9.3 The Response and Reaction of China’s
Logistics Industry Under COVID-19
In the face of COVID-19, government departments at all levels and many logistics
enterprises have taken measures to overcome the crisis together. On the one hand,
government departments have introduced relief policies to help enterprises
overcome difficulties, and resume work and production; on the other hand,
logistics enterprises have actively responded to operational difficulties and
achieved sustainable development by quickly applying new technologies, new
facilities, and innovative business models. Logistics enterprises have also assumed
social responsibility in the national anti-pandemic system and become an
important part of the national emergency relief system.
9.3.1 The Government Quickly Introduced Policies to Help the
Logistics Industry Cope with COVID-19
Since the COVID-19 outbreak, governments at all levels have introduced more than
a hundred policies to help enterprises tide over the difficulties. These policies
include fiscal, tax and financial policies for general enterprises, as well as special
support, operational guidance, and standardized development policies for the
logistics industry.
9.3.1.1 Fiscal, Tax and Financial Policies Rapidly Introduced During the Outbreak
During the pandemic control period, to ensure economic development and urban
livelihoods, governments at all levels actively introduced policies to assist
enterprises in coping with COVID-19 and sustaining development. Most of them
were closely related to the logistics industry. For example, in financial policies,
governments in Sichuan Province introduced policies on February 5, 2020 to
subsidize logistics costs for shopping malls, supermarkets, convenience chain
stores, wholesale markets, and other trade and distribution enterprises involved in
the supply of daily necessities. In tax and fee policies, since February 17, 2020, all
national toll roads have been toll-free. Vehicles of medical and healthcare
institutions and logistics enterprises assisting in pandemic control were exempted
from vehicle tax during 2020. In financial policies, on March 26, 2020, the China
Banking and Insurance Regulatory Commission issued the “Notice on Strengthening
Financial Services for the Resumption of Work and Production in Collaboration with
the Industry Chain”, to help resume work and production in collaboration with the
industry chain. The notice was designed to help industry chains explore innovative
financial service products, and encourage financial institutions to research and
develop new financial products that could serve core logistics enterprises.
9.3.1.2 Further Facilitate Customs Clearance and Improve Prevention and Control
Measures, to Strictly Reduce Transmission Risks from Abroad
During the COVID-19 outbreak phase, the General Administration of Customs
issued a series of policies to ensure the smooth functioning and flow of the foreign
trade industry chain and supply chain. These included the following measures: (1)
local customs lifted transit restrictions for the import of pandemic prevention
materials or products urgently required by enterprises to resume work and
production; (2) measures were taken for cosmetics used for disinfection and
sterilization, such as attaching Chinese labels after entry, release before inspection,
etc.; (3) support was given to agricultural and food imports, with advanced
bookings for customs clearance. Such goods would be given priority in inspection
and testing, to ensure a steady market supply. The General Administration of
Customs also required local customs to simplify clearance procedures and reduce
clearance costs. After the pandemic stabilized, cold-chain products had become a
potential channel for trans-mitting the COVID-19 virus into the country. The
Ministry of Transport also issued a policy urging enterprises to impose strict
disinfection of cold-chain logistics-related personnel and delivery equipment, and
to implement closed-loop management of highway freight drivers of cross-border
cold-chain logistics at port, operational and residential points. Customs has also
stepped up efforts to intercept unqualified materials at ports of entry, and to
further enforce health declarations upon entry, in order to strictly reduce the
transmission risks of the COVID-19 virus entering through ports.
9.3.1.3 Constructing Green Channels to Ensure Smooth Transport of Pandemic
Prevention Materials and Daily Necessities
During the COVID-19 outbreak period, the Ministry of Transport and the National
Health Commission of China jointly issued a document requiring the strict
implementation of green channels for emergency transport, ensuring that vehicles
taking part in the COVID-19 emergency were not required to stop at checkpoints,
and had priority access without needing to pay tolls. The State Post Bureau of China
raised the emergency response level to Level II at the start of the outbreak,
requiring logistics companies to establish a system ensuring uninterrupted delivery
services. At the same time, in order to ensure a daily supply of necessities during
the pandemic, the Ministry of Transport issued the “Implementation Opinions on
Coordinating Pandemic Prevention and Control and the Social and Economic
Development of Transport”, in order to fully guarantee the transport of agricultural
products and other materials for production and livelihoods, and to ensure the
normal operation of postal express and urban distribution.
