Alibaba, a Chinese style Ariba

On reading the story of Ariba on New York Times, I came up with the idea of introducing a legendary company from China, whose history is quite similar to Ariba, but has expanded to become the world's largest online B2B trading platform for small businesses. Today, I am introducing Alibaba Group, a giant in E-commerce on a global scale, which is similar to eBay in the United States. And I would also like to share my opinions about its founder, Jack Ma.

Headquartered in Hangzhou, Alibaba Group was founded in 1999 by 18 people led by Jack Ma (Ma Yun), a former English teacher from Hangzhou, China who aspired to help make the Internet accessible, trustworthy and beneficial for everyone. Alibaba Group currently hires more than 20,000 people across the globe and has more than 70 offices in China, Singapore, India, the United Kingdom and the United States. It's a family of Internet-based E-commerce businesses that cover B2B, B2C, C2C online markets, retail and payment platforms, shopping search engine and data-centric cloud computing services. 

Alibaba Group's major businesses and affiliated entities include the following websites, and I will elaborate a little bit on my experience with these sites.

Taobao Marketplace - China's most popular C2C online shopping destination

Launched in May 2003, Taobao Marketplace (www.taobao.com) is the most popular consumer-to-consumer (C2C) online marketplace in China catering to buyers who value product selection and price competitiveness. With around 760 million product listings as of March 2013, Taobao Marketplace is one of the world’s top 20 most visited websites according to Alexa. For the year ended March 31, 2013, the combined gross merchandise volume (GMV) of Taobao Marketplace and Tmall.com exceeded RMB1 trillion.

Experience: As a student who cannot afford too much for living necessity and clothing, taobao is my favorite shopping destination, as well as other Chinese college students and even white collars. We order food (snacks, instant noodles or drinks), clothing, accessories, stationaries, books, and almost everything on taobao. Although the User Interface is not as beautiful as that of Amazon or eBay, the low prices, detailed product descriptions and versatile search engine satisfied the needs of Chinese online shoppers. Its marketing campaigns were also remarkable during several times a year, such as Chinese Spring Festival, Chinese Valentine's Day, Single Day (11/11), etc. These huge campaigns might feature a 50% off everything in that single day, and the record-setting transaction amount usually becomes the top hit in next day's news. It's like an annual feast for Chinese online shoppers. Some added all the things they want into their shopping cart several days before the sale, and check out the moment the day arrived, which caused a huge traffic on the website and cast a great risk to server breakdown.

Tmall.com - China's leading B2C shopping destination for quality, brand-name goods

Tmall.com (www.tmall.com) is an online shopping landmark in China dedicated to providing an excellent shopping experience. It was launched by Taobao in April 2008 to complement its consumer-to-consumer (C2C) marketplace and became an independent platform in June 2011. An open business-to-consumer (B2C) platform, Tmall.com has established itself as the destination for quality, brand-name goods catering to increasingly sophisticated Chinese consumers. It is the most visited B2C online retail website in China according to Alexa.

As of March 2013, more than 70,000 international and Chinese brands have established retail flagship stores on Tmall.com, and among those brands are UNIQLO, L’Oréal, adidas, P&G, Unilever, Gap, Ray-Ban, Nike and Levi's. Tmall.com offers several product verticals with customized customer services, including Consumer Electronics mall; Book mall; Home Furnishing mall; Designer Footwear mall; and Beauty mall. Tmall.com and Taobao Marketplace set a record for highest single-day transaction volume during a special promotion on November 11, 2012, facilitating the sales of goods totaling RMB19.1 billion on the day. For the year ended March 31, 2013, the combined gross merchandise volume (GMV) of the two platforms exceeded RMB1 trillion.

Experience: I wasn't aware of the difference of taobao and Tmall, and thought Tmall was a part of taobao. After shopping on Tmall several times, I started to figure out the difference. Tmall is a host to well-known brands, compared to the fact that taobao hosts more often small businesses. Generally speaking, I felt that customer service and on-time delivery service are more guaranteed and satisfying with merchandisers on tmall, maybe because they are large brands.

