Jack Ma goes all-in on smart logistics infrastructure network

In a surprise appearance at last week’s Cainiao’s Global Smart Logistics Summit, Chinese tech tycoon Jack Ma announced that Cainiao Network, the logistics affiliate of Alibaba, is going to invest more than RMB 100 billion ($15 billion) to build the technical backbone for a smart logistics network aimed at improving delivery reach and efficiency. (Read our live blog of the event for a blow-by-blow of the speech).

To emphasize the company’s commitment, the Alibaba chairman added that “We will increase the investment to several hundreds of billions RMB if that’s not enough. Alibaba will bet a vast majority of our resources on it because we believe a better logistics infrastructure network could bring fundamental changes to the manufacturing industry.“

Thanks to the exponential growth of e-commerce industry, China’s logistics landscape has undergone massive changes in recent years. Ma noted that the industry started from zero parcels generated by e-commerce to now delivering 130 million parcels per day, while there are about 5 million people working at courier and food-delivery companies in the country, and seven delivery companies have gone public.

While the growth trajectory of the logistics industry shows no sign of slowing down, it is a no-brainer why the tech giant is taking huge bets on the logistics business.  Cainiao wants to eventually ensure single-day delivery across China and 72-hour delivery worldwide. Here’s how they say they will meet that goal.

A smart network powered by cutting-edge technologies

Despite the surge, the logistics industry is labor-intensive, Ma pointed out. “This growth is rooted in the hands and on the shoulders of millions of deliverymen, but I believe it’s going to be driven by mental labor in the future.” A top exec from China’s top logistics company admitted at the event that their deliverymen don’t really benefit from company growth because their salary is still largely determined by how many parcels they can deliver.

As a technology-driven socialized logistics collaboration platform, Cainiao has been working on the application of cutting-edge technologies in the logistics industry since its establishment five years ago. In 2015, the company founded ET Lab, an R&D unit that focuses on the development of emerging technology and applications in logistics.

At last week’s event, the company showcased the first Cainiao Future Park, featuring intelligent management at a large scale. The Future Park has cutting-edge technologies, such as Long Range (LoRa)-IoT, edge computing and artificial intelligence, introduced the company. Sensors are installed in the Park’s infrastructure system and, through the LoRa network, meters that monitor the water, electricity, temperature and humidity conditions can report in real-time.

Of course, application of technologies goes far beyond large-scale management solutions. By using AI technologies, Cainiao has developed an agile automated warehouse system that enables a large number of robots to work collaboratively in warehouses, creating an efficient end-to-end warehouse automation solution.

Inside the smart warehouses, packages are processed on completely automated assembly lines equipped with robotic arms and over 500 AGV (Automatic Guided Vehicles) robots are on the floor for fast product pickup and delivery. The automation is expected to save warehouse staff some 50,000 steps per person per day.

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Cainiao’s ET Lab has been tinkering with its driverless delivery vehicles over the past year. Zhang Chunhui, head of ET Lab told TechNode that the company is applying the technology in two different use cases: the autonomous driving trucks for long-distance delivery and driverless vans for intra-city delivery.

“We are developing highway autonomous driving truck fleet in partnership with FAW Group Corporation, a Chinese state-owned automotive manufacturing company. We call it ‘high-speed railway for trucks’, Zhang introduced.

For last-mile delivery, Cainiao’s ET Lab has two major products– “Little G” and “G Plus”. Equipped with a multi-sensor navigation system that includes 3DLidar, cameras and X-ray sensors, G Plus can achieve high-precision navigation through 3D modeling.

“Instead of laser radar, G Plus it uses MEMS (Micro-Electro-Mechanical Systems). It will cut almost two-thirds of the cost as compared with traditional solutions, facilitating the mass production of driverless vans,” he added. G Plus can go at a speed of 15 miles per hour. This speed makes sure it’s more efficient than human but won’t cause any security concerns in city, according to Zhang.

Little G is already being used on Alibaba’s campus. G Plus is currently in road tests and the plan is to come to commercialization end of this year.

While still at an early stage towards its full digitalization, the logistics industry has multiple options and paths to take. Compared with its competitor JD, which put bets on both driverless vans and drones, Alibaba put most of its resources on autonomous vehicles for last-mile delivery.

“We believe heavy unmanned aerial vehicles for large and long-distance cargo delivery will have better application prospects. Small drone for last-mile delivery still faces lots of problems, like security, regulation, and stability. But it’s a matter of choice based on the scenarios and the company’s current resources and research background,” said Zhang.

A connected network empowering partners

“This network was established by Cainiao, but it doesn’t belong to Cainiao. It belongs to all logistics companies. Logistics companies are Cainaio’s most important partners … we need to provide our partners with core technology and core products to make our logistics partners stronger,” Jack Ma noted at the speech.

Alibaba does not operate a self-owned logistics infrastructure but uses Cainiao to build a logistics network of delivery firms. Without direct competition, Cainiao is becoming increasingly integrated with logistics partners.

Last week, Alibaba Group and Cainiao Network joined a $1.38 million funding in China’s top express delivery company ZTO Express in exchange for an approximately 10% equity stake in the company. Under the agreement, Cainiao and ZTO will deepen collaboration from delivery and warehouse management to technology.

In the Future Park project, Cainiao only provides the overall intelligent solution to its warehouse partners, helping existing warehouses to upgrade their management systems and improve efficiencies. On top of that, it’s up to the warehouse operators to determine the scale and timeframe in adapting the solution.

“The openness of Cainiao’s services and solutions is determined by the Taobao ecosystem,” explained a Cainiao spokeswoman. JD operates its own marketplace and logistics infrastructure, so they can predict the growth trajectory and make corresponding warehouse upgrading plans. On the other hand, Alibaba’s marketplaces consist of millions of retailers. Orders could be very diverse and complex, and it is difficult for warehouses to meet the demands of e-commerce business that have peak and slow seasons, so it’s better to provide agile upgrading plans.

A global network links China and the rest of the world

Alibaba’s global vision is one of the key reasons for what the company has achieved so far and the mindset is shaping Cainiao’s future.

This network is not only national but also global. Cainiao’s global network will support 72-hour delivery across the world, starting from countries and regions involved in China’s Belt and Road Initiative.

“World trade will change because of logistics. Global trade will go from containers to packages, from trading between countries to trading between companies. All this change, we should be ready to prepare and fight today,” Jack Ma explained.