Amazon And Alibaba Bet The Future On Supply Chain Management: eRetailers Invest Big In Logistics

Description:  The world’s largest retailers are planning to not only grow into the world’s biggest logistics companies, but to completely revolutionize the industry.

Source: Forbes.com

Date: May 31. 2016

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Both Amazon and Alibaba have recently made significant investments to their supply chain capabilities and in the not distant future they will soon handle more shipments than most specialist delivery postal and courier companies.

In effect, these companies are building their own streamlined delivery systems that may replace the more established specialists.

Earlier this month, Amazon signed a new deal to lease more cargo jets, in effect doubling the size of its fleet. This is partly a response to increasing demand (shifted 27% more units in last quarter) but also a part of a grander plan.

The aimfor these internet giants is nothing less than the obliteration of all alternative forms of retail. When it comes to sales, Wal-Mart dwarfs Amazon by a factor of four. Jeff Bezos, Amazon CEO, plan is to undermine these lead by competing for consumer attention in ways that Wal-Mart can never match. That is, by offering a nearly infinite menu of goods, same-day delivery and liberating from the tiresome trip to the busy out-of-town store.    read rest of story

Questions:
1.  How do Amazon and Alibaba plan to revolutionize the logistics industry?

2.  Do you feel these companies will be successful in this strategy?  Why or Why not?

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62 thoughts on “Amazon And Alibaba Bet The Future On Supply Chain Management: eRetailers Invest Big In Logistics

  1. digitizelogistics

    What is their strategy?
    Amazon and Alibaba are realizing that e-commerce success depends not only on the UI/UX, marketing, product quality – but also heavily on the basic logistics dimensions (on time delivery, cost of delivery, information visibility in transit). So, the question is whether the traditional logistics companies are able to provide the right solution required in e-commerce… and the answer is ‘not sufficiently yet’. Hence, Amazon and Alibaba, being backed by investors to be able to put cash in, have decided to invest in building their own logistics assets (trucks, warehouses, planes, shipping license, etc.). But with a difference! The addition of automation, robotics, big data and the latest digitization technologies implies that these companies are not just competing with the existing logistics players but leading the industry in transformation. These digitization tools are not just as ‘gimmicks’, but to save on costs and improve productivity i.e. backed by strong business cases.
    Will they be successful?
    Combining their customer portfolio, marketplace setup/ core technology, and critical logistics assets – will surely bring Amazon and Alibaba to becoming leading integrated e-commerce giants. The heavy investment in assets implies that there is a longer payback period, however in the mid to long term, these companies will have built the capabilities and network to reach the consumers in the right time, cost and quality.

    Reply
  2. Michael Forster

    Question 1.
    Both Amazon and Alibaba aim to create there own extremely large scale, but also streamlined supply chains. This avoids the two companies from having to outsource their supply and distribution which will earn them a lot of extra revenue. Having to only handle transactions through one company will also add to the consumer experience and enhance customer service greatly. Eliminating the need to go to other companies is an aggressive and bold business strategy.

    Question 2.
    I believe it will pay off for Amazon and Alibaba, but not immediately. A massive change of how goods are provided cannot be instantly changed, as physical superstores are already ingrained in our economy. A new generation must grow up with this new technology for it to be truly embraced, many are already stuck in their ways and views of how the world should work. Being at the forefront of this movement is smart however and essential to get a jump on the competition. Change towards online domination is inevitable.

    Reply
  3. Brooke Torgerson

    They plan on offering consumers more products and in their eyes better service by offering same day delivery. Thus making them major distributors in the online consumer market. By opening their stock supplies and types of products they are eliminating the need for consumers to go to other sites for multiple products they would be able to get them all on one site.
    No I don’t think these companies will become successful, because if they open up their product stock too much, they can lose focus on quality. Also with how technology is advancing there are going to be more online stores, increasing the competition.

    Reply
  4. Todd Bullock

    Amazon and Alibaba plan to revolutionize the logistics industry by creating advanced supply chain techniques that will speed up the delivery process systems. This will eliminate the need for consumers to leave their homes and go to big box office stores such as Walmart for the products they desire.

    I do think that these companies will be successful with this strategy buy only in certain areas. It is easy to promise same day delivery in a major city, but for someone who grew up in a small town, i know mail can take forever to get to its destination. How will amazon and alibaba be able to guarantee same day delivery to smaller more remote places around the world? Also, with new product launches where everyone is buying at the same time, how will these companies be able to deliver to all at the same time using drones? I think it will be impossible for these companies to eliminate the need for big box office stores such as Walmart because consumers can go to these stores at any time and find the product they are looking for rather than wait at home for a package to arrive later.

    Reply
  5. Erika Lauer

    Amazon and Alibaba plan to revolutionize the logistics industry by using the most advanced supply chain techniques in order to develop the most effective and efficient delivery systems. By doing this, they will be able to have full control over shipping costs and can also have faster delivery times. Over time this will help to increase Amazon and Alibaba’s overall revenue. This will also allow them to control their own parcels, instead of having another delivery company such as Canada Post or Fedex delivering their packages.

    I feel that these companies will be successful in this new strategy, because they already have a pretty advanced logistics industry. With the increasing amount of people who shop online, having a business that guarantees a fast and accurate online shopping experience, then more people will continue to shop on there. Improving the logistics industry will only help to build a bigger cliental for these online shopping companies. With a bigger cliental, there will eventually be more parcels needing to be shipped out, therefore it would be beneficial if they could ship their own parcels. Consumers will want to buy products from companies that are both convenient and reliable. With improved logistics, Amazon and Alibaba’s numbers will probably increase over time.