Juhuasuan - Comprehensive group shopping platform in China

Juhuasuan (www.juhuasuan.com) is a comprehensive group shopping platform in China. It was launched by Taobao in March 2010 and became an independent platform in October 2011. Juhuasuan’s mission is to aggregate consumer power to offer a wide selection of high-quality merchandise and local lifestyle services at discounted prices.

Experience: Personally I believe Alibaba is a little bit too late to enter the group shopping marketplace. For group shopping, I might first consider nuomi.com or other groupon-style websites that has been in the run for a couple of years. The range of merchandisers are wider on other websites, and the deals are more appealing than those on juhuasuan.

eTao - Comprehensive shopping search engine in China

eTao (www.etao.com) is a shopping search engine in China which provides comprehensive information about products, merchants and promotional offers. It was launched by Taobao in October 2010 and became an independent platform in June 2011. Its mission is to create a “one-stop shopping engine” which can assist Chinese consumers in making online purchase decisions and help them identify low-cost, high-quality merchandise on the Internet faster.

Features and services offered by eTao include product search, deal and coupon search, hotel search, rebates and Tao Bar community. It reflects product results from various business-to-consumer (B2C) online shopping platforms and individual brands including Amazon China, Dangdang, Gome, Yihaodian, Nike China and Vancl, in addition to Taobao Marketplace and Tmall.com.

Experience: I used etao to compare prices of the same product on various online shopping websites (within and outside of Alibaba entities), and made the best decision regarding price, reputation, and delivery time.

Alibaba.com - Leading global e-commerce platform for small businesses

Launched in 1999, Alibaba.com (www.alibaba.com) is the leading global e-commerce platform for small businesses around the world. It aims to be the go-to English-language platform for cross-border trade and help small businesses worldwide expand to overseas markets. The platform, which now serves millions of buyers and suppliers from more than 240 countries and regions, showcases products ranging from raw materials to finished goods in more than 40 industry categories.

Experience: I created an account on Alibaba when I was conducting a research in e-business back in college(around 2008). By then, the user interface was horrible, but you still can figure out what you want about a product, and even contact the supplier online to discuss in detail, which was totally a new experience for me. Ariba is similar to Alibaba.com, but obviously Alibaba Group has made it further.

1688.com - Leading e-commerce platform for domestic China trade among small businesses

Launched in 1999, 1688.com (www.1688.com) is the leading e-commerce platform for domestic China trade among small businesses. Started as a business-to-business (B2B) platform, 1688.com has in recent years evolved into a wholesale and procurement marketplace with an increased focus on serving the product sourcing needs of sellers on the Taobao platforms.

AliExpress - Leading global e-marketplace for consumers

Launched in April 2010, AliExpress (www.aliexpress.com) is a leading global e-marketplace made up of small business sellers that offer a wide variety of consumer products at great prices. It is dedicated to bringing unique products in more than 20 major product categories to its millions of registered buyers in more than 220 countries and regions.

Experience: Chinese students missed the low price of everything on taobao so much after we came abroad, AliExpress provided such a solution. I can shop the taobao merchandises abroad, with a taobao merchant and a taobao price. Though it might take longer to get your stuff, the low price is still worth the wait.

Alibaba Cloud Computing - Developer of platforms for cloud computing and data management

Established in September 2009, Alibaba Cloud Computing (www.aliyun.com) is a developer of platforms for cloud computing and data management. It is committed to building the first platform of choice for sharing data and offering data-centric cloud computing services. Alibaba Cloud Computing supports the growth of Alibaba Group and the whole e-commerce ecosystem by providing sellers on the Taobao platforms as well as third-party users with a comprehensive suite of Internet-based computing services, which include data mining, data processing and data storage.

