May 25, 2021

What to expect from the JD Logistics IPO

JD Logistics
IPO
supply chain
Logistics
3 min
JD.com will launch an IPO for its delivery arm JD Logistics in Hong Kong on 28 May - here’s everything you need to know

Chinese ecommerce giant JD.com will this week float its delivery business JD Logistics on the Hong Kong Stock Exchange (HKEX). 

The public offering opened yesterday and will run until Friday 28 May, when trading begins on the Hong Kong bourse. 

JD Logistics IPO in brief

  • Where: Hong Kong
  • When: 28, May, 2021
  • Share price: HK$40.36 /$5.20
  • Number of shares: 609.2m shares 
  • Will raise: $3.16bn approx.

Set to raise $3.16bn, it will be the city’s second largest IPO since the start of the year. Shares will be priced at $5.20 (HK$40.36), according to Reuters, towards the low end of its initial HK$39.36 to HK$43.36 per share range. The shipping firm plans to sell 609.2m shares, with a further 90m shares earmarked if there is over-allocation due to strong demand.

Eight institutional investors have committed to buying $1.5bn worth of shares, or around 45% of the offering. They include Singaporean sovereign wealth fund Temasek Holdings, Softbank, and Blackstone Group. UBS is serving as a financial adviser on the listing, with Goldman Sachs, Bank of America Securities, and Haitong International Securities acting as the joint sponsors. 

The rise of JD Logistics 

Unable to find a third-party that could keep up with the speed and volume of its ecommerce business, JD.com established JD Logistics in 2007 as a separate unit to serve its growing supply chain and logistics demands. The network's first locations were based in Beijing, Shanghai, and Guangzhou. 

By 2010, it claimed to become the world’s first ecommerce company to offer next day delivery, ahead of Amazon’s two-day promise in the States. The division would remain an internal part of its ecommerce operations until 2017, when it was spun out into its own entity and began offering services to third-party retailers. In 2018 it began serving consumers with a new parcel delivery service.

Today JD Logistics covers 99% of China’s population using cutting-edge automation technology. Its network of more than 1000 warehouses have a combined footprint of approximately 21 million square metres, and are largely handled by sophisticated Automatic Storage and Retrieval Systems, robots and automated ground vehicles. Deliveries in rural areas are carried out by flying drones, while pilot schemes on select routes use self-driving trucks. The business also expanded its international presence in March 2021, opening two automated warehouses in Germany and Poland. 

Strong Q1 earnings for JD.com 

JD.com posted net revenues of $31.0 billion in the first quarter of 2021, ended 31 March. It marks a 39% increase on the same period 2020, though earnings that quarter was set against the backdrop of COVID-19 outbreak. 

Richard Liu, Chairman and Chief Executive Officer of JD.com said the company now has 500m active users across its services, and highlighted the growing importance of its supply chain infrastructure as a driver of new business and revenue. 

“JD is also increasingly the partner of choice for millions of businesses who benefit from our advanced supply-chain infrastructure to reduce costs and boost operating efficiency,” Liu said. 

JD Logistics shares begin trading on the Hong Kong Stock Exchange from 28 May. 
 

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Jun 19, 2021

Driver shortages: Why the industry needs to be worried

Logistics
SCALA
supplychain
Brexit
Rob Wright, Executive Director...
4 min
Logistics professionals need urgent solutions to a shortage in drivers caused by a perfect storm of Brexit, COVID-19 and compounding economic factors

While driver shortages are a global problem, with a recent survey from the International Road Transport Union suggesting that driver shortages are expected to increase by 25% year-on-year across its 23 member countries, the issue has very much made itself felt for UK businesses in recent weeks. 

A perfect storm of factors, which many within the industry have been wary of, and warning about, for months, have led to a situation wherein businesses are suddenly facing significant difficulties around transporting goods to shelves on time, as well as inflated operating costs for doing so. 

What’s more, the public may also see price rises as a result due to demand outmatching supply for certain product lines, which in turn brings with it the risk of customer dissatisfaction and a hit to brand and stakeholder reputation. Given that this price inflation has been speculated to hit in October, when the extended grace period on Brexit customs checks comes to an end, the worst may be yet to come.

"Steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole"


That said, we have already been hearing reports of service interruption due to lack of driver availability, meaning that volumes aren’t being transported, or delivered, to required schedules and lead times. A real-world example of this occurred on the weekend of 4-6 June with convenience retailer Nisa, with deliveries to Nisa outlets across the UK affected by driver shortages to its logistics provider DHL.

But where has this skills shortage stemmed from? 

Supply is the primary issue. Specifically, the number of available EU drivers has decreased by up to 15,000 drivers due to Brexit alone, and this has been further exacerbated by drivers returning to their home country during the COVID-19 pandemic, as well as changes to foreign exchange rates making UK a less desirable place to live and work. This, alongside the recent need to manage IR35 tax changes, has also led to significant inflation in driver and transport costs.

COVID-19 complications have also meant that there have been no HGV driver tests over the past year, meaning the expected 6,000-7,000 new drivers over the past year have not appeared. With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended.

It is little surprise, therefore, that the Road Haulage Association (RHA) earlier this month became the latest in a long line of industry spokespeople to write to the government about the driver shortage for trucks. The letter echoed the view held by much of the industry, that the cause of this issue is both multi-faceted and, at least in some aspects, long-standing. 

So, many in the industry are in agreement as to the driving factors behind this crisis. But what can be done? 

Simply enough, outside of businesses completely reorganising their supply chain network, external support is needed. In the short-term, the government should consider providing the industry with financial aid, and this can also be supported more widely with legislative change. 

Specifically, immigration policy could be updated to place drivers on the shortage occupations list, which would go some way towards easing the burden created by foreign drivers returning to their home countries. Looking elsewhere, government should also look for ways to increase the availability of HGV driver tests after the blockage created by the coronavirus lockdowns.

Looking more long-term, steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole. As it stands, multiple sources suggest that the average age of truck drivers in the UK is 48, with only one in every hundred drivers under the age of 25. We must therefore do more to increase the talent pipeline coming into the industry if we are to offset more significant skills shortages further down the line. 

On the back of a turbulent year for the supply chain industry, it has become increasingly clear that the long-foretold shortage of drivers is now having a tangible and, in places, crippling effect on supply chains. 

Drivers, and the wider supply chain industry, have rightly been recognised for the seismic role they played in keeping the nation moving and fed over the past year under unprecedented strain. If this level of service is to continue, we must now see Government answer calls to provide the support the sector needs, and work hand-in-hand with the industry to find a solution. If we do not see concrete action to this effect soon, we are likely to be in for a turbulent few months. 
 

Rob Wright is executive director at SCALA, a leading provider of management services for the supply chain and logistics sector

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