China’s number-two e-tailer launches 3PL division

Last week, Beijing-based JD.com announced it was moving forward with plans to formalize a logistics division, “JD Logistics” in support of the growing demand for express delivery services for its booming e-tailing business. Similar to Amazon’s Fulfillment by Amazon (FBA) program, the new division will provide third parties access to a wide range of supply chain solutions, including warehousing, transportation, delivery, after-sales service, and cross-border logistics.

With the focused move into logistics, JD.com becomes the latest e-tailer to leverage its massive data troves in an attempt to optimize logistics across its supply chain. Although plans have yet to be hashed out, JD.com is most operationally similar to US-based Amazon. In contrast to China’s other leading retailer, Alibaba (which focuses on platform-based sales primarily from merchants that utilize the site, and has very little infrastructure of its own), JD.com has always invested heavily in fulfillment and last-mile delivery services. With 256 warehouses and 6,906 delivery stations and pickup stations across China, JD relies on both its own network, as well as those of its partners to fulfill orders.

Since air freight and cross-border logistics are inextricably linked when it comes to time-sensitive shipments, the air freight mode will definitely have a place in JD Logistics. It remains to be seen however, if JD will continue to rely on its freight forwarding partners to secure capacity, become a forwarder itself, or, as Amazon did with Prime Air, launch its own air network.

Richard Liu, Chairman and CEO of JD.com said, “this move is a major step in our vision to make technology even more central to what we do.” He added, “leveraging our unparalleled access to data from every step of the e-commerce process, from ordering to delivery and after-sales service, JD Logistics will use AI, big data, and automation to once again redefine the potential of e-commerce logistics.”

Apart from supply chain logistics, JD.com is also pioneering UAV deliveries in China with drones being developed at its Beijing-area labs. Its model is unique in that, unlike other e-tailers JD is not presently targeting residential or urban deliveries. Rather, JD is building launch facilities which serve rural neighborhoods where poor transportation infrastructure inhibits efficient courier delivery. Four such facilities are already operational, and it plans to have 150 operational by 2020.