5 Reasons Why Logistics is the New Oil

Logistics is not only warehouses and trucks. It is also an industry that sees plenty of investment and has strong implications for an organization’s reputation. This has been played out by Amazon, which invests in the automation of warehouses and transportation, and is known not only for its assortment of eCommerce goods, but also for its smooth delivery.

The most important thing to note today is: Today’s logistics is the embodiment of modern technology and intellectual resources.

We have witnessed the use of drones to conduct express deliveries and artificial intelligence to navigate vehicles and calculate routes.

We believe that logistics is new oil. And that’s why.

Because it has a lot of money

According to a recent study by McKinsey, investments in logistics startups amounted to nearly $30 billion in 2019. These numbers will only grow in the future.

The pandemic has shown that many areas of business must be rebuilt in order to be more resilient and future-ready, and this requires significant investment in infrastructure development and automation. Logistics is one such industry. According to Ocean Insights, 67% of shipping and freight companies plan to invest in logistics technology after the COVID-19 crisis.

Because it helps to save

Nowadays, many companies consider logistics only as a necessity. Optimization can reduce these costs. To achieve this, latest technologies such as drones and neural networks are needed, which make logistics so much more interesting.

Modern technological solutions can increase business margins by 6 to 10%. For small sellers, it’s also a way to cut costs in half (and quite possibly make the business profitable).

Because it has autonomous vehicles

Robots that bring your hamburgers orders or products from AliExpress are already a reality. Amazon uses drones for delivery and Kiwibot roams the streets of American cities.

In China, Cainiao has been developing self-driving cars since 2015 to facilitate last mile delivery to end customers. At the height of the quarantine, when it was impossible to take to the streets in China and distribution points were unavailable, the usage and demand for self-driving cars increased. Even after the cities reopened, the deployment of these self-driving cars remain high, and were especially popular among young people and residents in large cities.

An autonomous vehicle is capable of transporting up to 500 orders per day, and also require minimal cost for maintenance.

Because it has artificial intelligence

Artificial intelligence algorithms are widely used in logistics. They help predict demand and plan deliveries to maximize resource utilization and efficiencies. This ultimately enhances the quality of service. Today’s savvy consumers prioritizes the entire shopping experience, right down to how the goods will be delivered — how quickly and accurately.

For example, Australian startup Adiona develops software that allows companies to improve their logistics processes and reduce costs. This software selects static and dynamic delivery routes so that cars do not drive empty, do not get stuck in traffic jams, and do not drive the extra distance. It also optimizes labor utilization and automates the redistribution of goods across different transport streams.

The US-based FACTIC platform offers a SaaS platform that predicts beverage demand and automates purchasing. For example, if the weather forecast predicts a heat wave, then the platform sends a large order to the supplier — because people will be thirsty and demand will increase.

Because it has the Internet of Things

Modern technologies make the work of a logistics professional easier and at the same time make it more interesting. One of the promising areas for the development of the industry is technologies that transfer data without human intervention.

IoT allows you to track each stage of the supply chain and determines the exact location of the goods in real-time. Smart devices monitor, track and report on the condition of vehicles, warehouse utilization and help to better manage stocks.

For example, pallets can signal that the weight of the product on them exceeds the allowable weight to prevent equipment breakdown. Heat and light sensors help track the storage conditions of goods. All signals can be sent directly to the manager who plans the volume of shipment and stocking of warehouses.

Logistics is like a processor in a computer that powers everything else. People don’t care what it looks like, but everyone understands that it is a central part of the ecosystem that handles all the tasks. If the processor is weak, the process will move slowly. It’s the same with logistics, especially in e-commerce. If the delivery does not work well, it prevents you from growing and scaling your business.

— Vyacheslav Savin, General Director of Cainiao in Russia

What is the company “Cainiao” and why it understands logistics

Cainiao is one of the largest logistics platforms in the world. The company became part of the broader Alibaba ecosystem in 2013. Cainiao delivers orders from AliExpress, Tmall, Taobao and Lazada globally. But it is less a logistics company and more like a technology platform that helps companies to optimize their logistics and supply chain operations.

In China, Cainiao Post stations which initially served as collection points quickly evolved into full-fledge community centers that boasts value-added services as such group buys and laundry services. Being operated by a member of their community, customers are often reassured that their unique needs are being met.

The company started operating in Russia in 2016. At the beginning, the task was simple — to deliver AliExpress orders from China. As the business grew, the number of tasks also grew with it. Now, the key focus is organizing the necessary infrastructure for AliExpress sellers in Russia: warehouses, the right routes, pick-up points and a trendy platform used by sellers. To some extent, the company’s services can be compared to a platform, whose services are adopted by sellers. Now, Cainiao cooperates with Russian Post, DPD, KSE, X5 Retail Group, PickPoint to facilitate the sellers’ delivery needs.

Cainiao’s investment in the development of warehouse infrastructure, technology platforms and subsidies to sellers in Russia exceeds 1 billion rubles.

What is Cainiao doing in Russia now?

In China, Cainiao is the main logistics partner for sellers on Alibaba’s platforms, and worldwide it transports more than 90% of AliExpress’ orders. Thanks to the agility and flexibility of the Cainiao platform, the average delivery time of an order within China is one day, and to rural cities — up to two days. The company’s technology platform makes it easy to find both the right warehouse and the right vendor.

In Russia, we carry about half of all parcels from Russian sellers on AliExpress. There are flights to Moscow and Novosibirsk in Russia, and in the near future there are plans to launch routes to Kazan and Yekaterinburg as well. This helps to solve one of the main problems with delivery to Russian regions: it lies in the fact that almost all parcels and orders previously went through Moscow, before despatching to the other Russian cities. The residents of the Urals, Siberia and the Far East feel this lack of logistics especially acutely.

In 2017, together with Russian Post, we launched a new route: small shipments from AliExpress travel from Hong Kong to Vladivostok, and from there — by train through Siberia to the European part of the country, sorting along the way at hubs in Khabarovsk and Novosibirsk. So Cainiao managed to half the delivery time for parcels outside the Urals.

— Vyacheslav Savin, General Director of Cainiao in Russia

Services for consumers are also gradually developing. Last year, it became possible to receive parcels at check-in terminals in Pyaterochka supermarkets.

In 2018, Cainiao launched its warehouse in Domodedovo for Russian sellers on AliExpress. This year, a partner warehouse with KupiVIP began operating, which facilitated the storage of clothings, shoes and accessories. These warehouses allow sellers to sort and ship orders up to 30% faster.

The company connects partners to the drop-shipping system: A Cainiao courier arrives at the merchant’s location, picks up the orders at the warehouse and sends them to the buyer. In short, Cainiao manages the end-to-end logistics for merchants and this can cut costs by up to 50%.

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