9.3.2 Logistics Companies Respond Actively to Short-Term
Operational Difficulties Under COVID-19
9.3.2.1 Actively Adopting Pandemic Prevention and Control Measures, and
Creating Conditions for Work and Production Resumption
Faced with the sudden COVID-19 outbreak, logistics enterprises took measures to
guarantee and promote work and production resumption and maintain operation
services. One of the ways was by enhancing pandemic prevention measures. Many
logistics companies set up pandemic prevention teams and actively prepared
materials such as masks, protective gear, goggles, alcohol and disinfectants to
ensure the safety of their daily operations.
They also established daily inspections and safety routines for daily operations.
These include daily temperature testing for employees; setting up health accounts
and filling in employees’ health status; ensuring that transport staff wear masks
and keep the interior of their vehicles well ventilated; disinfecting the interior of
vehicles and goods before loading/unloading operations. For example, JD Logistics
implemented an emergency plan almost immediately, making daily routine checks
on its staff on duty.
In addition, the companies adopted a combination of “training + protection” to
safeguard the employees’ health during the outbreak, including actively organizing
pandemic prevention classes, raising awareness on such prevention, setting up a
COVID-19 fund for employees, and purchasing insurance. ZTO Express and YTO
Express both set up special COVID-19 welfare funds. The frontline employees of
ZTO Express could receive a maximum of 500,000 RMB in subsidies if diagnosed
with COVID-19 at work. YTO Express provided a 3-month interest-free loan of
100,000-300,000 RMB for their branches facing difficulties (The State Post Bureau
of China 2020). The head office of YTO Express also bought “COVID-19 Insurance
Policies” for all its employees, including salesmen and operators across the entire
network.
9.3.2.2 Multi-channel Financing to Ensure Daily Operations
During the COVID-19 outbreak phase, many logistics enterprises shut down work
and production. In order to help pay rental fees and employees’ salaries, certain
small and medium-sized logistics enterprises raised funds through multiple
channels to ensure survival. Their first method was to ease cash flow by means of
operations, such as (I) fully communicating with cooperative financial institutions
for credit support; (2) looking for strategic equity financing for long-term
cooperation to expand capital reserves. Their second method was to reduce
expenses by saving labor costs, such as (1) resuming work in phases and batches;
(2) laying off employees. Their third method was to reallocate assets and reduce
the proportion of fixed costs, by (1) selling assets; (2) acquiring external resources
through leasing and sharing; (3) operationally leasing large fixed assets: (4) partially
outsourcing non-essential business operations. The fourth method was to
strengthen communication with government departments and strive for
preferential policies such as financial subsidies, tax cuts, incentive funds, and
financial support to compensate for the rising costs brought by the pandemic.
9.3.2.3 Adjusting the Structure of Transport Resources to Respond
Flexibly to Structural Changes in Market Demand The COVID-19 outbreak resulted
in a decline in passenger demand and an increase in freight demand in the
transport sector. Certain integrated transport service companies, which operate
both passenger and freight transport, also quickly adjusted their passenger and
freight capacity structure to respond to the structural shift in market demand. Take
aviation transport as an example: during the outbreak, major airlines adjusted their
air cargo structure by launching preighters (passenger aircraft converted into
freighters), making transfers abroad, increasing charter flights, and adding new
cargo routes to increase air cargo capacity. For example, as of April 2020, China
Eastern increased its air cargo capacity by launching preighters twice as often as
during the same period in 2019, dispatching more than 240 international air cargo
flights a week, with preighters accounting for about 120 of them (Caacnews.com.cn
2020). Another example is China Postal Express and Logistics actively responding to
the problem of international mail and express shipments being stranded abroad
due to COVID-19. It overcame this problem by making transfers abroad, increasing
charter flights, and opening up new flight routes. SF Airlines opened additional
routes to Europe, India, and the U.S., and dispatched 210 charter flights carrying
pandemic prevention materials between February and March during the 2020
COVID-19 outbreak. China Postal Airlines opened additional routes to Russia and
Belgium and dispatched 24 charter flights carrying pandemic prevention materials
in March 2020, delivering 42,000 mail items weighing 292 tons. Similarly, YTO
Express dispatched 84 charter flights for pandemic prevention materials weighing
more than 422 tons during the outbreak (Xi 2020).
