Fives eyeing China's logistics equipment market
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E-mail China Daily, November 30, 2015
A leading French engineering company is tapping into China's booming e-commerce market by selling energy-saving technology to logistics firms.
Fives Group, which designs and supplies machines, process equipment and production lines for the world's largest industrials, has rolled out small power-generating wheels for conveyor belts.
"Once the conveyor belt is moving, our supporting wheels start to generate power," Frederic Sanchez, chairman of Fives, said.
"The technology can keep an automated sorting system running when there is a power outage and help reduce electricity consumption by 20 percent."
The wheels are part of an automated logistic system that Fives, which employs 8,000 staff and operates in 30 countries, hopes will revolutionize a key part of the e-commerce sector.
Earlier this month, the company signed a deal which will eventually be worth about 200 million yuan ($31.3 million) with JD.com Inc, the second-largest online retailer in China.
Under the agreement, Fives plans to help JD.com build two smart logistics centers in Beijing and Kunshan, a city in Jiangsu province, and equip them with automated sorting lines.
"Our conveying belts can travel at 2.6 meters per second, which will enable JD.com to sort 36,000 parcels an hour in its new Beijing facility," Sanchez said. "This is far more efficient than manual sorting."
Fives' decision to expand its presence in China is hardly surprising. Logistics operations, including express delivery companies, are experiencing explosive growth due to the e-commerce boom. Speed has become a priority in sorting and delivering millions of packages a day.
"The courier industry in China is far less automated than that of other countries," Xu Yong, chief consultant for the express and logistics website cecss.com, said. "These companies are reluctant at first to make initial investments because automated equipment is pretty expensive."
An automated sorting system for a large operational center can cost up to 100 million yuan ($16 million), an industry resource expert said, without wishing to be named.
But rising labor costs are increasing demand for logistics systems. JD.com already runs a large operational center in Shanghai, where machines are humming every day.
"Chinese firms are stepping up efforts to upgrade centers and warehouses," Xu said. "The demand for advanced automatic equipment is growing fast."
Naturally, this presents commercial opportunities for equipment makers such as Fives Group, which sees China as one of its largest markets.
Last year, the company's sales revenue here was about 60 million euros ($64.2 million).
For the financial year that ended in December 2014, Fives reported global sales worth 1.56 billion euros.
"Logistics equipment will be one of our two most promising businesses in China," Sanchez said. "Despite the economic slowdown, huge opportunities exist as the country is encouraging traditional industries to embrace technology."
But Fives faces tough competition from rivals such as Dematic Group in Germany.
"Most automated logistic equipment is imported because companies in developed countries have advanced technology and more patent products," Tan Naixun, an analyst at Analysys International, a Beijing-based Internet consultancy, said. "Still, Chinese peers are making progress."
To expand its China footprint, Fives has launched new conveyor belt technology for logistics companies here. GENI-belt, as it is known, can process parcels of different sizes and shapes on the same sorting line.
"The deal with JD.com only marks the beginning of our ambition in China," Sanchez said. "As online shopping becomes increasingly popular in rural areas, we can tap into even more opportunities."
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