Alipay - Most widely used third-party online payment platform in China

Launched in December 2004, Alipay (www.alipay.com) is the most widely used third-party payment solution in China. It provides an easy, safe and secure way for millions of individuals and businesses to make and receive payments on the Internet. On November 11, 2012, Alipay set a record for the highest number of single-day transactions, processing more than 100 million payments during the 24-hour period.

The preferred online payment tool of Internet merchants in China, Alipay provides an escrow payment service that reduces transaction risk for online consumers. Shoppers have the ability to verify whether they are happy with goods they have purchased before releasing funds to the seller.

Alipay partners with multiple financial institutions including leading national and regional banks across China as well as Visa and MasterCard to facilitate payments in China and abroad. In addition to Taobao Marketplace and Tmall.com, Alipay provides payment solutions to merchants in a wide range of industries including online retail, virtual gaming, digital communications, commercial services, air ticketing and utilities. It also offers an online payment solution to help merchants worldwide sell directly to consumers in China and supports transactions in 14 major foreign currencies.

Experience: I felt safe when paying with Alipay, because the amount would only be deducted from my account once I got my merchandises and authorized the payment online.

Words about Jack Ma:

I respect Jack Ma as an aspiring public speaker and businessperson. Coming from education industry, he was so foresighted than other Chinese entrepreneurs that he foresaw the bright future of e-commerce in China back in 1990s. At the beginning of his entrepreneurship, he capitalized on his speaking skills formed when he was an English volunteer for foreign travelers in Hangzhou, to lobby government officers to support his e-commerce business. Like other start-up founders, he faced great pressure everyday trying to sell his idea to people who don't understand even a little bit of Internet. He was so determined that he finally made it possible and nurtured the company of its giant size today. From the perspective of corporate social responsibility, he is against Shark Fin trading on any of Alibaba's entities, and announced the banning of all shark fin sales on Alibaba. Also, as a father of 2 kids, he promised that Alibaba would never go into game businesses for the healthy environment for children's growth. A documentary film "Crocodile in the Yangtze", directed by former Alibaba executive, will tell the story in a more enticing way.

My questions this week would be:

1. With such a huge clientele, how can Alibaba Cloud Computing secure the privacy of its customers in a cloud environment?

2. It is said that Jack Ma is heading to build a supply chain company after he retired from Alibaba. How can he gain the 40% market share of logistics which is not contributed by taobao businesses? 

Sources: 
1. Online Marketplace, Better Late than Never
http://www.nytimes.com/2010/11/21/business/21ping.html?_r=0
2. Film "Crocodile in the Yangtze"
http://www.crocodileintheyangtze.com/
3. http://en.wikipedia.org/wiki/Alibaba_Group
4. http://en.wikipedia.org/wiki/Ma_Yun_(Jack_Ma)
5. http://news.alibaba.com/specials/aboutalibaba/aligroup/index.html

Crocodile in the Yangtze - Trailer

Environmental Goals in the supply chain strategy.

http://www.triplepundit.com/2013/09/hp-becomes-first-company-set-supply-chain-emissions-goals/

     This week's focus on the role of technology and the web in global supply chains proved to be interesting.  I found this article to be interesting because it brings up an aspect of the supply chain that I hadn't previously considered.  Most of the literature I have read on supply chain focuses on its effect on profits, but what else can the supply chain affect?  Hewlett Packard is becoming the first company to set emissions goals as part of its supply chain strategy.  Specifically they will:

• Expand their Energy Efficiency Program for manufacturing suppliers
• Institute specific emissions reduction initiatives with suppliers with greenhouse gas intensive operations
• Create production transportation-related efficiency initiatives

All of this is supposed to prevent 2 million metric tons of greenhouse emissions by 2020.  This is a significant number and is a of great benefit to the environment.
    
     Seeing HP's focus on emissions made me wonder will efforts to optimized the supply chain strategy for the environment increase?  I thought back to the case we read about the company that worked to make their office chairs business sustainable as one example.  I know that it will vary by industry and company, but it is interesting to see how an IT company is changing the supply chain of many other companies indirectly.  They supply a lot of businesses with technology and other services.  Utilizing HP can allow companies to optimized profits and have a positive effect on our environment.  I think efforts like this will be greatly increased in the future.  I feel that companies, especially those involved in healthcare, have an obligation to do everything to sustain our environment.  It is just interesting to see a global company like HP state actual emissions goals as part of its supply chain strategy.