9.3.3 Large Enterprises are Actively Assuming Social
Responsibility in the National COVID-19 Crisis
9.3.3.1 Actively Serving the National Emergency Rescue and Material Security
System
Under the national emergency rescue system, transport logistics resources and
their rapid response are important factors in determining the effectiveness of the
rescue missions. The key to building a national emergency and material security
system is to ensure material availability by integrating production, reserves, and
deployment to truly achieve availability anytime and anywhere during a crisis.
Transport logistics is an important means of deploying these emergency supplies.
With the development and growth of China’s logistics industry, logistics enterprises
were actively serving the outbreak areas, participating in the deployment and
transport of emergency materials, and playing an important role in serving the
national emergency and material security system. According to a survey conducted
by China Federation of Logistics and Purchasing on 546 Grade A logistics enterprises
nationwide, more than 94% of them were willing to participate in the national
emergency logistics system (Wu 2020).
During the COVID-19 outbreak, both large state-owned and private logistics
enterprises took the initiative to fight the pandemic and ensure the efficient
operation of the national emergency and material security system. Companies such
as JD Logistics, SF.com and Jztey.com played important roles in transporting
donated medical supplies and disaster relief materials. JD Logistics accepted orders
normally, and carried out effective deliveries in nearly 300 cities nationwide in less
than 40 days during the outbreak phase, delivering 220 million units of rice, flour,
grain and oil, meat, eggs, vegetables, and milk weighing 290 kilotons to consumers
nationwide (Xinhuanet.com 2020). ZJS Express set up a “Public Welfare Support
Team for Hubei and dispatched special public welfare vehicles from different
locations to quickly transport relief materials to Wuhan.
9.3.3.2 Pooling Transport Resources to Help Support Wuhan’s Outbreak Areas
During the COVID-19 outbreak and lockdown of Wuhan, large logistics enterprises
actively responded to the national call by delivering medical supplies, vegetables,
and daily necessities to Wuhan, pooling their advantageous resources and
participating in emergency logistics to support the outbreak areas. By taking
responsibility for the industry, they contributed greatly to the fight against COVID19. China Post immediately opened a green channel for medical transport after
January 25, 2020, offering free transport and distribution services for donated
materials to Wuhan. SF.com concentrated its efforts on providing public welfare
transport for governments and charitable organizations around the country, while
its subsidiary company, SF Airlines quickly opened up many all-cargo air routes both
at home and abroad to ensure the rapid delivery of relief materials to Wuhan. JD
Logistics opened a special channel for relief materials to Wuhan from the rest of
China, and answered calls from the government and public welfare organizations
to assist the city. Cainiao.com cooperated with major logistics companies such as
ZTO Express, STO Express, Yunda Express, Best Express, and Deppon Express, as
well as overseas logistics companies, to officially open green channels, both in
China and abroad to transport domestic and overseas donated items to Wuhan for
free. Suning.com, Yimidida.com, and other major logistics companies also opened
independent green channels to ensure the smooth delivery of anti-pandemic
materials during this period.
9.3.3.3 Proactively Taking Part in Social Welfare Activities to Fight COVID-19
Besides leveraging their own capabilities to provide logistics services to the
outbreak areas, major logistics companies also donated materials to Wuhan on
their own initiative, demonstrating the social commitment of the industry. On
January 24, 2020, JD.com announced the donation of 1 million medical masks to
Wuhan, with 60,000 items of medicines and medical supplies, including hand
sanitizer, disinfectants, amoxicillin, oseltamivir, etc., to be sent in batches to local
warehouses near Wuhan. An internal policy of allowed managers to donate
supplies from nearby warehouses to an emergency disaster area within China
without having to report it. On January 26, 2020, China Post Group Limited
announced its decision to donate 20 million RMB to Wuhan to support the city in
its fight against COVID-19. On the same day, SF Express also announced that they
were donating 20 million RMB to purchase medical supplies, masks, protective
gear, disinfectant, goggles, and other urgent relief materials. Two special SF Express
flights would be delivering these donated resources to Wuhan.
