2021-09-22

Warehouse Automation in China: Intelligent Solutions for a Growing Market

China is increasingly developing into a leading industrial nation. The economy is growing rapidly, and nowhere else in the world is e-commerce developing as quickly as here. But what does that mean for companies in China? How are they reacting to the enormous pace of growth and what do they need to be prepared for? In our interview, automation experts Chen Xiaochun, Senior Director Mobile Automation Linde MH (China), and Duan Chengwei, Senior Solution Consultant at Dematic China, talk about automation trends and rising demands in China and their most successful projects to date:

What impact are rapid economic growth and increasing productivity in China having on the companies producing goods there?

Chen Xiaochun: China has seen huge development in the past two decades including in terms of prosperity. The average annual salary in China increased almost tenfold between the years 2000 and 2019. Labor costs are also rising in line with this. Demographic change is also noticeable in China, making it increasingly difficult to recruit young talent, which has led to a local skills shortage. In order to secure long term growth, the government has launched its “Made in China 2025” strategy [see Infobox]. High-tech sectors are receiving strong support. The result is that many companies are beginning to embrace automation, including in intralogistics.

China is the world’s largest e-commerce market. To what extent are online orders changing warehouse logistics in China?

Duan Chengwei: “Online orders and the fact that customers expect to receive their orders as quickly as possible are leading to an ever greater demand for highly efficient warehouse logistics in China. The rapid development of China’s information and network technology has already created the necessary conditions for smarter automation. This is now increasingly being implemented.”

Chen Xiaochun: “Against the macroeconomic background of Industry 4.0 and ‘Made in China 2025’ there are three driving forces for the fast growth of the Chinese automation market: rapid technological adaptation, adequate return on investment through cost optimization, and a strong penchant for all things digital among corporate customers. The government’s assistance measures are also having a positive impact on the trend toward automation.”

Staying with e-commerce, what special challenges are there in China?

Duan Chengwei: “There are two key challenges for merchants: Firstly, they have to deal with online and offline sales channels at the same time; secondly, during peak times, such as large online shopping events in China like 11/11, they have to simultaneously handle orders and returns quickly and efficiently. Stocks for e-commerce and in-store trade are generally still kept separate. This is not the case at Dematic. As an intralogistics specialist, in China we prefer to use the same warehouse for both business models. This means a higher utilization rate for the facilities and greater working efficiency.”

Is Dematic a pioneer in integrated warehouse usage in China?

Duan Chengwei: “Yes, we are helping to lead the way in this area. We have already successfully completed several major projects, such as a system for well-known Chinese clothing brand Bosideng. The retail outlets’ logistics channels, the e-commerce handling and the returns and exchanges were all fully integrated into this system.

And what is the situation with industrial trucks?

Chen Xiaochun: “Our automation business focuses on end-to-end solutions for mobile robots in the field of industrial applications. Furthermore, users are showing great interest in solutions in the areas of simultaneous localization and mapping (SLAM) and outdoor navigation. One example of an integrated solution is one of our systems which is in use at large domestic packaging company HOTEL-STAR. This system combines very narrow aisle (VNA) trucks and autonomous mobile robots from Linde China.”

What opportunities and challenges are to be expected in the future?

Duan Chengwei: “Cost pressure will continue to increase, so we need to continue to automate and increase the efficiency.”

Chen Xiaochun: “And there’s a lot of room for us to grow here: In 2020, the market for driverless transport systems stood at just 0.6 percent. This means there is huge growth potential for the future. But the competition never sleeps. There are now more than 300 providers on the market for mobile robots in China, and this number will continue to grow. This means that competition will continue to intensify for both technology and price. Chinese customers are fascinated by the speed of technological change. This is forcing us to further optimize solutions, push on with research and development and use agile processes. Only in this way can we make further inroads into the Chinese market.”

Made in China 2025

In 2015, the Chinese government launched a major initiative under the name “Made in China 2025”. The aim is to transform the Middle Kingdom into a producer of high-tech goods in the coming decades. With billions invested as part of this master plan, the People’s Republic is aiming to become a market leader in a number of important sectors crucial to the growth of many industrial countries. These include information technology, computer-operated machines, robots, energy-saving vehicles and medical devices, as well as high-tech equipment for aerospace applications, and sea and rail transport.

Dematic in China on a clear path of growth

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