About the Future Collaborative Supply Chain

 This week’s article “2016 Future Supply Chain” systematically maps out the trends of supply chain industry in the next five years. It seems to me that the future supply chain will probably not encounter some breakthrough changes but instead the changes will be incremental and accumulative since a number of the primary concepts in this article sound familiar and intuitive.  For instance, with the competition escalating and customers becoming increasingly demanding, “on-shelf availability” should be greatly improved; Collaborative “everything”  (warehousing, transportation and Information Sharing) among “everyone” (among competitors, among retailers and manufacturers..); greener supply chain.

Since nothing is really “revolutionary” here, the key is then- Implementation. How companies can implement these not brand new but highly effective strategies innovatively and efficiently.

One key word of this article is “collaboration” . It is easy to understand the benefit of collaboration (reduce cost and save energies).  But according to a Nielsen report, although most CPG (consumer packaged goods) manufacturers believe that collaboration effort is important but only 50% of these respondents achieve modest outcome, 30% with no measureable results at all and only 20% reach full potential of collaboration. Then my question is what the obstacles and challenges that facing companies in succeeding with this strategy?  According to the recent report published by “SCM World” which surveyed 374 companies, the major problem is “Speed of issue resolution” instead of the commonly believed “Trust and Governance”.

The report first applauds the idea of collaboration, which turns out to be a steep learning curve within organizations. With true and effective collaboration, all the “operational metrics” can be expected to improve 1.5 times. “ The most prominent problem with collaboration is the need for fast problem solving capabilities.  About 50% of respondents claim that the speed of issue resolution between partners is a problem.  With collaboration, there will be more parties involved in one deal and if the information flow if fragmented and of poor quality, the overall quality of the collaboration will suffer.

One obstacle, although not a major one, is trust. Collaborative transportation and warehousing is carried out by “competitors” , either companies which produce similar products and thus have similar customers or manufacturers (upstream) and retailers (downstream) which cut from the same pie. The basis for collaboration is not solid even the parties agree to use a 3PL (Third-party logistics)..

Questions:

The article mentions several concepts: Warehouse, distribution center and hub. How are they different from each other?

A related question is that the article says that “warehouses locations on the edge of cities will be reshaped to function as hubs where cross-docking will take place for final distribution” what does this change really mean to the whole supply chain?

How “revolutionary” “new” or “different” is the concept of “collaborative warehousing and collaborative transportation” are?

Sources:

Collaborative Execution Speed, innovation and profitability http://www.e2open.com/assets/pdf/papers-and-reports/E2open_SCMWorld_Collaborative_Execution_2012.pdf

Emerging from the storm-how leading customer organization reignite growth.- GMA/Neilsen/McKinsey

Collaborative Supply Chain Begets Optimization and Benefits http://cerasis.com/2013/04/12/collaborative-supply-chain/

Collaborative Distribution-Is it really a new concept? http://www.shipperswarehouse.com/article/9-collaborative-distribution

Advantages and obstacles of running business on cloud

Zhou (Joe) Ye

Cloud computing is the top 1 hot word in IT industry in recent years. And it inevitably involved in supply chain management topic. I worked in SAP, the largest ERP software producer, for 5 years and cloud computing had been a topic in the company’s top management team.

There’re several significant advantages of running ERP at cloud rather than the current mode.

At the moment, ERP software is running as centralized system on the servers. The maintenance of these servers is responsibility of the manufacturer itself. Therefore each ERP user pays for its own maintenance. However, it’s a different story in cloud computing. The servers are actually at cloud side like Amazon, Google or Microsoft. The maintenance cost will significantly drop due to economics of scale.

