Click to read the original text for details Front warehouses, as the closest existence to consumers, are not only diverse in form but also must be shared. Enterprises reduce logistics costs every year, while logistics practitioners, especially drivers, face increasing living costs in cities each year. This is inherently a contradictory proposition. Deep cultivation in vertical fields, no matter how much efficiency is improved or how extreme it is, can hardly balance this contradictory reality. I remember writing an article last year titled "The Next Chinese Richest Person Will Come from Same-City Distribution." Now, nearly a year has passed, and I am even more certain that the same-city distribution field will see explosive development in the coming years. In the second half of this year, the three major brands in the same-city distribution platform—YunNiao, YiHuoDi, and Kuaigou Dache (formerly 58 Suyun)—have all undergone internal adjustments, showing that their business expansion is becoming increasingly difficult and that they are hesitant about the existing models. During the "618 Grand Promotion" in the first half of this year, compared to previous years, Tmall and JD.com's online sales increased year-on-year, but the volume of goods processed by logistics stations in various cities decreased year-on-year. In the past, the transfer station delivery that used to take a week to complete was finished in just 2 days this year. Taking JD.com as an example, as of 24:00 on June 18, the cumulative transaction amount over 18 days was 159.2 billion yuan, a year-on-year increase of 33%. In previous years, such a large volume would take at least a week or even half a month to digest. But this year, 90% of JD.com's self-operated orders were delivered on the same day or the next day. Moreover, the urban distribution, which had always been very painful in previous years, resumed normal shifts by June 20, with all promotional orders fully digested. In addition to factors such as improved logistics equipment and pre-stocking of goods, this year, most of Tmall's online orders were shipped from RT-Mart stores, while JD.com's orders were shipped from Walmart. This shows that the addition of front warehouses can indeed improve logistics efficiency and service. Based on the above three points, and combined with the current layout of some giant companies, I believe that the era of full-process integration of same-city logistics has arrived. Only through the integration of the entire same-city logistics process can we reduce logistics costs while effectively increasing the income of logistics practitioners and improving logistics efficiency and service. As can be seen from the above figure, in the field of distribution, various markets and brands have already formed; but in the field of warehousing, there are not yet many brands involved or operating, let alone brands that have successfully integrated warehousing and distribution. Many people talk about "cutting out the middle links." Theoretically, without front warehouses and last-mile delivery, shipping directly from urban warehouses would only require the cost of one link—urban distribution—saving the costs of front warehouses and last-mile delivery. Thus, logistics costs could be greatly reduced. However, those who have worked in FMCG should know that the cost of distribution is far greater than the cost of warehousing. Warehousing is a fixed cost, while distribution involves many variables depending on delivery distance and vehicle type. I once calculated that if the volume reaches 3,000 orders, adding front warehouses and last-mile delivery would balance the overall logistics cost with direct shipping from urban warehouses; once the volume exceeds 3,000 orders, the cost with front warehouses would be absolutely lower than direct shipping from urban warehouses. Shipping from front warehouses seems to add two links—front warehouse and last-mile delivery—but in terms of distribution, the vehicle type, distance, and operational difficulty are all reduced. With very low marginal costs, logistics costs actually drop significantly. Meituan's food ingredient delivery business, which is currently struggling, will definitely set up front warehouses once its volume increases, considering cost and efficiency, especially since Meituan's rider team and system are already very mature. Below, I use a diagram to illustrate the changes in efficiency and cost of Meituan's model under the front warehouse model. Front warehouses, as the closest existence to consumers, are not only diverse in form but also must be shared. This is not only because the rent costs in various residential areas are relatively high, but also because a single warehouse alone is difficult to create