Close to home
Alibaba chose to make the city in which it is headquartered, Hangzhou, the location of one of its two international hubs within China. Its operations in the city won’t be identical to the other five, but could serve as something of a boilerplate for how operations could look at the other hub locations.
Early last fall, Alibaba finished the construction of a smart warehouse in Hangzhou, in partnership with carrier YTO Express – another Hangzhou-based company – of which Alibaba owns a minority stake. The high-efficiency facility is able to sort 500,000 items per day of mainly small e-commerce parcels by employing robots not much larger than a standard bathroom scale that zoom around the facility’s floor in a rhythmic synchronicity, sorting parcels into the correct shoots that will ship off to their destinations.
Alibaba has employed a team of regional carriers to help fulfill its airfreight needs in its home country of China. In addition to YTO Express, it also works with SF Express, a Shenzen-based carrier. And last May, it announced an investment of US$1.4 billion for a ten percent stake in ZTO Express, a Shanghai-based carrier of which it has had an ongoing relationship.
The Dimerco Express Group is a logistics company in China that is keen on capitalizing on e-commerce growth. Its president, Andy Hsu, spoke excitedly to Air Cargo World about the potential impact that a global e-commerce network will have on supply chains, saying that, in 2019, one out of every three of China’s retail dollars will be spent online.
“Cainiao’s up-and-coming hubs may provide more opportunities to freight forwarders,” he said, echoing a sentiment heard from many different kinds of players in cargo communities that Cainiao stands to affect. “Demand for both inbound and outbound air cargo movements keeps growing [and] availability of warehouse and handling capacity at air cargo hubs will be more sparse or expensive for the airports in ASEAN countries.”
Kuala Lumpur was chosen as Cainiao’s Southeast Asian hub, which will expand its reach to emerging markets such as Vietnam and the Philippines. There, it pushed forward the establishment of a digital free trade zone (DFTZ) that went live in 2017 – an initiative between Malaysia and China to loosen trade barriers between the two regions. And in a joint venture with Malaysia Airports Holdings Bhd’s (MAHB), Cainiao is expected to invest $197 million to develop the Kuala Lumpur International Airport (KLIA) Aeropolis Digital Free Trade Zone (DFTZ) Park, which will include the development of cargo terminals, sorting centers and warehouses. The hub is scheduled to be finished by 2020.
Transcargo Worldwide is Cainiao’s customs partners in the region. Ong Chin Keong, director of the Malaysia-based forwarder, agreed that Cainiao’s presence would benefit “airlines, terminals, operators, and forwarders,” but reiterated the same point Hsu had regarding whether or not there is enough capacity at the airport and in warehouses in the Southeast Asian region for the forthcoming growth in cargo volumes.
“The hub will probably pull away all e-commerce logistics from existing terminal operators and ease the congestion [at KUL], but we are still not very sure how it is going to work,” Keong said. He added that the traditional forwarder will continue to face congestion, as there are already “many players still queueing up for warehouse space.” Since capacity in the area is tight already at present, according to Keong and Hsu, it could be that Cainiao’s presence will pose some challenges for logistics players in the region that plan to capitalize on the e-commerce giant’s new presence in their communities.
Nearly 1,400 nautical miles north, Cainiao already has three fulfillment centers at its other long-established hub – Hong Kong – and is boosting capacity in its Southern Chinese hub even further. In a joint venture with China National Aviation Corp and YTO Express, $1.53 billion will be put toward the construction of another yet logistics center at Hong Kong Airport (HKG) as part of its efforts to expand its global delivery network, set to open in 2023.