Additionally, the firm running ERP should maintain both the software and hardware by itself, whereas it might not be good at that since it could be a plastic bottle manufacturer. Therefore, consulting firm like Accenture or IBM and support team of ERP software provider like SAP are hired to help the client (plastic bottle manufacturer) implement, upgrade, and maintain this huge system. Since the whole process (from the beginning installation to daily maintenance) is outsourced, and it’s hard to estimate the volume of work, the cost is not transparent to the real stakeholder – the plastic bottle manufacturer. And in the real world, this cost is usually very high. In the cloud computing world, the plastic bottle manufacturer need not worry about transparency. The price of cloud computing is clearly marked based on the storage size, the data flow size, and computing power needed, rather than private and man-day based contract with consulting firms.

Besides the cost efficiency, a unified system format and more integrated communication channel in cloud server will make the business process between different business entities much easier and effective. Just as mentioned in the article “Cloud computing: The answer to supply chain woes”, in current ERP systems, partners across the supply chain often do not provide each other with timely enough information, and process steps tend not to be joined up as seamlessly as they might be[i].

However, just like adoption of ERP systems 20 years ago, there’re also obstacles to run business on cloud. The top 1 problem is security concern. Now every ERP servers are running at each company’s headquarters, which means all the confidential data is physically within the company border. While in cloud computing’s case, all the business data, confidential or not, legal or not, will be in Amazon, Google or Microsoft’s hands. No matter how cloud computing services claimed about privacy, this security concern about data’s physical location is hard to overcome in the short future.

Another problem is when the whole economics is running on the cloud, the reliability of cloud servers is very critical. Technical breakdown or terrorist attack on these servers may bring the whole nation’s economy down.

To sum up, cloud computing is a very smart and effective methodology in future’s business management. It is the trend in spite of the obstacles in the way at the moment.

---

[i] http://www.computerweekly.com/feature/Cloud-computing-The-answer-to-supply-chain-woes

Wind and water, the other side of the tech spectrum

This week's subject is information technology and the influence of cutting-edge software and hardware solutions upon the global supply chain. This is an exciting and very interesting subject area, one that will undoubtedly drive procurement and IT strategy over the next decade.

However, I would like to use this opportunity to explore the far other end of the technology spectrum. If cloud computing and big data analytics comprise the top end of technology, then surely the raw forces of nature comprise the bottom end: wind, mud, and water.

I've been wanting to explore this topic for some time, because it directly dovetails with our discussion and exploration of Lean manufacturing methods. Much was written about this topic in 2011, following massive flooding in Thailand. The "Weather Extreme" blog notes that the Chao Praya, a river which passes through Bangkok, crested at its highest level ever recorded in October of that year. (2) Thailand holds manufacturing plants for Mazda, Toyota, Toshiba and Honda, among many others.(3)

As quoted in Fortune Technology, Bob Ferrari (a supply chain consultant) says: "These recent 'black swan' or unprecedented natural disaster events have obviously exposed vulnerabilities among industry supply chains. The question now is, has the quest for lowest-cost production and hyper-lean supply chains overridden and exposed vulnerability to significant business risk?" (1)

There are two very interesting elements in this quote. First, the reference to the "black swan" concept, and second, the connection between lean supply chains and natural disaster risk.

The "Black Swan" concept comes from work by Nassim Taleb, an expert in risk. According to the New York Times, a Black Swan event has three main attributes: A "Black Swan" is an event that is an outlier according to a traditional probability distribution, has an extreme impact, and one which can be explained in retrospect as a deterministic outcome of some specific sequence of events. Taleb points to events such as the outbreak of World War I and the fall of the Soviet Union as major events that arrived unexpected on the world stage but which carried a huge effect.

Major flooding in a large manufacturing hub could certainly fit this description.

The second important point in the Ferrari quote pertains to "hyper-lean" supply chains. We have learned, in depth, it is key to the Lean philosophy that buffer inventory should be kept at the absolute minimum possible. We were even exposed to tools like the statistical control chart which is explicitly predicated upon the principle that our processes will remain within some "normal" range, and may serve to lull managers into a false sense of security.

