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Is JD.com exploring own-controlled capacity?

Charles Kauffman by Charles Kauffman
July 24, 2018
in Capacity & Demand, Carriers, E-Commerce, News Archives
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The HNA Group’s various combination carriers already move cargo in the belly hold for Chinese e-commerce giant, JD.Com. Could the Group one day operate freighter flights for JD as well?

Earlier this week, reports emerged that Chinese e-commerce giant JD.com had entered into discussions with the HNA Group over potential “participation” in one of the group’s air cargo carriers. We note that collaboration between the two companies has been expected to some extent since March of this year when JD.com and HNA Group entered into a “Strategic Cooperation Framework Agreement.”

Both companies operate logistics subsidiaries based in the city of Xi’an in west-central China and intend to leverage their joint resources to develop e-commerce logistics in China. As part of the March agreement, the pair committed to cooperate on a wide variety of projects, such as logistics, real estate, air cargo, cold chain logistics, cross-border e-commerce, offline retail, air travel services, finance, and technology.

Based on the agreement, it would not be difficult to imagine JD utilizing air cargo capacity in some form on one of the HNA Group’s combination or all-cargo carriers, but up until now, air freight has played only a minor role in JD.com’s domestic e-commerce fulfillment operations. This is partially because like Amazon, most of JD’s sales are characterized as “direct sales” – where JD procures, sells, and fulfills orders directly as opposed to a marketplace full of third-party sellers. With a growing number of 335 warehouses and large fulfillment centers, and 7,000 delivery stations across China operated by JD.com’s logistics subsidiary, JD Logistics, the company says it is able to achieve next-day deliveries to 92% of its customers, and for most products, without air freight.

Even though the e-tailer continues to invest heavily in predictive analytics technologies, which increase forward-stocking efficiency so that it can provide same-day delivery for more goods, this is not to say that air freight does not play a role in its domestic supply chain. JD Logistics told Cargo Facts that its practice is to truck cargo that needs to move less than 800km, and air freight goods that need to move more than 1500 km. For anything between the 800-1500km range, decisions are made on a case-by-case basis.

To date, however, JD Logistics has found adequate capacity belly space on passenger flights, and currently utilizes space on dozens of passenger flights each day, but perhaps that could change. JD Logistics may see a need for dedicated overnight cargo flights on trunk routes to reposition stock at major warehouses. Such flights could also be utilized to provide lift for “offline” customers using the company’s 3PL services.

Whether JD’s path toward becoming an increasingly formidable 3PL provider leads to dedicated capacity, and if an own-operated network could mean closer alignment or even a financial stake in an HNA-Group affiliate carrier, however, remains to be seen.

Tags: Asia-Pacific Cargoe-commerceHNA GroupJD.com. own-controlled
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