The world’s first logistics firm to become a unicorn at Series A is a model of innovation in China. More overseas growth is next
It counts Amazon, Alibaba and JD.com, the world’s biggest e-commerce players, as among its customers. But little was known about YH Global, the supply management firm chosen by the online giants to support their logistics operations in China – which are critical to ensuring the fastest, cheapest shipping and delivery for all that online shopping.
Then in September 2017, YH Global became the first logistics company in the world to reach unicorn status with just a Series A round of financing. It raised RMB 1.2 billion (about US$188.3 million) at a valuation of over US$1 billion, from venture capital firms like Stone Capital and the conglomerate Grandland Holdings.
The figures of the deal may seem staggering, but YH Global is the leader in integrated supply chain management in China. The third-party manager controls over 3.3 million square meters of logistics and warehouse space spread over 8 major locations and 114 other smaller centers across the country. Overseas, it has a network spanning much of Southeast Asia, Russia, and parts of the Middle East and Europe – the same area mapped out by China in its multi-trillion-dollar One Belt, One Road trading and development project for the 21st century.
And increasingly it’s making its warehouse space “intelligent”. Employing big data, sensor and cloud technologies, YH Global automates processes like sorting, and enables related information to be accessed and decisions made remotely, via the Internet.
“In the Industry 4.0 era, the innovation of supply chain management is the future,” one of YH Global’s investors, Yonghua Capital, said in a statement announcing the funding. “Those companies with the ability to consolidate supply chain capabilities will become the great corporations of tomorrow.”
“Longest” supply chain
YH Global was founded in Shenzhen, China’s largest port after Shanghai, in 1997. Back then, thanks to the government’s Reform and Opening-up policy, the local logistics sector was riding on the back of the booming international trade economy.
At the time, the supply chain comprised a limited number of profit sources, e.g., transportation, storage, customs clearance, delivery, sales. Still, a large number of logistics enterprises were crowding and competing against one another in each segment, getting at best only a small share of the spoils.
In 2005, YH Global realized there might be a better way of doing things. The company introduced its integrated supply chain management model, which came to shape the direction of modern logistics in China.
The integrated model gave YH Global the “longest” supply chain in the industry. By providing one-stop supply chain management services, logistics processes got streamlined – something lauded by clients who benefited from the ensuing lower costs and greater efficiency. This in turn contributed to YH Global’s rapid growth.
Philips, for instance, handed its supply chain to YH Global in 2004, who helped its new customer achieve a new sales record – a 35% year-on-year surge – one month after the first integration. YH Global then took over all intermediate processes as well – from factories to end customers – and, in 2005 became Philips’s general distributor in China.
Adding to its bag of tricks
To further solidify its hold on the logistics market, YH Global came up with short-term financing for its customers. Since its primary clients are multinationals with strong credit profiles and hence, low risk “borrowers”, YH Global pays for all their business processes in advance. This, it finds, helps it to retain existing clients and attract new ones.
“We help clients solve funding problems through procurement and distribution implementation, thus shouldering more responsibility in the supply chain. That’s what banks couldn’t do, and neither could traditional logistics companies,” YH Global founder and CEO Zhang Quan has said. He was named Entrepreneur of the Year China by consultancy EY (Ernst & Young) in 2017.
In 2014, YH Global launched the “supply chain platform for e-commerce coordination,” which helped it attract the country’s biggest players, JD.com and Alibaba.
Also in 2014, it set up the Intelligent Supply Chain Research Center in conjunction with Cambridge University. The Center has since created new IT infrastructure that has allowed YH Global to improve its management and operations across e-commerce, supply chain and logistics fields.
Meanwhile, the Chinese state and municipal governments have voiced their support for YH Global. Its “C2B + DIY” model introduced in 2016 to build a demand-driven supply chain and promote the industry’s transition to Industry 4.0 was recognized by the Ministry of Commerce as a model of innovation for companies, amid China’s structural reforms to transform the economy into a demand-driven one.
Today, YH Global is the world’s largest third-party supply chain management provider, processing about 20 million parcels daily.
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