Leading e-commerce players like Alibaba and JD.com are cutting their fulfillment costs to around half of the industry average in Asia Pacific in part by adopting new technologies like automated guided vehicles and autonomous manoeuvrable robots, as well as by incorporating rooftop solar and other sustainability measures into their facilities, a pair of industry experts said at an MTD TV panel on Monday.
“Everyone in the value chain needs to look to these technologies as a way to drive the customer service experience, as well as address efficiency and costs within the supply chain,” said Tim Foster, head of supply chain and logistics advisory for Asia Pacific at Cushman & Wakefield. “Certainly, this technology is here to stay and has real application in warehouse operations as well as broader supply chain.”
Foster told an MTD TV forum that investing in technology for their warehouses and overall supply chains allowed mainland e-commerce giants Alibaba and JD to keep their fulfilment costs to around 10 to 12 percent of gross merchandise value – which is around half the regional average of 20 to 25 percent.
To lower expenses further, ESR’s group head for customer solutions and partnership in logistics Dr. Michael de Jong-Douglas said continued push for sustainability can help bring power costs down as well, and even generate additional revenue by giving warehouse operators the opportunity to sell surplus solar power.
Foster said Alibaba and JD, which already account for 60 percent of the total market in China, have been investing heavily in technology like automation, predictive analytics, machine learning and artificial intelligence, among others, to make deliveries more efficient.
With e-commerce consumers in Asia increasingly demanding delivery times of one day or less, Foster pointed to speed, accuracy and flexibility as the main driving factors for tenants to consider high-tech facilities.
“Technology has to address a number of factors within the supply chain and of course, along with that, we’re looking to achieve synchronisation – product being received into a warehouse, stored if necessary, picked, packed, dispatched – and the more synchronisation we can get, the more efficient an operation will be and those costs will come down accordingly,” he said.
Foster pointed to automated guided vehicles (AGV) and autonomous manoeuvrable robots (AMR) as among the array of technologies helping logistics companies to move goods through their facilities more efficiently and to add more value to the supply chain within the warehouse.
Power of Scale
With the total value of e-commerce transactions in Asia having increased more than tenfold from 2010 to reach more than $2.7 trillion in 2021, the scale of the region’s online shopping industry to driving change and making new efficiencies possible.
For de Jong-Douglas, Asia’s huge population alone makes the region a suitable environment to innovate solutions for efficiency, with the region in position to lead in the integration of new logistics technologies as Chinese and Indian tech firms serve the burgeoning e-commerce industry in the region.
“I think from an e-commerce point of view, you could have efficiencies there just from the scale of consumers that you wouldn’t be able to have in, say a European market with 2 million people versus 20 million people (in Asia) and I think that’s why a lot of the innovations on the last mile or the three hour deliveries will be done in Asian markets first,” he said during the last show of Mingtiandi’s Asia Logistics Forum 2022, which is sponsored by Yardi.
Solar Powered Savings
While ESR attracted headlines in 2020 when it unveiled plans for a pilot project for building a fleet of automated drones to speed deliveries, the company is also turning its eyes to the sun as it begins integrating renewable power solutions into its logistics facilities, according to de Jong-Douglas.
After rolling out a program in Japan where ESR has fitted solar panels to the roofs of their warehouses, he said his team is expanding this strategy to other markets in an attempt to reduce operating costs for clients.
“Solar combined with battery storage, combined with electric vehicles, in a perfect world, you’d be able to take it off the grid,” he said. “There are other possibilities for renewable energy, but I think it’s also a situation where you can make things more efficient – the more efficient it is, then it should be cheaper from an electrical point of view to operate.”
After rounding up the Asia Logistics Forum 2022 with a discussion on logistics and innovation, MTD TV will be back next month to explore investments Down Under as more Asian investors flock to the Australian real estate market.