterprises started transnational operations and localized production and in the 1990s, economic globalization was created and has kept developing. To follow the trend of global purchasing, production and sales, logistics also go beyond national boundaries. Without transnational logistics, it is impossible for global trade, manufacturing and purchase to develop and flourish. Vice versa, in an economic pattern characterized by global production, trade and capital flows, it is a must for logistics enterprises to carry out transnational operations. In short, global economic integration will definitely result in transnational logistics.
In recent years, transnational logistics enterprises including APL, FedEx, MSK, Nippon Express, Sagawa Express and Siemens Logistics vigorously contend in the global logistics market. They enter the local logistics domain of different countries by partnering with manufacturing enterprises in the supply chain. In the past, such large-scale transnational logistic companies were just buried in the air-sea-land transportation market, but now, they go to local markets and join in the construction of regional logistics infrastructure and logistics hubs so as to gradually complete their own transnational logistic networks. Seizing the opportunities created by economic globalization, and through financing, loans, aid, and the building of joint ventures, logistics companies are now able to put their idle capital into critical logistics elements such as ports, wharfs, highways, logistics parks and container terminals. Consequently, they are expanding global logistics channels, ensuring smooth international logistics services, and driving a systemic circulation of transnational logistics.
Logistics Enters the Supply Chain
The definition and scope of logistics has experienced a process of evolution. Before the 1950s, internal logistics emphasized transport efficiency. During the 1950s, they focused more on cost reduction and customer service. In the 1960s, logistics outsourcing became a trend. In the 1970s, operation integration and service quality were much addressed. In the 1980s, to improve financial performance and realize operation optimization became the key issue. In 1990s, logistics played a more important role in maintaining customer relations and logistics companies began to ally with different enterprises in the supply chain. In 2005, the U.S. Council of Logistics Management changed its name to the Council of Supply Chain Management Professionals, marking the engagement of logistics services into the supply chain.
As “enterprise groups” increasingly show advantages in the fierce market competition, traditional logistics mode fail to meet the requirements of the new economic pattern. Logistics in modern times needs to be combined with production, purchasing, sales and information elements so as to adapt itself to the new competitive environment. Likewise, while keeping the core competitiveness, enterprises need to form an alliance with their upstream and downstream enterprises including manufacturers, raw material suppliers, wholesalers, retailers, logistics enterprises, as well as finance, insurance, information and consulting companies. As the competition between individual enterprises gives place to that between enterprise groups, traditional logistics must be engaged in the supply chain in order to meet the needs of such competition. That is why we say that logistics has moved to a higher stage of development.
Logistics Extend to the Entire Economic Sphere
Logistics is a young discipline with less than 100 years’ of history. The scope and orientation of logistics keeps evolving along with economic development, technological advancement, and the change of consumers’ needs.
At the beginning, logistics was limited to packaging, transportation, loading and moving, storage, distribution processing and information transferring of products that get off from the production line. It mainly worked on behalf of the sales activities of the enterprise. Later, the scope of logistics expanded to material purchasing and production areas, with an emphasis on enhancing enterprise services and competitiveness. Later, more focus was put into the planning and management of logistics delivery and logistics activities, which were seen as important strategies for enterprise operations and management. Now, the new trend is to extend logistics to wider areas by connecting it with customs clearance, commodity inspection, business flow, capital flow and information flow and integrating it into the entire economic sphere from manufacturing, distribution to consumption.
Modern logistics covers the entire process of circulation from the product’s “birth” to “death” and plays a crucial role in the survival and development of manufacturing enterprises and trade circulation enterprises, who regard logistics not only as a way to reduce costs, enhance service levels, strengthen competitiveness and create extra profit lines, but also an important economic growth point, the pillar of economic development and a critical industry. In developed countries, manufacturing enterprises place great emphasis on the cooperation with logistics enterprises. They hand over all business activities except production and marketing to logistics enterprises, and also invite them to join in the production and marketing elements.
The Informatization and Hi-tech Trend of Logistics
The informatization of logistics refers to the establishment of commodity codes and databases, the rationalization of transport networks and sales networks, the digitization of logistics center management, and the application of barcode technology. The wide application of various information platforms, electronic data interchange systems, transaction processing systems, management information systems, decision support systems in logistics improves the efficiency of information sharing, makes information transfer more convenient, fast and accurate, and largely enhances the functions of different logistics sections including transportation, storage, loading and moving, packaging, distribution processing and delivery. Moreover, logistics will be more and more integrated with business flow, capital flow and information flow. As a result, the comprehensive benefits of manufacturing, circulation and consumption will be promoted and social logistics costs will decrease. This is undoubtedly a breakthrough for logistics.