Alibaba and Amazon Bet The Future On Supply Chain Management: 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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69 thoughts on “Alibaba and Amazon Bet The Future On Supply Chain Management: Invest Big In Logistics

  1. Kemorine R

    Amazon and Alibaba are planning to revolutionize the logistics industry by both making improving on their current logistics capabilities and making investments towards creating their own delivery systems. Some of the ways that they are doing this is by increasing the size of their fleets, opening more delivery and distribution centres in order to meet the current demand. Amazon intends to expand its offering to an infinite menu of goods thereby making it a one stop shop for everything that their customers could potentially need. Thereby, removing the need have to enter a store if you don’t want to. In addition to that Amazon hopes to increase its same day delivery services and eventually take it a step further and provide delivery within 30 mins of an order.
    Creating their own delivery system with the potential to process more orders that current postal and delivery services will expand the reach of both companies opening them up to more business growth locally and internationally. One way in which they will be able to achieve this is through their use of drone technology which would enable them to deliver to customers in rural and secluded areas that were previously difficult for them to reach.
    These changes are likely to not only allow Amazon and Alibaba to secure more of their current market but it also positions them to be leaders in transforming the way we view online businesses and delivery systems in the future. They will likely enjoy first mover advantages once their plans are underway and will become experts in developing technologically advance logistic systems while their competitors are playing catch up

    Reply
  2. Cole Malaka

    1) Alibaba and Amazon plan to revolutionize the logistics industry by removing the middle man. They intend to gain complete control over their own transport and delivery. The overall goal is to compete with the current big dogs like Walmart in a way they cannot fight. Who would make the long trek to Walmart when all they have to do is go online, order what they need, and have it delivered to their door the same day!

    2) I am not 100% sure. It sounds pretty ambitious and far fetched to me. Not just the sheer scale of investment it would take to accomplish this, but the backlash they will inevitably receive from both their competitors and probably the public as well. The biggest public issue I can see is loss of thousands and maybe even millions of jobs. Yah going to the store can be an inconvenience, but one Walmart alone has well over 50 staff members alone. Now spread this over the whole retail industry and we may run into a big problem. You don’t need nearly as many staff to run a warehouse as a full on retail establishment. So unless Amazon and Alibaba can find a way to mitigate this issue and convince the public that they will be financially safe, I think this will be extremely difficult to achieve. I do not think that competitors like Walmart would go down without a fight either. It is very likely companies would back and probably fund movements against Amazon and Alibaba for this. But, only time will tell.

    Reply
  3. Raj Pannu

    Ill only be speaking about amazon in my response since I do not know much about Alibaba I would rather just talk about amazon. Amazon plans to revolutionize the logistics industry by having faster shipping making it their shipping time only one day shipping. Instead of going to a busy store to look for a product they may have in stock and they may not have it. Amazon allows the customer to order what they want without having to leave the house and knowing that they’ll receive it within the day will make it much more convenient and applying to many consumers. I feel like these companies will have massive success if they implement this strategy. A lot of people would much rather sit at home and order whatever they like just by a touch of a button and adding one day shipping as well just adds to the appeal of it all. After work it is a hassle to stop at a grocery store and pick up dinner for the night but if amazon adds this new strategy people will be able to order their groceries online and have their groceries waiting for them at the front door. I think Amazon is taking a step into the future and if they do this they will surpass all competition they are competing against.

    Reply
  4. Sandy Derksen

    Amazon and Alibaba plan to revolutionize the logistics industry by innovating a quicker, more convenient way for consumers to make purchases. They have made substantial investments into their supply chain management in order for this to happen. They have already initiated this by providing same-day shipping and offering a wider variety of items. They plan to continue on this revolutionary path by introducing the use of drones in their company. They will offer 30 minute shipping through the use of advance drone technology involving airplane, helicopter and sensory systems. The delivery will be automatic and allow for a major decrease in arrival time of products. I think this plan will be successful, however, it will not completely eliminate other forms of retail, such as Walmart. With the significant changes and advances being made in the technology industry, it is entirely possible for this plan to occur and increase the value of the company. Although some consumers will see the value in switching from in person shopping, I think most consumers will continue on with their usual ways. Though online shopping is widely used and appreciated by many people, it is not likely that retail stores will ever completely be eliminated by online stores such as Amazon or Alibaba. While it does not mention in the article if the use of drones to deliver products will be costly for consumers, it is safe to assume the fee of using such technology will be high. If this is the case, it is even less likely for consumers to make the switch over from retail stores to the new technology.

