Alibaba’s Jack Ma to spend $20bn on logistics, handle 1bn parcels a day

Alibaba’s Jack Ma to spend $20bn on logistics, handle 1bn parcels a day

Following Tuesday’s announcement of driving its logistics green, Alibaba founder Jack Ma has provided further details on his plans for the group’s logistics arm.

Alibaba Group will invest over 100 billion yuan (approx. AUD 20bn) to build the technical backbone for a smart logistics network aimed at improving delivery reach and efficiency, as well as sharply driving down logistics costs, said executive chairman of Alibaba Group Jack Ma at the 2018 Global Smart Logistics Summit.

The network mainly aims to push 24-hour delivery across China and push logistics costs down to less than 5% of China’s gross domestic product from around 15% at present, and thereby increasing profit margins for the manufacturing industry and logistics sector. It also aims to push 72-hour delivery to the rest of the world.

Over the past five years since its establishment, Cainiao Network, Alibaba’s logistics arm, has witnessed an increasingly intelligent logistics industry as a result of the joint efforts of Cainiao and its partners. Through technology innovation and open collaboration, Cainiao has reduced cross-border shipping time from an average of 70 days to less than 10 days for some countries. The number of B2C parcels that go through customs clearance is now one million every day. Within China, Cainiao’s same-day and next-day delivery now covers 1,500 counties and districts.

“This network is not only national, but global. This is on what we will work closely with our partners to achieve and bring benefits to all,” said Mr Ma. “As the industry will increasingly become tech-driven, Cainiao aims to be the ‘brain’ of the logistics industry. Since the first day of its birth, Cainiao’s mission is not to deliver goods, but to help delivery firms to deliver goods by building a network that links all logistics elements and connects every deliver person, every warehouse, every hub, every city, and every house.”

Today, about 100 million parcels are processed through Cainiao’s logistics platform every day. What has made it possible is Cainiao’s efforts in driving industry digitalisation. For example, the electronic bills and labels have helped digitise and standardise the industry infrastructure.

China’s logistics landscape has undergone massive change in recent years, reaching unprecedented scale. Ma noted the industry started from zero ecommerce parcels and is now delivering 130 million parcels per day, while there are about five million people working at courier and food-delivery companies in the country, and seven delivery companies have gone public.

With that pace of change, it’s not unreasonable that the peak handling during the company’s 11.11 mega-sale will become the daily average a decade later.

“We want to build this network to help the industry to meet the future needs,” said Mr Ma. “Today, the industry can process 100 million packages a day. In the future, we will need to process 1 billion packages a day. The logistics industry need to get prepared for that with a robust infrastructure.”

The company has also announced plans for five global distribution centres. More details in Tuesday’s newsletter.

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