It was two minutes past mid-night November 12, 2017. Richard Liu – the Founder and CEO of JD.com, the second largest e-commerce platform in China – sat back at his oversized desk in his office in Beijing, waiting anxiously for the final sales number of JD.com during Singles’ Day (an annual 24-hour buying frenzy that takes place in China on Nov.11) and its run-up.
“$19.14 billion , up 50 percent from a year ago!” This number, higher than the combined sales for Black Friday and Cyber Monday in the United States, brought a smile to Richard’s face, however, can JD.com’s logistic infrastructure manage such a large volume of deliveries?
With the penetration of e-commerce, the supply chains become more complex and customers more demanding. According to MHI’s 2017 annual survey on next-generation supply chains, 80% of respondents believe that the digital supply chain will be the predominate model within the next five years – with just 16% saying it’s happening today. 
Source of the Picture: The 2017 MHI Annual Industry Report
Therefore, a growing number of companies, including JD.com, are turning to technologies to help them manage their supply chains more efficiently. The proof is in the numbers: the market for supply chain management (SCM) software grew by 9% in 2016, and the SCM market is expected to exceed $13 billion in total software revenue by the end of 2017, with Cloud-based applications growing by 20%  annually. By implementing data technology, e-commerce platforms can obtain better diagnostic information, manage internal resources that are beyond control, and reduce demand variability and cycle times.
On the hardware side, the development of internet-of-things is further enhancing the efficiency of logistics by allowing machines to “think” and then communicate with each other. For instance, the adoption of advanced robotics – featured by artificial intelligence, full automation, and machine-to-machine (“M2M”) technology  – in the storage and warehouse management has significantly reduced the lead time and labor cost by 10% to 20% . Looking forward, people believe that the use of drones for delivery and driver-less lift trucks for distribution centers automation will together bring the supply chain efficiency to the next level.
The “Three Arrows” of JD.com
Unlike China’s other e-commerce giant Alibaba, JD.com is focused on building its own supply chain infrastructures. By the end of 2016, JD.com operated 7 fulfillment centers and 335 warehouses across the country, covering 2,691 counties and districts. By leveraging its state-of-the-art distribution centers, JD.com successfully fulfilled over 1 billion orders generated by 258 million active customer accounts  in 1H2017.
Source of the Picture: JD.com 1H 2017 Investors Presentation, Capital IQ, August 2017
To lower cost and improve customer service, JD.com has been consistently investing in digitalization, including the “smart” warehousing system, automated drones, and cloud-based platform.
Smart Warehouse – To boost efficiency and better cater the growing demand, JD.com has decided to push for full automation of distribution centers. As its first step, JD.com launched a flagship “smart” warehouse, which is equipped with an army of robots, in Huiyang, Guangdong province in October 2017 .
Automated Drones – To provide a cost-effective solution for the last-mile delivery, JD.com has pioneered in the development of automated drones, including a pilot program of building 150 operational sites for drone deliveries in Sichuan province. “Wages are going up and the R&D cost is going down,” said Bao Yan, director who manages JD.com’s logistics network. “We want to have automation throughout, from the fulfillment center to transportation and for last-mile delivery.” 
Cloud Computing – To compete against Alibaba, the largest cloud service provider in China, JD.com has invested heavily in cloud computing . As part of its long-term strategy, by inviting third-party partners to its cloud-based platforms, JD.com can sign up for a longer menu of logistics services with better fee arrangements.
The digitalization game just started. Almost all the major e-commerce players, including Amazon and Alibaba, are betting on data technology, robots, and automation. To differentiate itself from other competitors and provide high-quality services to customers, JD.com needs to focus on not only the speed but also the quality of the roll-out of its next-generation logistic network. For instance, the real-time tracking system coupled with sensors built into robots and drones would help reduce the loss and damage of goods. Also, by analyzing the data collected from warehouses and drones, JD.com will be more effective in the site selection of new distribution centers.
“JD.com will use AI, big data, and automation to redefine the potential of e-commerce logistics once again.”  Richard Liu expressed his ambition during a recent interview. Looking ahead, however, Richard and his team are still facing many challenges. The cloud-based platform sounds exciting, but how will JD.com share its data with business partners while maintaining the security of customers’ personal information? In addition, how could JD.com work together with regulatory authorities to come up with a set of industry standards that ensures both drone flight safety and minimal disruptions to the existing transportation system?
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