Last year more than 40 billion packages were delivered in China – half the world’s global total. In other impressive statistics, China has 40 per cent of the road freight in OECD countries and around 24 per cent of rail freight.
Given that logistics account for around 14 per cent of China’s GDP, well above the average in developed countries of 8-9 per cent, improvements in logistics have become a top economic priority. One way of tackling this challenge is “smart logistics” such as self-driving trucks, integration of multi-modal forms of transport, artificial intelligence, predictive analytics and automation.
Asean’s imports from China are growing by 9 per cent a year while exports are growing by 20 per cent, and Asean’s trade with China is expected to hit US$1 trillion (Bt32.8 trillion) by 2020, up from $40 billion in 2000. This increase in trade partially reflects the development of the “China plus Asean” supply chain whereby components are produced in Asean with final assembly in China.
China’s largest operator of warehouses, GLP, uses AI to select the best transport mode between water, rail, road and rail – thus lowering costs and increasing efficiency – and is using real-time tracking of deliveries and self-driving trucks in the ports. It is also investing in areas such as the Internet of Things and robotics, and working with partners on automated parcel-sorting systems.
Meanwhile, the logistics affiliate of Alibaba, Cainiao Network, plans to invest more than $15 billion to build the technical backbone for a smart logistics network. Already Cainiao has developed an agile automated warehouse system that includes completely automated assembly lines equipped with robotic arms and serviced by over 500 AGV (automatic guided vehicles). They are also developing autonomous driving trucks for long-range deliveries and driverless vans for intra-city deliveries.
Alibaba’s rival JD.com is also investing in smart logistics, focusing on areas such as new energy vehicles, drones and driverless vehicles linked by cloud computing and Big Data.
The race to adopt smart logistics is also extending to smaller companies. One of our customers, for example, is using drones to do inventory management, which can complete the task in a matter of hours instead of days if done manually.
In these columns I have often talked about how connectivity will boost economic development in our region, especially the Mekong-bordering countries of Cambodia, Laos, Myanmar, Vietnam and Thailand. Greater connectivity combined with smart logistics will improve both the regional supply chains and access to the promising Chinese market where imports are growing twice as fast as exports. With China’s total consumer spending expected to double by 2030 the easier connections and logistics will encourage market integration between Asean and China along with faster economic development.
For more columns in this series please visit www.bangkokbank.com.