    Reply
  5. Keshah Austin

    How Amazon and Alibaba plan to revolutionize the logistics industry is through their supply chains. They have done this through increasing their delivery systems and building a better repertoire. What they have done is made life much easier on customers.  Their aim is to make deliveries easier — within the same day. These companies have made a shift to focus on the customer, one of their primary stakeholders.  They are even trying to “outwit” the giant that is Walmart.  Is this beneficial? Yes, I believe in the long run that they will increase the efficiency of the company, but more importantly they will build a stronger base with their customers. And because of this reason, they have revolutionized the industry.
     
    I did not agree with what Bezos’ plan to make it irresponsible to not be on Amazon Prime. First off, as someone who is fairly unfamiliar with that Amazon Prime is, why is it irresponsible to use something, it is a choice.  There are also some people that do not like to use Amazon or Ebay or anything similar. We are a point where doing anything on the interest causes risks. There is a increase in Internet fraud and phishing attacks . This is also slightly off topic from what is being discussed.

    I think that the companies overall have been successful in their strategies — this is evident based on the fact that others are following suit. It is, however, still new and there could be underlying risks that we are unaware of.

    Reply
  6. Katie Bergeson

    Amazon and Alibaba have made significant investments into their supply chains in order to make their companies more efficient. They plan on gaining a larger market share and becoming more appealing to their consumers by making their delivery systems more effective and efficient through drone use, eliminating the wait for delivery. I feel like this is an excellent strategy, and may be highly effective. For example, growing up on a farm I had to travel 20 minutes to the nearest grocery store, and an hour to a store with a significant offering. But with the use of drones, I could possibly get my groceries (and anything else I have ever wanted) delivered right to my door. Ordering online has always been a nuisance because if the package was too big for the mailbox, I would have to travel the 20 minutes into the nearest post-office (and 20 minutes home) and I would end up paying for shipping and then for gas, as basically an additional shipping charge. I think that Amazon and Alibaba have the opportunity to address this need in rural communities and make online shopping more accessible and efficient. (This is all providing that delivery fees are not insane.)
    They also have the socially responsible opportunity expand their efforts into Africa and other poverty stricken areas, to more easily deliver clean water and food that is so desperately needed.

    On the downside, if their efforts prove to be successful, the effects will hit harder than the transition from post to e-mail, and the postal industry will cease to exist and many people will lose their jobs.

    Reply
  7. Taylor Rice

    Amazon and Alibaba have an incredibly ambitious plan to revolutionize the supply chain and delivery systems within their organizations. They plan on spending enormous sums of money in order to gain the competitive advantage not only over other internet-based competitors, but over all retail companies. Amazon’s plan is to surpass Wal-Mart, which currently does more than four times the retail business each year. Ambitious plans indeed!
    One of the most revolutionary ways that Amazon and Alibaba plan on grinding out their competitive advantage is to update and modernize the way they deliver their goods to customers. Since these companies represent the shift to large online retailers with no physical retail of their own, the efficiency and speed at which they can deliver their products is vital to their success. Amazon already offers Amazon Prime, which provides for free two-day shipping. However, this is not enough in today’s impatient consumer market, according to Amazon CEO Jeff Bezos. As a push to effectively make themselves the eclipsing giants of retail, Amazon hopes to introduce highly advanced drones capable of delivering items within 30 minutes of purchase. They also hope to phase out current delivery systems, which have not received a significant change since their inception in the nineteenth century. Moves such as these would surely mark Amazon and Alibaba as retail giants around the world.
    Though it will take huge investments of capital, I believe these business strategies can prove successful. Amazon and Alibaba have already proved they are on the leading edge of internet retail and have the drive and resources necessary to undertake and accomplish ambitious goals.

