Tapping on Automation and AI to Transform Business Operations in the Era of Smart Logistics

Cainiao Group
5 min readAug 29, 2023

By: Dr Ding Hongwei, Vice President, Cainiao Group and General Manager, Logistics Technology

With the rise of cutting-edge technologies such as artificial intelligence (AI), machine learning (ML), and robotics, automation in logistics has evolved from a nice-to-have tool to an essential value-added resource in the supply chain. Aside from streamlining warehouse operations, it helps with managing unpredictable surges in inventory and digesting large amounts of unstructured data.

As consumers become more digitally savvy, logistics businesses are realizing the need to digitalize legacy equipment, which is a key reason that Mordor Intelligence predicted the Asia Pacific (APAC) warehouse automation market to grow at a CAGR of 17.3 percent between 2023 and 2028. This is also further fueled by the rise of Asia Pacific eCommerce sector which is expected to reach USD4.02 trillion by 2028, signaling a strong demand for online shopping that will require efficient, effective distribution of goods.

The emergence of generative AI technologies, for example, is bringing about a new era of automation innovation and unimagined possibilities. This includes analyzing data for demand forecasting and route optimization at scale, and enabling smart packaging algorithms that minimize waste. This translates to efficiencies in package sorting, warehouse management, and last-mile deliveries. In time, generative AI will augment these processes by making it easier to personalize services for partners and customers, and optimize ongoing AI processes and activities. All these reduce the workload of warehouse staff, which gives them the bandwidth to provide better customer experiences.

Warehouse Management Systems to Maximize Supply Chain Control and Transparency

AI and warehouse automation systems provide substantial operational benefits for the logistics and supply chain sectors, as well as stakeholders such as partners, merchants, and end-customers. These technologies help them keep pace with the rising demand for eCommerce and better cope with the surge in demand during peak seasons such as major shopping festivals and holidays.

For instance, Cainiao’s proprietary warehouse management system effectively manages the entire value chain including first-mile pickup, sorting and distribution in warehouses, last-mile deliveries, and numerous other logistics scenarios.

Together with enhanced billing and order management systems, Warehouse Operations Management System (WOMS), and a Traffic Management and Control System (TMCS), this provides greater visibility and control for inventory management, streamlining the end-to-end supply chain process. In addition to augmenting logistics operations, automation systems also make for an opportunity for logistics companies to upskill and reskill employees so that they can keep pace with digital transformation and operational expansions, which ultimately results in better business outcomes.

Cainiao’s newly-launched proprietary pallet shuttle, designed for palletized cargo management in dense storage spaces

To complement our smart warehouse solutions and proprietary warehouse management system, we have also implemented a proprietary pallet shuttle capable of optimizing entire pallet storage shelves. Together with our proprietary scheduling algorithm, we are able to adapt to warehouse layouts as needed, effectively reducing operational inefficiencies. Additionally, our automated guided vehicles (AGVs) in smart warehouses reduce the distance travelled by employees, thereby improving storage accuracy and pickup efficiency. By plugging existing gaps in the industry with our technologies, this equips our smart warehouses with the ability to handle high parcel volumes no matter the time of the year.

When looking to invest in automation and related technologies, organizations must take a concerted and holistic approach to ensure productivity is maximized when new systems are deployed and integrated.

Smart Logistics As a Competitive Edge

To stay ahead of the curve and maintain a competitive edge, logistics companies are investing in technologies to boost logistics efficiencies and customer experiences.

Emerging technologies like generative AI are proving to be valuable for industry growth — McKinsey predicted a potential productivity lift by one to two percent globally for retail and consumer packaged goods, owing to the boost that generative AI will provide for supply chain operations.

Photo by Steve Johnson on Unsplash

Beyond augmenting supply chain capabilities, automation, being one of the most significant trends in logistics technology, paves the way for a future-proof supply chain when deployed at scale. This also fosters a culture of innovation, ensuring that logistics companies are not left behind in an ever-evolving industry.

The reality is the growth in eCommerce today and in turn eCommerce logistics volume meant that there is a limit as to how much logistics players’ parcel handling capacities can be expanded and stretched if they rely solely on traditional models and manual processes. This can directly impact competitiveness and efficiencies, and ultimately, making it harder to tap on opportunities afforded by the digital economy and rapid eCommerce growth.

In the face of supply chain disruptions, companies that rely on legacy processes can be more vulnerable to disruptions such as labor shortages and unexpected demand spikes, which will impact process flow and customer experiences.

The Future of Smart Logistics

With the popularity of eCommerce, future tech opportunities for the logistics sector will hinge on tools and solutions that are capable of bolstering eCommerce growth and providing quality delivery services at scale. In view of labor shortages and potential supply chain disruptions, logistics players must not only strengthen their business resiliency, but also actively invest in digitalization to truly reap the benefits afforded by the emergence of advanced technologies.

Being one of the largest carbon emitters in the world, there is an opportunity for the logistics industry to review sustainability goals and proactively adopt a technology-backed holistic approach towards achieving these goals. Beyond reaping the long-term benefits of decarbonization, such as lower utility costs and increased overall efficiency, solutions such as climate measurement tools and AI-based smart packaging algorithms will empower the development of a greener and more sustainable industry.

Beyond upskilling the existing workforce, automation and predictive technology such as robotics and AI-driven systems can also supersede skilled workers in areas such as interactive customer engagement (via chatbots) and even forklift operations. Looking ahead, logistics operators that can effectively strike the right balance between human labor and automation technologies will gain an additional competitive edge in the logistics landscape.

That being said, the future of logistics presents a slew of opportunities for companies that can remain adaptable and are willing to adopt a holistic approach towards addressing challenges associated with an ever-evolving logistics landscape. Alongside existing and emerging technologies that will continue to evolve, such as AI, ML, and automation, holistic solutions that address broader challenges will be imperative.

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Cainiao Group

The smart logistics arm of Alibaba Group. Follow us for content on smart logistics and supply chain management