(Newswire.net — December 11, 2020) — While there are many ways in which Richard Liu’s JD.com has set itself apart from the competition and carved a path to success, the most striking is its commitment to a strong supply chain. This year the company updated its strategic positioning to reflect this, moving on from the ultimately limiting nature of eCommerce and becoming “a supply chain-based technology and service company.” It was in 2007 that founder and CEO Richard Liu first envisioned a company in which they managed the supply chain from warehouse to the customer’s doorstep, and though many scoffed at the idea calling it too costly and intensive he persisted in broadening his logistical network, investing in infrastructure for the company such as warehouse storage, shipping, and customer service. One decade later, this drive to create a unique supply chain infrastructure served as the bedrock for JD’s continued expansion past retail, and during JD’s annual meeting in February of 2017 Liu further emphasized the importance of continuing to rethink business models and utilize technology to push innovation forward.
2017 was also the year that JD began holding an annual technology conference, where industry experts from all areas of the sector are able to gather and discuss the most pertinent issues and developments in the industry. Now known as JD Discovery (JDD), the conference has become a pinnacle tech event, symbolizing JD’s growing stance as a technological innovator. Within the span of fewer than two decades, JD has made astounding developments in first retail, then logistics, and now finally digital technology, and looking forward Liu now has his eyes set on being the technology backbone of the industrial internet, helping businesses of all sizes in all industries to address their pain points, and providing real, tangible value to society. JD has increased their research and development allocation by 47.8% year-over-year to US$2.6 billion, as Liu continues to ensure that the company is always on the cutting edge of technology and well-positioned for not only the markets today, but also the future.
Although perhaps most known today as an eCommerce giant, JD.com’s roots don’t even lie on the internet. In 1998, Richard Liu used his life savings to rent a tiny stall in one of the technological bazaars of Zhongguancun in Beijing. Opening up under the name “Jingdong,” Liu sold magneto-optical drives and became first amongst the stalls of the bazaar to place price tags on his items. Counterfeit and knock-off products were commonplace in many of the stalls, so many buyers were initially shocked to find that Liu was not willing to haggle with them. However, he explained that his prices were set because he guaranteed the items he sold were authentic and of good quality, and he was quickly able to gain the trust and business of many within his minuscule booth. Like nearly a decade later when he ignored naysayers and invested in his logistics network, Liu’s commitment to going off the beaten path proved successful.
Soon Liu was able to open up his own retail location outside of the bazaar and expand his product offering to include additional electronics. Within five years, he had expanded from Beijing to locations in Shanghai and Shenyang and was operating a chain of 12 successful electronics stores. However, in a case of challenges spurring innovation, the SARS epidemic of 2003 forced him to temporarily shutter all of his retail locations as citizens stayed home to avoid catching and spreading the virus. In order to maintain a revenue stream, Liu began posting his products to online bulletin boards and found that he was able to keep his business afloat by selling on the burgeoning internet. After the panic had subsided and he reopened all of his locations, he enlisted one employee to continue posting products online full-time, and after one year of operating both made the decision to transition his business exclusively online. Again, many did not understand why he would want to divert from an already successful business model in favor of a mode of selling that at the time wasn’t proven, but Liu’s uncanny ability to envision the future saw that he was proven right again.
Today, JD.com has a market cap of US$130 billion, over 440 million annual active customers, more than 320,000 employees, and operates 800 warehouses across China. The company continues to evolve with each passing year, now finding that the technology and services they have developed in the field of AI and big data to increase the efficiency of transactions for consumers have the ability to also increase the efficiency of industries. This is also known as the industrial internet – where big data, analytical tools, and wireless networks are integrated and linked with physical and industrial equipment. Through the industrial internet, ideas that were previously considered science fiction such as driverless vehicles are now a possible reality, and every industry has the ability to transform through intelligent, interconnect objects that will dramatically improve performance, lower operating costs, and increase reliability.
JD built the world’s first fully-automated warehouse in Shanghai and is in the process of automating as many steps as possible in their other warehouses. Some of the company’s most advanced robots have the ability to not only stack products on the shelves, but also even package and ship out merchandise to customers. Thanks to their heavy investment in infrastructure and technology, where the sudden outbreak of Covid-19 saw other eCommerce companies such as Amazon and Alibaba struggle to keep their delivery promises, JD.com was able to maintain their previous records of same-day delivery for over 90% of their orders. They also currently have the largest drone delivery system, infrastructure, and capability in the world, and this year have announced a plan to roll out a fleet of 100 autonomous delivery vans. These last-mile delivery solutions also proved to be useful during the coronavirus pandemic when social distancing measures benefitted from utilizing contactless delivery solutions such as drones and autonomous vehicles.
