In November, Alibaba’s logistics affiliate, Cainiao, broke its own record during the “11.11” holiday by handling more than 1 billion orders in a single day. The fact that such a feat could occur is a credit to Wan Lin, president of Cainiao Network Technology.
Wan first joined the company as vice president in 2014. Under his leadership, Cainiao has built the largest smart warehousing network in China, Wan is perhaps best known for leading the international expansion of Cainiao’s cross-border logistics operations.
This year, Cainiao made a momentous decision – with far more potential impact than any logistical stunt. The Hangzhou-based logistics giant revealed plans for the construction of “eHubs” in up to six cities in Asia, Europe and the Middle East “to meet the surging cross-border e-commerce needs.” Dubai was selected as the future site for one a Cainiao logistics hub, along with Kuala Lumpur, Liège, Moscow and Hangzhou.
Soon after unveiling the first five eHubs, Cainiao revealed a US$1.5 billion investment in a joint-venture (JV) logistics center at Hong Kong International Airport (HKG), which will effectively act as its sixth hub. With the investment, Cainiao will own a 51 percent controlling stake in the new 380,000-square-meter JV logistics hub, adjacent to HKG, with China National Aviation Corp. (CNAC) and YTO Express holding minority shares of 35 percent and 14 percent, respectively. When the facility is finished, sometime in 2023, Cainiao said it would begin ramping up capacity to “tens of millions of parcels” each year and a total annual capacity of up to 1.7 million tonnes.
“Hong Kong is an important trans-shipment center for China’s cross-border e-commerce,” he said. “Cainiao already has three Global Fulfillment Centers in Hong Kong. It is an important gateway for global goods to enter the mainland China market and vice-versa.”
As Cainiao’s eHubs become operational, the network’s reliance on airlift is expected to grow exponentially. “Upon the establishment of the first six Global Logistics eHubs, global air routes used by the intelligent logistics network will also expand rapidly,” Wan said.
Expanded logistics infrastructure supports the Alibaba Group’s goal of reducing average delivery times to 24 hours across China and 72 hours to the rest of the world. “Air cargo, as well as an international smart logistics network, are inseparable elements to achieve this goal,” Wan said. This realization is, in part, what drove Alibaba and Cainiao to “commit to building the backbone for a smart logistics network,” he added.
Another key pillar of Alibaba’s grandiose cross-border vision includes major reductions to logistics costs, from around 15 percent, as of June 2018, down to less than 5 percent of China’s gross domestic product. While this may be an unconventional way to drive efficiency, the cost-cutting strategy leaves open the question of whether carriers can work with Cainiao in a mutually-beneficial manner. However, with more than 3,000 delivery partners integrating 30 million square meters of warehousing space and 3 million delivery personnel into Cainiao’s Network, companies are still more than willing.
Cainiao’s focus on cross-border service expansion and global partnerships suggests that, much like Amazon and JD.com, Cainiao also could choose to invest in airlines and pursue the development of an own-controlled network.
As we make the turn to 2019, we can expect Cainiao to add capacity, but it’s up to Lin to make that determination. “We firmly believe today’s records,” he said, “will become the normal daily capacity in the coming years.”