A major point stemming from the recent spate of natural disasters ought to be a reevaluation of the lockstep march toward increasingly "lean" design for supply chain and other processes. Here is, in my opinion, the most important question:

Much of the writing about supply chain disruptions has related to commercial companies like Toyota and Honda. Surely, a blip on the income statement of an international automotive corporation is troubling to shareholders. However, we have also read about the push to adopt Lean methods in the healthcare system. If razor-thin inventory buffers truly colonize the healthcare sphere, will we be comfortable with the "exposed vulnerability" that Ferrari mentions above? If we are considering sutures or bandages, can we suffer a multi-week delay as we can with bumpers or dashboards?

(1) http://tech.fortune.cnn.com/2011/12/12/supply-chain-distasters-disruptions/ "The Global Supply Chain: So Very Fragile." Bill Powell.
(2) http://www.wunderground.com/blog/weatherhistorian/comment.html?entrynum=47 "The Great Bangkok Flood." Christopher Burt.
(3) http://paulbarsch.wordpress.com/2011/11/08/black-swan-alert-low-tech-links-devastate-high-tech-supply-chains/ "Black Swan Alert: Low Tech Links Devastate High Tech Supply Chains." Paul Barsch.

Twitter, Public Health and Supply Chains

This week’s topic is about the role of technology and the web on global supply chains. Last semester I took a population health class, where we discussed how researchers have begun to use social media data to, “…model public health at a population scale.” For example, Michael Paul and Mark Dredze, researchers from John Hopkins University, analyzed data from Twitter to see what public health information was out there but more specifically to track influenza. The technique used is known as syndromic surveillance, where they tracked trends in medical conditions over time. The focus on influenza was because the infection is episodic and widespread. They were able to find patterns with influenza outbreaks within a specific location. Their hope is to eventually link up the geography data with the known public health data to have a valid model to predict disease outbreaks.

Another article stated that they were able to quantify the impact of social status, exposure to pollution, interpersonal interactions, travel patterns, and other important lifestyle factors on health by analyzing Twitter posts. They have also found that models developed for infectious disease can be applied to study mental health disorders.

I think that data mining social media to identify trends within public health is a great tool. The models created not only can predict where the next outbreak could be globally, but could also contribute to predicting the amount of vaccinations and medications needed. For example, using the influenza outbreak model could help the pharmaceutical industry produce the predicted demand for vaccinations and know where to ship it, in a timely manner. This additional information could be applied to FEMA’s or the American Red Cross’s supply chain system. They can be better prepared in terms of having the appropriate amount of supplies and staff to control infectious disease outbreaks.

Do you think social media data is a valid source to identify public health patterns and predict future trends? 

Sources: http://www.cs.rochester.edu/u/kautz/papers/senior.pdf

http://www.cs.jhu.edu/~mdredze/publications/twitter_health_icwsm_11.pdf

iTunes online music delivery

By now, everyone knows what iTunes is even if they haven’t used it personally.  Apple, with their iTunes software, was one of the first to allow customers to buy either single songs or entire albums online and receive their music instantly.  All this occurred during the transition from hard copy music to digital.  Digital offered convenience to customers since it was more compact and allowed the listener to carry more songs with them wherever they went.  Eventually, iTunes expanded to include videos as well as Podcasts, which can all be obtained from the iTunes platform.

The iTunes platform is very lean since there are only a few steps and the customer is not paying for any steps they don’t value.  All the media is stored on Apple’s servers and can be retrieved by the customer through the iTunes software platform.  All that is required is distribution from the server to the customer in one single step.  Each iTunes account is unique and has its own credits and debits as well as a history of what was purchased that can be re-download.  This simple system is always on so customers can always access this service, which is another benefit of the entire supply chain being electronic.

Technology has helped make the music industry more lean by offering an easier, more convenient way to distribute music.  Can technology improve the system even more or does the current state represent the peak efficiency of digital media delivery?