9.3.4 Accelerating “Informatized” and “Fully Unmanned” New
Technologies and New Facilities
9.3.4.1 Unmanned Technologies and Facilities Have Become the New Focus of
Government and Logistics Enterprises Alike
In recent years, governments at all levels have repeatedly issued important
documents on developing logistics technology, and many logistics enterprises have
actively applied suitable new technologies to improve their logistics operations. As
new technology revolution picks up pace, new technologies represented by
information technology are driving the industry’s upgrading continuously. A
systematized smart logistics system is taking shape in China.
Faced with the sudden COVID-19 pandemic, many logistics enterprises have begun
exploiting the new technology applications, constantly adapting to the new
situation and new needs under the pandemic. Government departments also
introduced policies to encourage the application of such new technologies by
enterprises. The main focus of these enterprises is to significantly improve
unmanned operation capacity in warehousing, distribution, and emergency
dispatch. For example, JD Logistics now relies on the deep learning algorithms, and
other technologies to improve its logistics operational efficiency. First, the
company has realized “goods-to-person” picking in warehouses; second, it has
prioritized picking of medical orders; third, its system can intelligently plan
transport routes and precisely dispatch vehicles to ensure a daily supply of
materials and necessities during the outbreak. Almost immediately after JD.com
announced that it was donating medical supplies to Wuhan, the first batch was
delivered to the frontline in just seven hours. During the lockdown period, an
unmanned vehicle was deployed by JD.com to make the first deliveries to Wuhan
No. 9 Hospital, where the outbreak was more serious, and to its neighboring
districts. The unmanned vehicle could complete about 70% of the service orders
within these districts.
The government has further advanced its “New Infrastructure” strategic
deployment and implementation encouraging the logistics industry to develop
smart innovative logistics. New Infrastructure investment and construction
includes 5G infrastructure, ultra-high voltage, high-speed intercity rail express and
rail transport, charging pillars for electric cars, big data centers, artificial
intelligence, industrial Internet, and other major technological fields. Most of these
technological fields are closely related to informatized or unmanned logistics. By
further promoting New Infrastructure, the overall technology level of the logistics
industry has improved, providing technical support for logistics operations during
the COVID-19 outbreak.
9.3.4.2 A “Transparent” Technical Facilities System with Full Tracking Capability
is Gradually Being Perfected
During the COVID-19 outbreak, the ability to track cargo throughout the logistics
process became an important concern for customers of logistics enterprises. The
visualization and transparency of the entire operating process soon became a
common demand of the entire logistics industry. On the one hand, there may be
COVID-19 cases in many areas, resulting in traffic restrictions and production
shutdowns, which will in turn lead to disruptions in the supply chains and changes
in logistics routes for the related enterprises. Enterprises need a transparent
information system to understand the real-time operational situation so that they
can quickly respond to unexpected problems. On the other hand, enterprises need
to make rational demand forecasts and contingency plans during the pandemic and
obtain enough big data, which in turn needs to be supported by a complete,
visualized IT system. Real-time recording of every procedure during COVID-19 can
offer precise tracking and close contact isolation after an outbreak. This can help
decision-making and emergency support for the whole community in pandemic
control.
One example is Imdada.cn’s “Canggiong” smart big data logistics platform, which
uses trillions of information accumulated over the years as its basic database,
offering support for a smart ordering, distribution, capacity control system for
supply and demand. Tt can also record and analyze the stores, equipment,
commodities, customers, etc. that each rider has come into contact with in real
time. If there is a sudden COVID-19 outbreak among delivery riders, the system can
offer case data to help pandemic control at any time. Its stable and high-quality
services have won the trust of many customers. In June 2020, Dada Group was
officially listed on NASDAQ, becoming the first Chinese “crowdsourcing” logistics
company listed on the stock market.
