Alibaba Group Holding Ltd. (NYSE: BABA) is wasting no time on its pledge to spend $15 billion over the next five years to build out its global logistics network. The Chinese e-commerce giant recently laid out plans for a "smart" warehouse system known as "Cainiao Future Park," as well as plans to help build a huge logistics hub right at Hong Kong International Airport.
Cainiao is a logistics affiliate cofounded in 2013 by Alibaba, which recently upped its stake in the loss-making company to 51%. Cainiao helps with deliveries in more than 224 countries and regions worldwide, so its main purpose is to help with Alibaba's aggressive overseas expansion.
Alibaba announced two big Cainiao projects in the past few weeks. Here are the four most important things to know about the new initiatives.
Cainiao Network is updating its warehouse complexes with a "smart" system. Image source: Alibaba.
1. Wuxi will be Cainiao's first "smart" warehouse spot
The idea for Cainiao Future Park is to improve logistics efficiency by digitizing warehouse complexes so they don't have to rely on human employees to do the heavy lifting, scheduling, and monitoring. The first stop for Cainiao Future Park will be a 160,000-square-meter complex in Wuxi, China, near Shanghai. In addition to the "smart" warehouses, the park will also have convenience stores and office buildings.
The warehouses will use Internet of Things applications, big data, edge computing, and artificial intelligence (AI) to improve efficiency. These tools will help determine warehouse storage capacities and the height of stacked boxes, as well as oversee traffic by guiding cars toward empty parking spaces.
Wuxi Future Park will also be outfitted with sensors that can detect water, electricity, temperature, and humidity conditions across the park, and send out an alert when property managers need to fix something.
2. Cainiao is relying more on robots
In early August, Alibaba gave customers a look inside Cainiao's original intelligent warehouse, which uses smart robots that can move packages weighing up to 500 kilograms. Cainiao is now saying that it will be advancing this concept by using 500 automated guided vehicles to pick packages off carts and deliver them to the warehouse clerk using the most efficient routes. The self-charging AGVs are expected to cut an average of 50,000 steps per day for each employee.
In addition, Cainiao said that its updated last-mile robot, G Plus, will be ready to help with deliveries by the end of the year. The robot can carry multiple packages and has a maximum speed of 9.3 miles per hour; it uses its built-in navigation system to deliver packages. G Plus can either automatically dispense them at their destinations, or wait for customers to enter personal codes to retrieve the packages themselves.
3. Cainao launched a smart locker
Customers can now have a Cainiao Box installed outside their door to accept deliveries for when they can't be home, as a way to prevent stolen packages. Using the facial recognition feature on the box, delivery drivers will be authorized to place a package inside.
The box can accept both packages and food deliveries. To preserve fresh food, the temperature of the box can be adjusted with a mobile app to accommodate either hot or cold food.
Amazon (NASDAQ: AMZN) has similar programs in place. In late 2017, Amazon launched Amazon Key, a program that allows keyless entry for friends, family, and Amazon delivery employees. A connected camera sends video to an app, so customers can view them entering a house to ensure nothing is stolen or tampered with. Amazon also uses package lockers and Hub pickup spots in certain apartment buildings.
4. Cainiao is leading the construction of a Hong Kong logistics hub
On June 6, just a few weeks after announcing Cainiao Future Park, the company announced that it was leading a group in investing $1.5 billion to build out a logistics hub at Hong Kong International Airport. Cainiao holds a 51% stake in the joint venture.
The logistics center will have an estimated gross floor area of 380,000 square meters, including an air-cargo processing center, a sorting center, and an order-fulfillment center. Cainiao said the center should be able to process tens of millions of packages per year and is expected to start running in 2023.
This is another way for Cainiao to become more of a global logistics player. The company has said that its ultimate goal is to offer 24-hour delivery inside China and 72-hour delivery to and from the rest of the world. Right now Cainiao is handling about 100 million packages per day, but Alibaba executive chairman Jack Ma says it's not far from handling 1 billion packages per day.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Natalie Walters has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.