AI and Robotics to achieve China’s Retail Logistics Revolution
Over the past decade, China’s logistics industry has been through significant changes, led by the exponential growth of online retail. To give you an idea of the extent of that market, the total number of parcels delivered in 2017 reached 40 billion and is estimated to reach 71 billion in 2020.
China is heavily investing in logistics such as last mile deliveries infrastructures and the reasons being the increase in the country’s imported goods, the emergence of new segments such as groceries or meals deliveries and the New Retail trends turning physical stores into fulfillment centers, pickup points or new data generators for e-retailers.
China’s logistics industry, though, is not optimal. In 2017 the proportion of logistics costs to China’s GDP was 14.6%, a much higher number than the 7.7% recorded by the U.S. The global Chinese logistics industry and the Chinese e-commerce companies using their own delivery fleets and delivery services platforms feel a real pressure on business growth and margins.
AI & Robotics to Reinvent Logistics
To make both top and bottom-line improvements, Chinese companies are looking into AI technologies, such as machine learning-based predictive analytics, computer vision systems and conversational bots.
China’s second-largest e-commerce company JD.com, owning dedicated distribution and logistics operations, is looking to achieve a tenfold increase in sales by 2030 with the help of AI and robotics. Richard Liu, founder of JD.com, said that they could not longer significantly increase efficiency or reduce costs with previously available technologies, and relied on AI and robotics to restructure the retail industry.
Cainiao Network Technology
The logistics subsidiary of the e-commerce behemoth Alibaba and several other Chinese logistics shareholders built Cainiao Network Technology (“Cainiao”), a distribution and logistics network platform helping connected logistics partners collaborate and benefit from AI applications and other deep technologies being deployed in the logistics space.
Machine learning algorithms have been widely adopted, especially for parcel volume prediction and delivery route optimization. The delivery dispatch system of Meituan, a leading meal delivery service fulfilling up to 20 million orders daily, is trained to insure that meals are reaching the consumer’s hands within an average of 28 minutes. On another hand, Alibaba’s Cainiao, present in 40,000 villages, hopes to shorten the average delivery journey by 30% in rural areas by 2020 using AI algorithms.
In the meantime, a great amount of Chinese companies in the e-commerce, logistics, devices and AI software spaces are building self-driving trucks, last-mile delivery bots and drones to optimize delivery processes. Cainiao is planning to deploy 100,000 autonomous delivery vehicles over the next three years and JD.com is currently building 150 drone airports in one of the two provinces where regulations to implement delivery drones have been approved.
AI for Warehousing and Distribution
Warehouse and distribution automation are other major fields for AI applications. JD.com, opening a fully automated warehouse in Beijing this year developed an unmanned sorting center unveiled in August 2017, increasing productivity by 400% for the company. In the meantime, in May 2019 Cainiao unveiled a solution in smart logistics parks that combines AI and a range of other technologies to fully digitize and automate warehouse complexes around the whole country.
Intelligent customer service bots have also been widely adopted by logistics and e-commerce companies in China, cutting customer service staff by 27% in 2017 for SF Express, one of China’s largest logistics companies.
What’s next?
China’s e-commerce market is estimated to grow to reach twice as much as that of the U.S. by 2022, according to a recent report by Forrester and deep technologies will remain the major area of investment in the future. In September 2017, Alibaba announced investments in technologies to reach 100 billion RMB (US$14.6 billion) in the next five years to optimize logistics processes and gain efficiency.
Chinese companies are also seeking technologies in advanced markets to improve efficiency and help with their global expansion. JD adopted NVIDIA Jetson platform for its JDrone and JDrover delivery bots. Alibaba’s Cainiao unveiled in June last year an AI computing platform for autonomous vehicles navigation, together with Gyrfalcon Technology, a US-based AI chip startup.