9.3.5 Logistics Enterprises Actively Innovate Their Operational
Methods and Business Models
9.3.5.1 Innovating Logistics Operations Such as Contactless Delivery and
Community Group Buying
Due to the impact of COVID-19, in order to minimize the risk of infection caused by
human contact in logistics delivery, express delivery, instant delivery, and other
consumer logistics systems have innovated a “contactless” model for terminal
logistics delivery. “Contactless delivery” marks a change in the traditional face-toface logistics delivery, placing goods at designated pickup points for customers,
thus reducing direct contact between logistics operators and customers and
effectively minimizing the transmission risks. “Contactless delivery” was one of the
main delivery methods for e-tailing before the pandemic. During the COVID-19
outbreak phase, Meituan.com, an instant logistics company, took the lead in
offering “contactless delivery” (Sohu.com 2020c). “Contactless delivery” soon
began to be more widely applied in different market segments of the logistics
market. “Contactless delivery” mainly operates through contactless shelves, smart
mail-boxes, unmanned delivery vehicles, drones, and customer-designated outlets
(such as the entrance to a district or a front desk) without requiring any physical
contact. Smart mailboxes emerged as an important carrier of “contactless” express
parcels at logistics outlets during the outbreak. According to the statistics of the
State Post Office, China had around 406,000 smart mailboxes in 2020, and
deliveries to smart mailboxes accounted for 10% of total express mail. SF Express’s
“Fengchao™ smart mailboxes not only provide self-collection services and express
delivery, but also allow fast food deliveries in cabinets in Hubei Province and other
outbreak areas, achieving integrated, contactless, “instant express” deliveries to
further reduce direct contact between consumers and logistics operators. COVID19 has, to a certain extent, accelerated the use of small community “lastKilometer” delivery hubs (mainly unmanned smart mailboxes and manned poststations), further reshaping the ways consumers receive express deliveries. During
the outbreak, most people were isolated at home, and “contactless delivery”
became very popular and the preferred method for express pick-ups. Even after
the outbreak stabilized, this habit, formed during the outbreak, gradually became
one of the three preferred modes of home delivery in urban areas: namely, doorto-door delivery, smart mailboxes, and post-stations. The three modes have met
the diversified needs of different consumers. In addition to “contactless delivery”,
new logistics operations emerged during to support community group buying, fresh
food retail, and other business models. Most of these modes of operation can
quickly distribute daily necessities and fresh agricultural products in the form of
FDCs, with many community leaders’ houses. fresh food chain stores, property
gatehouses, and express outlets rebuilt into small or medium-sized community
warehouses and distribution centers. These new “community-level” distribution
hubs have reduced personnel contact, increased logistics operations, and lowered
the cost of logistics operations for fresh products.
9.3.5.2 Integrated Online and Offline Consumption has Led to Logistics Business
Innovations
Under COVID-19, household consumption, once dominated by traditional
agricultural markets and large supermarkets gradually transformed into a mixed,
multifaceted “online and offline” model. Accordingly, traditional consumer logistics
is also moving from a “store delivery” model for merchants to a hybrid “store +
home delivery” model for merchants and consumers. Home quarantine, as a result
of has further restrained offline household consumption. Logistics companies
began to adopt innovative business models that promote consumer logistics. For
example, during the initial COVID-19 outbreak, which started around Chinese New
Eve and lasted for the subsequent six days, many brick-and-mortar stores were
closed, but online orders for fresh fruit, vegetables, and frozen foods were four to
nine times those during the same period the previous year. New 020 hybrid models,
including livestream shopping, community group buying, food and beverage
deliveries, and fresh produce retail were accepted by more and more consumers
during this period. Consumer logistics for household products continues to grow,
leading and driving business innovation in home delivery logistics. New business
models have also emerged for consumer logistics, such as express co-delivery and
errand purchasing.