    Reply
  8. Rose-Marie Nyberg

    Amazon and Alibaba appear to be two companies that remain focused on getting ahead of the competition in the shipping and receiving business through their innovative practices, as expressed through technology and logistics. Their efforts are timely and commendable. Supply chain management allows the desired competitive advantage through the streamlined efficiency in inventory control and customer service that exponentially grows the dimensions of any sector of desired business growth. These initiatives will help to drive new business and grow the economy. With e-business on a growth spiral and the continual decline of brick and mortar businesses, the growth potential for increased efficiency in supply chain management provides the foundation that is necessary for business growth, planning and goal execution. The current CEO of Amazon, Jeff Bezos, has clearly indicated his leadership role in directing energy towards cutting into the corporate pie that Walmart has sunk its teeth in. What is it that an ambitious business should do, other than to begin to create a newly designed space in an already plugged market? If Amazon can topple the monopoly created though Walmart’s expedited supply chain management regime, then the future of Amazon to tap into all the areas that Walmart has not already encroached on is not be to underestimated. Healthy completion in this similar area through the efforts of Amazon’s main rival, Alibaba, is an equally refreshing market offering especially with its notably strong presence in China. The more society progresses on its current path, the day will certainly come when retailers will need to give up their storefront leases in the malls and focus on the online presence that looms ahead of all retailers and consumers. The interpersonal skills required to be successful in sales will likely be replaced by an electronic version which will be to be programmed to elicit human feelings of positive public relations in a world with depressingly less human contact.

    Reply
  9. Ryan Loman

    The companies like Amazon and Alibaba plan revolutionize the logistics industry by investing largely into their supply chain capabilities, allowing them to deliver parcels much quicker and more efficiently than even specialized delivery companies can. The effect that this have would be them building their own streamlined delivery systems that will outcompete traditional couriers and postal services. Allowing people to access a virtually endless variety of goods and perks like priority two-day shipping, same-day shipping, and potentially even 30-minute shipping will make consumers a lot more willing to shop online with Amazon or Alibaba than at the traditional outlet stores. I believe that both Amazon and Alibaba, while using their strategies, will be successful in the future. One company may be more successful than the other in implementing the innovations to their respective supply chains, but I also think there is a strong correlation between the two companies that it will ultimately help the future of the other business just as much. Both company face different obstacles when updating their delivery systems; Amazon operating primarily within North America, and Alibaba in Asia. Even though both companies operate on a world-wide scale, and have capacity to ship parcels almost anywhere, I think Amazon has more freedom and capacity to develop its supply chain in a less-restricted way. The density of China, with respect to the amount of people, buildings, etc. would make it much more difficult for Alibaba to secure the distribution centers and delivery stations it needs to carry out their plan. Amazon in North America, is not faced with this type of obstacle.

    Reply
  10. Leigh Muirhead

    As merchandising company logistics is one of the most complex and important concept in the marketing mix. As an e-retailer logistics are what make or break the company. Amazon and Alibaba are prime examples of companies based on logistics, essentially playing the part of the “middle man” for manufacturers and consumers. In order to keep a competitive edge and market share both companies recognize the significant investment needed for the development and implementation of advanced logistic systems. Logistics use to be solely based around the physical action of getting a product from the manufacturer to the consumer but now, through the advancements of technology and competition in industries data collection has become a huge player in logistics.

    I think that the competitive advantage in this industry lies in data collection and the analysis of information to increase efficiencies at as many touch points as possible. At this point the actual physical handling and work have already been changed to be as efficient as possible, we have moved on to the need for data collection efficiencies to be extended. Each company has proposed massive budgets to be put towards improved logistics, the majority being allocated to research and development to enhance data quantity and route planning information. As a consumer, usually, the only complaint about using sources like Amazon is that you have to wait for your purchase. Both companies see this constraint and have developed same-day-shipping options and are working to further benefit their customers through their advancements in logistics strategies.

    Reply
  11. Emily Carscadden

    Amazon and Alibaba plan to revolutionize the logistics industry by focusing in on their strengths that include offering a nearly infinite menu of products, same-day delivery, and giving consumers the option to shop from their own homes without making the tiresome trip out to a busy store. If all the products are at the tip of your fingertips, and only a click away, why would you ever go to a mall? Malls are horrible crowded places full of teenagers with nothing better to do! You don’t have time for that! Amazon and Alibaba are recognizing this and capitalizing on it. As technology enables them to improve efficiencies, these companies are refining their strategies and adapting their supply chains. It appears that Amazon and Alibaba are well on their way to being successful with this strategy.