stickiness with consumers, making it hard to turn this cost center into a profit center. As can be seen from the above figure, many logistics giants are laying out front warehouses and last-mile delivery, and their front warehouse choices are basically in the form of convenience stores/supermarkets: supplying goods to convenience stores to solve their procurement problems; while convenience stores make money by selling goods, they also become the shipping ports for the giants; with online sales and offline delivery, the giants and convenience stores ultimately share the profits. So, for giants, turning front warehouses from cost centers into profit centers is essentially a matter of volume and time. Once front warehouses break even, stable cargo volume means controllable urban distribution routes, and then the reduction in logistics costs becomes a matter of optimizing urban distribution routes. Based on the above description, with the goal of reducing enterprise costs while increasing driver income, I have the following ideas, and I welcome industry experts to exchange and advise: 1) The current awkward situation in the logistics industry—where enterprises reduce logistics costs while logistics practitioners' living costs increase—can only be solved by giants or platform companies. Once this problem is solved, the platform companies will ultimately receive equivalent returns. 2) With cargo sources as the entry point, as discussed earlier, the establishment of front warehouses is closely related to order volume. Taking food ingredient delivery as an example, if Meituan alone cannot meet the volume requirement, what if we add Meicai? If the two companies are delivered by the same company, not only can delivery efficiency and service be improved, but ultimately logistics costs will also see a considerable reduction. This is also the "unified warehousing and shared distribution" that the logistics industry has always mentioned, which, from the spatial dimension, increases driver income while reducing logistics costs. 3) In addition to the spatial dimension, from the temporal dimension, it is also possible to effectively reduce costs while increasing driver income. Again, taking Meituan's food ingredient delivery business as an example, its warehouse usage time is basically from 23:00 at night to 5:00 the next morning. The delivery time for the first shift is 6-8 o'clock, and the second shift is required to be completed before 11 o'clock. However, companies like Xian Shiji that do convenience store delivery mostly use warehouses from 5:00 in the morning to 12:00 noon, with delivery times basically from 9:00 to 21:00. The times can be staggered and continuous, and the vehicle types are basically the same. As long as the warehouse locations are chosen to complement each other and reduce empty driving time, it is entirely possible for the same group of drivers to deliver for both businesses. If enterprise logistics costs drop by 20%, and drivers earn 20% less per order, but do two orders a day, their income would still be far higher than the current one order per day. However, the prerequisite is the reasonable layout of front warehouses. This is the "multi-shift delivery" model I proposed, which, from the temporal dimension, increases driver income while reducing logistics costs. 4) In addition to the spatial and temporal dimensions, cross-border operations can also reduce enterprise logistics costs while increasing driver income. Out of professional instinct, I chat with drivers every time I take a taxi. Summarizing the drivers' experiences, I found that drivers for Didi, Shouqi, and Shenzhou, given Hangzhou's consumption level, if they work 14 hours a day, their monthly income is basically around 8,000-10,000 yuan, with an average daily net income of 330 yuan, of which more than 50% comes from the morning peak. If these drivers start hauling goods from early morning, delivering express transfer station business (ending before 5:30), and then carrying passengers during the morning peak and morning, then according to my calculations, drivers working 10 hours from 1:00 AM to 11:00 AM would earn more than they do now as pure ride-hailing drivers. 