{"id":22665,"date":"2017-11-14T18:41:30","date_gmt":"2017-11-14T23:41:30","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/jd-com-building-the-smart-logistic-system-for-the-future\/"},"modified":"2017-11-14T18:41:30","modified_gmt":"2017-11-14T23:41:30","slug":"jd-com-building-the-smart-logistic-system-for-the-future","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/jd-com-building-the-smart-logistic-system-for-the-future\/","title":{"rendered":"JD.com: Building the Smart Logistic System for the Future"},"content":{"rendered":"

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\u2019 Day (an annual 24-hour buying frenzy that takes place in China on Nov.11) and its run-up.<\/p>\n

\u201c$19.14 billion [1], up 50 percent from a year ago!\u201d This number, higher than the combined sales for Black Friday and Cyber Monday in the United States, brought a smile to Richard\u2019s face, however, can JD.com\u2019s logistic infrastructure manage such a large volume of deliveries?<\/p>\n

 <\/p>\n

Go Digital!<\/em><\/strong><\/h3>\n

With the penetration of e-commerce, the supply chains become more complex and customers more demanding. According to MHI\u2019s 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 \u00ad five years \u2013 with just 16% saying it\u2019s happening today. [2]<\/p>\n

\"\"<\/a><\/p>\n

Source of the Picture: The 2017 MHI Annual Industry Report<\/p>\n

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% [3] 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.<\/p>\n

On the hardware side, the development of internet-of-things is further enhancing the efficiency of logistics by allowing machines to \u201cthink\u201d and then communicate with each other. For instance, the adoption of advanced robotics \u2013 featured by artificial intelligence, full automation, and machine-to-machine (\u201cM2M\u201d) technology [4] \u2013 in the storage and warehouse management has significantly reduced the lead time and labor cost by 10% to 20% [5]. 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.<\/p>\n

 <\/p>\n

The \u201cThree Arrows\u201d of JD.com<\/em><\/strong><\/h3>\n

Unlike China\u2019s 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 [6] in 1H2017.<\/p>\n

\"\"<\/a><\/p>\n

Source of the Picture: JD.com 1H 2017 Investors Presentation, Capital IQ, August 2017<\/p>\n

To lower cost and improve customer service, JD.com has been consistently investing in digitalization, including the \u201csmart\u201d warehousing system, automated drones, and cloud-based platform.<\/p>\n

Smart Warehouse<\/em> \u2013 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 [7].<\/p>\n

Automated Drones<\/em> \u2013 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.” [8]<\/p>\n

Cloud Computing <\/em>\u2013 To compete against Alibaba, the largest cloud service provider in China, JD.com has invested heavily in cloud computing [9]. 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.<\/p>\n

\"\"<\/a>Source of the Pictures: JD.com<\/p>\n

 <\/p>\n

What\u2019s Next?<\/em><\/strong><\/h3>\n

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.<\/p>\n

“JD.com will use AI, big data, and automation to redefine the potential of e-commerce logistics once again.” [10] 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\u2019 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?<\/p>\n

 <\/p>\n

(Word Count: 797)<\/em><\/p>\n

 <\/p>\n

Endnotes:<\/em><\/strong><\/h3>\n

[1] Matthew Miller. \u201cChina’s JD.com, Alibaba rival, reports $19.1 billion in shopping event sales.\u201d Thomson Reuters, November 12, 2017, via Factiva, accessed November 2017.<\/p>\n

[2] Robert Michel. \u201cThe evolution of the digital supply chain.\u201d Logistics Management, May 2017, ABI\/INFORM via ProQuest, accessed November 2017.<\/p>\n

[3] Bridget McCrea. \u201c6 ways big data is enhancing the global supply chain.\u201d Logistics Management, September 2017, ABI\/INFORM via ProQuest, accessed November 2017.<\/p>\n

[4] Szozda N., 2017 \u201cIndustry 4.0 and its impact on the functioning of supply chains.\u201d LogForum 13 (4), 401-414. http:\/\/dx.doi.org\/10.17270\/J.LOG.2017.4.2, ABI\/INFORM via ProQuest, accessed November 2017.<\/p>\n

[5] \u201cIndustry 4.0. How to navigate digitization of the manufacturing sector.\u201d 2015, Report of McKinsey& Company, https:\/\/www.mckinsey.de\/files\/mck_industry_40_report.pdf, accessed November 2017.<\/p>\n

[6] JD.com 1H 2017 Investors Presentation, August 2017, Capital IQ, accessed November 2017.<\/p>\n

[7] Fan Feifei. \u201cRobots and drones will untangle delivery network.\u201d China Daily-Hong Kong Edition, November 8, 2017, via Factiva, accessed November 2017.<\/p>\n

[8] Brenda Goh and Pei Li. \u201cChina’s deliverymen face robot revolution as parcel demand soars.\u201d Thomson Reuters, November 10, 2017, via Factiva, accessed November 2017.<\/p>\n

[9] Brian Deagon. \u201cThese 3 Top Chinese Internets Get New, Bullish Coverage.\u201d Investor’s Business Daily, September 27, 2017, via Factiva, accessed November 2017.<\/p>\n

[10] Catherine Shu. \u201cJD.com creates new unit for its logistics services.\u201d TechCrunch, Apr 25, 2017, https:\/\/techcrunch.com\/2017\/04\/25\/jd-com-creates-new-unit-for-its-logistics-services\/, accessed November 2017.<\/p>\n","protected":false},"excerpt":{"rendered":"

How will the second largest e-commerce player in China digitalize the logistic system to thrive in the future?<\/p>\n","protected":false},"author":10059,"featured_media":22670,"comment_status":"open","ping_status":"closed","template":"","categories":[154,50,3298,2696,219,21,3225],"class_list":["post-22665","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-china","category-cloud-computing","category-dititalization","category-drone-delivery","category-ecommerce","category-logistics","category-smart-logistics","hck-taxonomy-organization-jdcom","hck-taxonomy-industry-technology","hck-taxonomy-country-china"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nJD.com: Building the Smart Logistic System for the Future - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/jd-com-building-the-smart-logistic-system-for-the-future\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"JD.com: Building the Smart Logistic System for the Future - 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