9.4 Outlook on the Development of China’s
Logistics in the Post-COVID-19 Era
The impact of COVID-19 on the global economy and society will be lasting and
profound. China’s logistics industry needs to gradually adapt to the “new normal”
of COVID-19, and be prepared to fight a protracted war, seizing this great historical
period when China is advancing high-quality economic development and building a
new development paradigm, to adapt its development strategy and turn the
challenges of COVID-19 into development opportunities.
9.4.1 The Increasing Importance of Logistics in the National
Economy and Social Operation
Modern logistics is a fundamental, strategic, and pioneering industry of the
national economy. Logistics networks provide natural support for emergency
disaster relief, while large logistics enterprises are capable of playing a greater role
in this area, and taking on more strategic and social responsibilities for the country.
During the COVID-19 outbreak, China’s large logistics enterprises made important
contributions in responding to the pandemic with their nationwide networks,
showing their social responsibility to the public. Thanks to the crucial position and
role they play in the national economy and social operations, logistics enterprises
have received much attention from the government and the public. As the industry
develops and society progresses, the logistics industry will further integrate into
the national emergency relief system, and contribute more to the country in the
terms of humanitarian aid, social welfare, low-carbon environmental conservation,
and job creation.
9.4.2 COVID-19 Has Accelerated the Global Supply Chain
Reconfiguration, As Regional Logistics Markets Make Profound Adjustments During
the COVID-19 outbreak, the global supply chain was disrupted on a major scale,
and core supply chain enterprises began adjusting their supply chains to improve
the emergency response capability and elasticity of these chains. Along with the
adjustment of global supply chains, the demand and supply structure of major
regional logistics markets is also undergoing profound adjustments. The spatial
configuration of global logistics demand may be moving toward localization and
regionalization. The original spatial structures of major logistics hubs, channels, and
supply chains are facing different degrees of re-adjustment. In order to respond to
the call to build a new development paradigm and strengthen cooperation with the
ASEAN, Asia, Africa, and other countries in the “Belt and Road Initiative”, Chinese
enterprises are also readjusting and reconfiguring their global supply chains and
resources. Logistics enterprises will actively cooperate with customer enterprises
to deploy their resources and capabilities in a new configuration.
9.4.3 Logistics Enterprises Will Further Focus on and Enhance
Their Resilience to Risks
COVID-19 has raised concerns about the supply chain security and risk resilience of
all kinds of enterprises. The many problems logistics enterprises have faced during
COVID-19, in capital, personnel, road access, and business operations, have also
prompted more enterprises to start paying attention to the need to respond
adequately to emergencies and promote sustainable business operations. At
present, there are still many uncertainties in the global economic, political, social,
trade, and natural ecology fields. The rapid development of technology and
changes in customer demand are constantly altering the market environment, so
logistics companies must continuously enhance their risk resilience capabilities.
9.4.4 Contactless Commerce is Becoming More Widespread,
with Intelligent Facilities Increasingly Used
Contactless commerce refers to the widespread use of modern information
technology and artificial intelligence to offer a carrier and platform for human
production, distribution, interaction, and consumption, realizing transactions
without physical contact in an entirely contactless commercial process. E-tailing,
TV shopping, live-streaming, micro-business, community sales, and unmanned
vending machines are all basic forms of contactless commerce, offering new modes
of transaction, transforming traditional face-to-face transactions, and breaking
through the limitations of time and space. Business, capital, and information flow
in contactless commerce are relatively easy to realize, both on the Internet and in
its trait of non-physical contact. Logistics, which is the final delivery point of
business activities, is the one difficulty faced by contactless commerce. To enhance
consumer experience, the transformation to contactless logistics needs to be
supported by “New Infrastructure”. COVID-19 has driven the development of
contactless commerce globally, and logistics companies have increased investment
in automated and smart facilities to reduce labor costs and staff gathering. The
proportion of unmanned or reduced personnel logistics-based warehousing,
sorting, distribution, and delivery services in China’s logistics industry is set to
increase. Facilities such as smart delivery robots, automated parking lots, smart
vending machines, and smart mailboxes will become even more widely used. In the
future, the Chinese government and logistics companies will continue to promote
the use of intelligent logistics facilities and equipment, further supporting the
development of more contactless businesses.