They have also begun to open up their supply chain and logistics capabilities to third parties, helping merchants maximize efficiency by utilizing big data to make accurate inventory predictions and optimize warehouse layouts. Collaborating with the Chinese electrical appliance manufacturer Midea, JD was able to provide an example of how digitalization and intelligence can help a company achieve more cost-effective operations. By working together in inventory forecast, procurement, and fulfillment, the automatic ordering process in the warehouse has improved from 10% to 30%, inventory turnover days for refrigerators were reduced from 45 days at the most to only 28 days, and transportation allocation optimization of refrigerators between warehouses has saved nearly US$1 million.
But Richard Liu’s vision goes beyond creating solutions for a singular industry. For the company’s future development, JD hopes to leverage the digitalized and intelligent technology based on the supply chain to connect and optimize processes in order to reduce cost and improve efficiency across any and all industries. JD Digits is a tech company that uses big data, artificial intelligence, the Internet of Things, and blockchain to help financial and real economy sectors reduce costs, improve efficiency, optimize user experience, and advance business models. It serves 400 million users, more than 700 financial institutions, over 30 cities as well as several public service institutions. JD Logistics is focusing on building the Global Smart Supply Chain (GSSC) together with partners around the world. JD Cloud and AI saw the scale of its business increase by over 500% in 2019 and was recently designated one of JD’s four core businesses. Technology remains at the core of JD’s growth, and by integrating advanced technologies into its retail platform, each branch pursues the common goal of reducing industry costs and increasing efficiency for the whole society.
Within their JD Health subsidiary, JD has reconstructed the medical supply chain to better support daily needs. Their medicine procurement platform has improved the circulation efficiency of more traditional channels while also increasing the transparency of information, and has considerably helped small and medium-sized chain drugstores, clinics, and other medical institutions that are often located in fourth-tier cities overcome previous difficulties faced such as incomplete drug procurement varieties, inability to compare prices, and long procurement cycles. Using a knowledge graph-based system, they developed PharmCOO to act as an expert that pharmacists can use as a tool, taking the burden off of them to memorize large amounts of medical data and allowing them to prioritize the most pertinent information. This year, they launched a standalone app that in addition to providing valuable and pertinent information regarding the pandemic, offers the ability to have online consultations with doctors across the entire scope of the medical industry from cardiologists to psychologists. The app also aided in lessening the burden on hospitals considerably, with tens of thousands of patients being served within an hour during peak times and an average of 100,000 consultations occurring a day.
In the field of agriculture, the company’s subsidiary JD Digits is utilizing AI, IoT, robots, and edge computing to digitize traditional agriculture practices in order to help reduce costs for farmers and improve efficiency in the agricultural sector. Introducing their technology to the pig-breeding industry, it has shown promise in decreasing costs by 30% to 50%, reducing the amount of fodder needed by up to 10%, and shortening the slaughter time by five to eight days, effectively lowering costs within the industry by up to US$6 billion. Within city development, they have developed an urban computing platform that can support the construction of intelligent cities. Using AI technology, the platform has the ability to optimize emergency response systems, shortening the amount of critical time first responders and ambulances spend in traffic by up to 30% and potentially saving countless lives. It can also improve the efficiency of a city’s energy consumption by 0.5%, a seemingly small number that has the potential to reduce costs per year by billions of dollars. In addition to these examples, it also provides customized intelligence solutions to benefit the environment, transportation, and consumption amongst many other sectors.
These are just a few examples of how JD’s unique supply chain infrastructure will enable JD to optimize cost, efficiency, and experience across all industries. Richard Liu has divided the value chain for retail and consumer goods industries into ten sections: creativity, design, research and development, manufacturing, pricing, marketing, transaction, warehousing, delivery, and post-sales. In his theory, the first five sections are important to brand owners and the last five are important to retailers, so over the past decade, JD has focused on building their supply chain utilizing the last five, starting with transactions and gradually working their way toward warehousing, delivery, post-sales, and marketing. As previously evidenced this focus has resulted in massive yet effective infrastructure, and by stretching their supply chain capabilities to other industries such as health or city planning they open up the possibility of expanding to other sections of Liu’s theory such as creativity, design, research and development, manufacturing, and pricing.
Supply chain development has improved considerably in China since JD first made investments into it with its logistics network. Logistical costs have gone from 18.4% of GDP to 14.7% today, but in Europe and the United States the number is less than 10%, meaning that there is still considerable room for improvement of efficiency available. For Liu and JD, the next decade will be all about the continued development of the industrial internet and they will seek to utilize it to empower the retail economy, improve efficiency among industries, and promote environmentally friendly programs. “In the next 12 years, JD needs to leverage technology to break and rebuild business models,” said Liu.