    Reply
  12. Maddy Durfey

    One of the major ways that sticks out to me that will definitely revolutionize the logistics industry is the mention of same day delivery. It is absolutely mind blowing to think that you could click the mouse on a product you want and have the opportunity to have it delivered that day. Just having a supply chain in place to support a move like this is amazing in itself. Being currently involved in a company that has high inventory demands make you realize the difficulties that come along with supply chain and the logistics of getting the inventory where it needs to go. With situations arising in the shipping process that are most of the time out of your control it more often that not leaves you fairly frustrated. Also by providing their own in house delivery systems this would allow them to streamline the shipping process that would cut out the difficulties that could arise when using an outside party to get the products to the end consumer.
    Time will only tell if this plan will be successful but I don’t see it impossible for Amazon or Alibaba to replace traditional retail giants such as Walmart. Living a little way outside of an urban centre my family sees the benefits of Amazon and the ease that can come with getting your products delivered directly to your door and not having to plan a trip to the city to get those things you have your eye on. If these companies can maximize their supply chain to make the ease of delivery and availability of products endless there may be no stopping these online retail companies.

    Reply
  13. Ethan Plotnikoff

    Logistics is a huge part of any companies success, the ability to have such coordinated complex operations involving many people facilities and supplies can give companies the upper hand in the highly competitive business of retail. This is something Amazon is really trying to focus on by doubling their fleet of aircraft and revolutionize the logistics industry. Amazons biggest competitor is Wal-Mart who when it comes to sales has four times more than Amazon. Amazon has to think big and they have by attempting to completely eliminate the need to go to the Wal-Mart store that can take almost up to two hours. Amazon is investing big into drones to try to have deliveries to 30min something Wal-Mart could not compete with. Amazons biggest rival must keep up with Amazon and they did by investing $16 billion into the logistics company Cainiao. These companies know they can not compete directly with Wal-Mart so if they are able to revolutionize this supply chain management they can not only undermine Wal-Mart but become the dominate forces in retail. In a society that appears to be getting lazier and lazier with companies like McDonalds even doing delivery it is not crazy to think that Amazon an internet bookseller can become the dominate force in the retail business by offering services that Wal-Mart has yet to invest in giving them a competitive advantage.

    Reply
  14. Michael Isfeld

    Amazon and Alibaba plan to revolutionize the industry by getting rid of their biggest weakness, “expensive and slow delivery” as the article states. By investing in their supply chains, both are trying to effectively be more efficient and effective at delivering goods to you than any other store in the world. If they end up succeeding, they will become bigger than Walmart, unless Walmart adapts and than who really knows what will happen. I however, don’t think that it will ever quite be as efficient. No matter what, there will always be some cost for delivery. I can’t imagine that Amazon will be able to deliver anything you would think at buying at a store, let’s say Walmart, in the foreseeable future with a delivery price that would make it worth it. Also I don’t think that they could give this service to everyone globally. For example, if you live in a small town 30 minutes away from your nearest city, I don’t believe that you could order your groceries and they would get to you in a timely manner that would save you money, even when you account for the time it takes you, the gas, and other economic factors. At the end of the day, I don’t believe that Amazon or Alibaba will be able to enact their plans to the degree that they are wanting to. I do believe however, that they may be able to offer this service in a few locations that it would make it worth using for the consumer.

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  15. Connor Cook

    Amazon and Alibaba plan to not only stop outsourcing their logistics but to completely revolutionize the industry and become the largest logistics companies in the world. What exactly is there goal in forming their own distribution departments? To completely obliterate all other forms of retail. Bezo’s wants to make it “irresponsible” for people to not be a part of Amazon prime. Both Amazon and Alibaba have already invested huge amounts of money in their own logistics services including a 16 billion dollar investment from Cainiao, Alibaba’s logistics comapany, to improve data quality and route information as well as 1800 distribution centers and 97,000 delivery stations in more than 600 cities across 31 Chinese provinces. Amazon has signed a new deal to lease more cargo jets, in effect doubling the size of its fleet.
    I feel these companies will be successful with these strategies as they definitely have the capital to successfully fund the ventures. What it will come down to is proper management of the logistics services and based on these companies track records, management will be handled effectively. Customers are always interested in fast and inexpensive ways to obtain their products ordered online, if Amazon can effectively expedite their drone delivery services, and release themselves from their archaic method of delivery, they will truly revolutionize the logistics industry. Although they may not completely take over the logistics industry, they will definitely be market leaders if everything goes to plan.

    Reply

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