    Reply
  6. Donovan Goeseels

    Amazon and Alibaba plan to revolutionized their logistics a few ways. They are increasing their own fleet of planes and trucks, allowing them to ship more things to their customers. They also plan on cutting down time for packages to get to their customers by using drones and better information and data management. The drones would carry the package directly to your house after you order it, and the data and information management enhancements allow them to keep track of information easier which will help them cut costs of shipping in the long run.

    They will be successful. More and more people are buying online and Amazon’s enlarged fleet and new information management will allow them to keep up with demand. Most small towns don’t have Wal Mart, and those websites cater to that niche that Wal Mart simply cannot. The drones of while a good idea, may not be as successful. There is always a possibility of someone throwing rocks at it and stealing the package, but it is hard to predict because it has never been tried before.

    Reply
  7. Tristan Lansdall

    Amazon and Alibaba plan to revolutionize the logistics industry in a few ways. First they are making massive investments in themselves as they build their own logistics fleet and operations. They hope these investments will relieve them of their dependence on current carriers (FedEx, Purolator, etc.) and they also hope that it will streamline the shopping experience for their customers. They are also talking about the use of drones to deliver products to their customers. They are hoping to reach a point where a customer purchases an item, and within 30 minutes an automated drone delivers the product directly to the customers house. Their hopes for this is that it will help them be more competitive with companys such as Wal-Mart and Target. They also want to use this technology to reach customers in remote locations that may not have access to it otherwise.

    I do feel that they will be successful with these aspirations, it is just a question of when. The base for the technology is there and ready to be taken advantage of, but I think that it is at least 5-10 years away from becoming their main way of conducting business. I would imagine that they would have alot of hoops to jump through as far as government regulations go in regards to air space for the drones, as well as sending products internationally. I think that this is an exciting idea and im curious to see how long it takes before this becomes the norm for the world.

    Reply
  8. Sam Gleim

    Amazon and Alibaba are paving the way for the future. These firms are capitalizing on the need of convenience in every possible way, and in doing so creating a large competitive advantage for themselves. By creating their own in-house logistics system they dispose of the need for a third party. This increases their flexibility greatly as they no longer must rely on organizations such as UPS, etc. and can deliver goods across the globe. This possible successful implementation poses a great threat to chains such as Wal-Mart. Wal-Mart may be convenient as it prides itself on low prices and one-stop shopping, however Wal-Mart is unable to compare to the proposals laid out by Alibaba and Amazon. What’s more convenient than being offered “a nearly infinite menu of goods [and] same-day delivery” without ever having to go to a store?

    However, the question remains; is it possible for Alibaba and Amazon to implement these proposals successfully? In theory I believe it is revolutionary; it is unheard of to propose such convenience. On the other hand, I do not believe it is realistic. Judy Tung, Cainiao president, suggested that the goal was “to make it easy to deliver goods to anywhere”. This is unfeasible. According to internetlivestats.com, approximately only 46.1% of the global population had access to the internet in 2016. This statistic is increasing yearly, however global internet access is still under 50%. The internet is the only link to Amazon and Alibaba products and services. If over 50% of the global population does not have internet access how do these corporations to expect to deliver anywhere across the globe. Not only is the internet access an issue, political and economic stability, cultural norms, etc. pose challenges for this proposal. On the other hand, if these organizations manage to overcome these obstacles and successfully implement, they will change the game.

    Reply
  9. Samuel Dumont

    As Amazon and Alibaba gain more popularity in the global marketplace, they need to effectively use logistics to compete with larger firms like Walmart. To do this, both companies have heavily invested in their supply chain management to streamline and expand their deliveries. Whereas Amazon focused on more cargo jets for their large number of deliveries, Alibaba added distribution centers and delivery stations. As well as these classic logistic solutions, Amazon has heavily invested in drones to make automated and more remote deliveries. As the companies make both short term and long term plans, their reach and their profit potential continue to increase.
    I believe both companies will be successful if they keep a strong focus on expansion and streamlined logistics. Amazon Prime is an extremely efficient service and allows me to ship most items directly to my door within two days. As well, they offer a discounted rate for students of only $40 a year. As Amazon becomes larger, faster, and better, they will be able to compete more directly with less innovative firms like Walmart. Although I am not as familiar with Alibaba they seem to have a similar drive and also seem to place ease of access ahead of profits. This is essential for these firms to be able to compete against other companies that might offer better customer service. It will be interesting to see what these two companies manage to do in the future as they continue to increase their capacity and popularity. Perhaps “Amazoning” your products will be like “Googling” information.

    Reply
  10. Stephanie Martin

    1. How do Amazon and Alibaba plan to revolutionize the logistics industry?

    Amazon and Alibaba plan to revolutionize the logistics industry by using advanced supply chain techniques to build streamlined delivery systems. These systems will hopefully eliminate other forms of retail such as big box stores. They will do this by providing things these big box stores can’t, mostly focused around technology that increases consumer convenience.

    2. Do you feel these companies will be successful in this strategy? Why or why not?

    I believe that these companies will be successful, however it will take a generation for that to happen. So much of society is geared towards the baby boomers and their wants and needs. As a generation I feel that though most may utilize the internet for online shopping and all its convenience there is still a large amount that shopping online is a foreign concept to. That being said generation Y and generations to come are and will be comfortable utilizing the internet to the fullest extent. Making the idea of ordering toothpaste online and having it delivered that day not a crazy thing. For example, having someone pick up and deliver your groceries is becoming very popular in the states. Also the idea of using drones I think will aid in the success for these companies. It eliminates a lot of expense and complications with needing a large human workforce such as union strikes.

    Reply

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