2023 Edelman Finalist JD.com
Socially Responsible Planning Strengthens Supply Chain Capability: Operational Excellence, Resiliency under Disruption and Value Creation for the EcosystemARVE Error: src mismatch
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Supply chain management is facing tremendous challenges these days, with exploding customer demands, evolving fulfillment channels, extremely extended supply networks, and sophisticated technologies to be deployed. JD.com, China’s largest retailer and leading supply chain-based technology and service provider, operates a vast in-house logistics network of approximately 1,400 warehouses, containing various nodes and links and over 10 million self-operated stock-keeping units (SKUs). Over 90% of JD’s retail orders can be fulfilled within 24 hours.
The diverse customer base, expanding product variety, and higher service expectations present new inventory management challenges for JD.com. Additionally, the lengthy supply chain, with numerous intermediaries between manufacturers and consumers, limits direct access to comprehensive consumer insights. This, coupled with the bullwhip effect, leads to increased operational costs. Furthermore, the COVID-19 pandemic has exacerbated disruptions in the retail industry, affecting various stakeholders within the ecosystem.
To address these challenges, JD.com, partnered with researchers from UC Berkeley and Stanford, has developed three novel technologies: 1) end-to-end optimization, 2) consumer-to-manufacturer (C2M) model, and 3) intelligent risk management, resulting in an intelligent, integrated, and resilient supply chain to reduce operational costs, enhance efficiency, promote customer satisfaction, and ensure supply chain resilience. (Research Paper)
The uncertainty of consumer demands, the complexity of the supply chain network, and the vast volume of SKUs make inventory management a tremendously challenging task. The traditional predict-then-optimize solution framework decouples the prediction and optimization stages and misses useful information, leading to substantial forecast errors. Based on AI deep learning, JD.com’s “End-to-End Optimization” offers an optimal automated replenishment plan decision directly from input data without any intermediate steps. The end-to-end system of JD.com avoids error accumulation over the middle stages and simultaneously outputs the predictions and inventory level, thus significantly improving the calculation effectiveness and enhancing decision-making efficiency. Based on this end-to-end solution, JD.com has achieved an automated procurement rate of 85 percent, online availability of 95 percent, and 31.5-day turnover days, and has saved over 94.7 million dollars by 2022.
In addition, manufacturers cannot capture consumer preference while designing new popular products in a timely manner, given that the chain is long with countless intermediate links between the manufacturer and consumers. The traditional survey method is time-consuming and inevitably has deviations from the real ideas and concepts of consumers. In response, JD.com’s “C2M Platform,” leveraging massive data of consumers and transactions and incorporating intelligent algorithms, quantifies consumer preferences and helps manufacturers improve their overall efficiency, from product design, production and inventory planning, and pricing to marketing and sales strategies. During 2021-2022, the intelligent techniques have enabled manufacturers to reduce product launch time by 67 percent and the related transaction volume to reach 3.21 billion dollars. By providing the service to the partner manufacturers, JD.com earned 43.05 million dollars in revenues. Moreover, JD.com has distributed more than 88.78 million trial products, and the sales stimulated by the free trial programs have achieved over 90 million dollars. More importantly, the C2M project has enhanced customer welfare and benefited all players within the retail ecosystem.
From the consumers’ perspective, emergencies such as the pandemic can disrupt fulfillment due to road closures, labor shortages, and surging order volumes. The information relied on manual reports can be out of date and lose the guaranteed reliability and accuracy. Consumers can be vulnerable to severe shortages of essential products and medical supplies. JD.com’s “Intelligent Risk Management System” can detect and identify risks and disruptions even before they take place, rank their severity, and coordinate the whole supply chain simultaneously to allocate and ensure supplies catch up with demand and reach end-consumers effectively. This intelligence risk management system ensured operational flexibility, gained supply chain resiliency, and achieved customer satisfaction during the COVID-19 pandemic. The system has saved over 94.7 million dollars since its launch. It helped JD.com rank No.2 on Fortune’s 2022 Change the World List for its efforts in delivering essential supplies during the height of the COVID-19 outbreak in China.
JD.com’s socially responsible approach to implementing advanced analytics and operations research techniques has significantly strengthened its supply chain capabilities. The company has achieved operational excellence by reducing costs, improving efficiency, adapting to disruptions, and enhancing risk management. JD.com’s supply chain aspires to be the best in the industry, enhancing the welfare of all ecosystem participants and consumers.