Chapter 9 Achieving Operational Excellence and Customer Intimacy: Enterprise Applications 377 INTERACTIVE SESSION MANAGEMENT Physical Flow in Alibaba Alibaba Group Holding Limited was founded in 1999 big-data-powered data-sharing platform called the at Hangzhou, China, by 18 founders led by Jack Ma. "Cainiao Logistics Cloud" through various interfaces Its first business, Alibaba.com, is a global wholesale for streamlining the logistics operation. e-marketplace that opens a wealth of business op- Cainiao operates domestic fulfillment centers portunities for firms regardless of operation scale. dedicated to Alibaba's TMall Supermarket, serving The group provides business-to-business, business-to- numerous vendors. Storehouses and bonded ware- consumer, and consumer-to-consumer sales services houses use a warehouse management system to mainly via its web portals Alibaba.com, TMall.com, raise efficiency by optimizing stock location manage- and Taobao. com, serving both Chinese and overseas ment and minimizing honeycombing (unexhausted markets. Its core commerce businesses together space). Later, Cainiao runs new intelligent ware- generated a revenue of $53.13 billion for the twelve houses (some located at sites decided based on big months ending December 31, 2018. data) which are equipped with armies of automated China's online retail sales are expected to grow guided robots that move shelfing racks to warehouse from $1.3 trillion in 2018 to over $6 trillion in 2020. clerks following the guidance of RFID floor tags with The 552 million active consumers of Alibaba Group, instructions received through Wi-Fi, doubling the ef- growing in purchasing power, together contribute ficiency of product picking and packing and thereby to a huge demand for frictionless long-distance de- improving accuracy. livery service across this giant country with varying Cross-border deliveries become easier and faster terrain. Most friction takes place in the last mile" thanks to electronic clearance through the special (also known as 'last kilometer") of the delivery. In government-backed China Customs channels. When e-commerce, this refers to the last leg of a pack- consumers buy from overseas retailers using Alibaba age's journey from a transportation hub to the final Group websites, the three essential pieces of in- destination, which is usually a customer's doorstep. formation that Chinese customs requires for every Customers expect the package to arrive as soon as order-transaction, payment, and shipping data-are possible, but they may not be at home all day to wait automatically sent to Cainiao's clearance system and for it. Failed delivery results in extra costs and more then to Chinese customs through a direct digital link pollution. Moreover, the last-mile service is a key for speedier custom processing and more accurate differentiator of online retailers in cutthroat compe- tariff calculation. tition as it is the last-and perhaps the only-direct With the aid of standardized e-shipping labels contact with customers, thus leaving them with the deepest impression in the whole online shopa2860is a Badrevel s Customer Address Database, packages are sorted and grouped automatically by .58.67 perience. If the customers' perceptions are negative, warehouse equipment for delivery consolidation by they switch to competitors without hesitation. different land-bridge transport operators. Delivery- In 2013, to fulfill its product delivery needs, persons can search for the precise location based on Alibaba Group founded a logistics affiliate, Cainiao the text-based address. Cainiao gives couriers real- Network ("Cainiao' means "rookie" in Chinese), with time logistics data and intelligence, such as smart a consortium of logistics companies including 20 routing and dynamic forecasting, computed using an major players and 8,000 smaller ones in the Chinese intelligence algorithm to maximize vehicle fill and express delivery market, competing only on price. minimize empty running (delivery vehicles return- Cainiao is a pioneering syndicate that collaborates ing empty to the transportation depot), thus allowing with its partners through data infrastructure, tech- logistics partners to leverage their capacity and capa- nologies, and advanced intelligence. As a freight for- bilities without expanding their transportation fleet. warder, Cainiao provides various stakeholders-fulfil- Cainiao also optimizes delivery routing and sched- ment centers, overseas vendors, delivery companies, uling with the aid of machine leaming to fulfill the merchants, and customers-with real-time access to special delivery needs of individual vendors, such as up-to-date logistics information from a cloud- and direct store delivery and milk runs.10/21/2020 9:00:17 AM - 553864 - 2.49.58.67 378 Part Three Key System Applications for the Digital Age Merchants operating at any Alibaba marketplace arrive at the pick-up stations, SMS and email notifica- can access up-to-date delivery data from Cainiao tions are sent to customers. They can collect the par- available in various data visualization and presen- cels any time they want, and as the delivery address tation formats, to see an overview of the nation- is not the customer's home or office address, this also wide warehousing and distribution network, which ensures better security protection of privacy. Pick-up supports daily operations such as replenishment stations located in rural, remote areas even help planning. The intelligent backbone supports data local residents pay their utility bills and facilitate exchange with partners to and from different types sales of their agricultural produce to urban areas. of databases using various computer languages pro- Cainiao is approaching the realization of its ulti- tected by data encryption. The system's high flex- mate goal of delivery anywhere across China within ibility helps vendors avoid huge investment in data 24 hours and anywhere in the world within 72 hours. marts. The Cainiao Network website provides a global Sources "Alibaba's Cainiao Launches China's First loT Distribution order-tracking function by working with national Center," Xinhua Silk Road Information Service, January 23, 2019 post offices as well as its partners abroad. In 2016, it "Alibaba Revenue 2011-2013," www.marotrends.net, accessed March launched Cainiao Guoguo, a mobile app for custom- 28, 2019; James Melton, "Online Retail Sales in China Grew Nearly 24% in 2018, Its Government Says," and Digital Commerce 360, ers in China who wish to track their packages. In ad- January 24, 2019. J. Erickson, "Cainiao, Alibaba's Logistics Arm, dition, when placing orders in Alibaba Group- Opens Up," www.alizila.com, May 28, 2015, accessed October 28, related platforms, customers may select a self-pick- 2017, Goldman Sachs, "China E-commerce: The Next Leg of Growth," up spot in China (there are more than 40,000 thanks www.goldmansachs.com, July 2017, accessed October 28, 2017; www.alibabagroup.com, accessed October 28, 2017; www.alizila. to arrangements with individuals, convenience com, accessed October 28, 2017. stores, chain stores, and colleges). Once the packages Case contributed by Joyce Chan, City CASE STUDY QUESTIONS University of Hong Kong, and Christy Cheung Hong Kong Baptist University 1. Identify the logistics problems Alibaba Group 3. What are the tactics Cainiao has adopted to deal faced. What are the issues raised by the last-mile with the information flow in daily logistics opera- bottleneck? tions? What are technological innovations or appli- 2. What are the logistical activities supported by cations employed? Cainiao Network? 4. How does Cainiao Network solve the last-mile bot- tleneck? What is your evaluation of the solution? The Supply Chain A firm's supply chain is a network of organizations and business processes for procuring raw materials, transforming these materials into intermediate and finished products, and distributing the finished products to customers. It links 10/21/2020 9:00: 17 Asuppliers, manufacturing plants, distribution centers, retail outlets, and custom- ers to supply goods and services from source through consumption. Materials, information, and payments flow through the supply chain in both directions. Goods start out as raw materials and, as they move through the supply chain, are transformed into intermediate products (also referred to as components or parts) and, finally, into finished products. The finished products are shipped to distribution centers and from there to retailers and customers. Returned items flow in the reverse direction from the buyer back to the seller. Let's look at the supply chain for Nike sneakers as an example. Nike designs, markets, and sells sneakers, socks, athletic clothing, and accessories through- out the world. Its primary suppliers are contract manufacturers with factories in China, Thailand, Indonesia, Brazil, and other countries. These companies fashion Nike's finished products