5) Driver crowdsourcing. In logistics distribution, labor costs are always the largest cost. Currently, many new energy vehicle leasing companies have emerged. For distribution businesses with relatively stable routes and volumes, if urban distribution companies lease vehicles from new energy companies and then recruit drivers through crowdsourcing, this approach might also help companies reduce costs. Moreover, some delivery scenarios have peak periods on Saturdays and Sundays. For drivers who want to earn some extra money on weekends, their expected income is definitely lower than that of full-time delivery drivers. For scenarios requiring small vehicle delivery, can truck manufacturers launch a dedicated vehicle for both people and goods? For example, at night, the rear seats can be removed to carry goods, and during the day, after cleaning and reinstalling, it can carry passengers. As long as safety and hygiene are handled properly, it is not impossible. Many current last-mile delivery companies are experimenting with drone delivery, and intercity distribution is even using autonomous driving technology. This article mainly discusses the importance of front warehouses in the same-city chain and explores models to reduce enterprise costs while increasing logistics practitioners' income. Other technological attempts and models are not discussed one by one. If you are interested in these topics or in models that switch from logistics to commercial flow, feel free to leave a comment for discussion. From October 23 to 24, during the Autumn Sugar and Wine Fair, the "2018 FMCG Urban Distribution Logistics Conference" hosted by New Distribution will be held. We will invite industry experts, FMCG warehousing and distribution specialists, and distributors who have transformed to unified warehousing and distribution platforms to discuss and answer questions about the future development trends of FMCG urban distribution logistics and practical cases of distributor transformation to unified warehousing and distribution, under the theme "New Distribution, New Urban Distribution." We hope it will bring you different inspiration and thinking! The specific meeting topics are as follows: List of Participating Companies In no particular order Hunan Zonglan Diandan Network Technology Co., Ltd. Jingbang (Wuhan) International Freight Forwarding Co., Ltd. Mengniu Dairy Qinghai Hanxiang E-commerce Co., Ltd. Unilever Service (Hefei) Co., Ltd. Shanghai Branch Huicong Hunan Xuanang Food Co., Ltd. Guangzhou Tongdaoren Information Technology Co., Ltd. Qingdao 888 Trading Co., Ltd. Uni-President Enterprises (China) Investment Co., Ltd. Hunan Province Zhongxiang Gongpei Logistics Co., Ltd. Shenglong Ingredients COSCO Shipping Logistics Warehousing and Distribution Co., Ltd. Guangxi Yongpai Wine Industry Co., Ltd. Shangqiu Kangrong Trading Co., Ltd. Jinan Dingzhong Economic and Trade Co., Ltd. Liaoning Bimai Agricultural Technology Co., Ltd. Kunming Xiongjia Trading Co., Ltd. Shaanxi Houheng Trading Co., Ltd. Guangzhou Dingwo Enterprise Information Consulting Co., Ltd. Shaodong Jiajiale Commercial Firm Boda Trading Industrial Bank Changsha Branch Wuhan Muchen Convenience Store Chain Co., Ltd. Fujian Fuxing Yuncang Logistics Co., Ltd. Guizhou Yilimi E-commerce Co., Ltd. Jiangxi Xiao Laoer E-commerce Co., Ltd. Jinshan Koufu Shanxi Taihang Yuanjing Supply Chain Management Co., Ltd. Shanxi Dezhun Supply Chain Management Co., Ltd. Shaoyang Tongdeli Trading (Xiangbang Logistics) Huanfu Tongda Express Urban Distribution Beijing Xinjingxiang Food Co., Ltd. Wuhan Huizhong Tianhong Wine Industry Co., Ltd. Changsha Paide Biotechnology Co., Ltd. Chaoan Tuqiang Guizhou Yihe Bopin Supply Chain Management Co., Ltd. Jiangxi Kang'en Industrial Development Co., Ltd. Xiangtan County Yisuhe Town Yuhua Paper Store Luoyang Yuanlang Trading Co., Ltd. Tongchuan Yaozhou District Huayuan Supermarket Co., Ltd. Hunan Yongfu Jiujiu Trading Co., Ltd. Zhejiang Chengchengtong Logistics Co., Ltd. Chongqing Kaiguo Materials Trading Co., Ltd. Beijing Xianmaixianmai Data Technology Co., Ltd. Hanchuan Qixing Trading Co., Ltd. Tongxin Jiuzhi Trading Co., Ltd. Guizhou Meiguo Guoguo Network Technology Co., Ltd. ...... Representatives of Distributor Transformation (Proposed) In no particular order Jiangsu Huashang Urban Distribution Network Co., Ltd. Chairman, Rong Jun Hubei Yijiaren Logistics Co., Ltd. Chairman, Wang Bo Sichuan Chengdu Xingrenxing Trading Co., Ltd. General Manager, Jiang Shuming Shandong Yunbang Warehousing and Logistics Co., Ltd. Chairman, Liu Jichen Chongqing Lingyu Consumer Goods Supply Chain Management Co., Ltd. Chairman, Tu Mingyu Guangzhou Zhongshan Wanrong Marketing Co., Ltd. Chairman, Yang Su Sichuan Bajie Supply Chain Management Co., Ltd. Chairman, Yuan Xia Hubei Pengdun Meiyitian Supply Chain Management Co., Ltd. Co-founder, Li Qiangyun Henan Xuchang Jiulegou E-commerce Co., Ltd. Chairman, Zhang Jianyong Hebei Changyi Logistics Co., Ltd. Founder, Ma Haichao Hebei (Chengde) Wulian Yuncang Co., Ltd. General Manager, Meng Yucun Xinjiang Urumqi Su'an Jinchi Logistics Co., Ltd. Chairman, Zhang Xun Jilin Sansheng Lianguo Chairman, Zhang Hailing Hebei Dunjie Supply Chain Management Co., Ltd. Founder, Qiang Huitao Hunan Damei Supply Chain Management Co., Ltd. General Manager, Liao Lei ...... -END-