Supply Chains Darlings – 6 Supply Chains the Industry Has Obsessed Over - #1, Alibaba
‘Supply Chains Darlings’ – the companies that tend to dominate the headlines of the supply chain world every-so-often for their innovative thinking, and re-imagination of the industry. Here’s part 6 in our series.
Over the last 6 weeks, eft chronicled ‘Supply Chains Darlings’ – you know, the companies that tend to dominate the headlines of the supply chain world every-so-often for their innovative thinking, and re-imagination of the industry. The idea behind doing this is to revisit some of the reasons why supply chains have grabbed headlines and to imagine what companies might be gracing headlines over the next decade. With all six chronicled, we turn our attention to which companies might be gracing the headlines of the industry in the coming years.
We launched #SupplyChainDarlings 3 days before Alibaba's IPO. In the aftermath of the biggest IPO in US history, we've seen share price climb from $68 to $97 as I write this. No matter what business we’re in, our eyes will be on this company for years to come no matter which part of the world we're in despite it's very Asia-centric focus. In Supply Chain, the company first really started to grab our attention when it declared its intention to build a $16 billion logistics network in China. As the IPO announcement has shed more light for us non-APAC based folks on the ‘Amazon/PayPal/Ebay of China’, it’s not difficult to imagine how the company is set to dominate the headlines of the next year. It has cracked the Chinese logistics conundrum which the ‘move west’ mentality has struggled with. (The movement of outsourcing in China from East to West to tap cheaper labor). It has cracked the highly lucrative APAC eCommerce market – the BBC tells us APAC boasts 1,430m internet users vs. 277m in US, 546 in Europe, and online spending of $489.7bn vs. $293.9bn US, $209.7bn, Europe, its operating margins are 57% (vs. Amazon’s 1% or Ebay’s 28%) and it is a big-time investor in US tech startups. Wired magazine explained one of the critical differences between Amazon and Alibaba in that ‘Unlike Amazon, Alibaba doesn't own its own inventory. Its marketplaces handle the selling, not the stuff itself. Even Alibaba’s logistics operation exists to coordinate deliveries, not to make them’ allowing the company to retain much higher operating margins and low, ‘digital’ overheads. As Alibaba looks to disrupt the concept of eCommerce, we're likely to see a lot more of this company over the next year as The Alibaba effect is set to stay.
Why does/will Alibaba dominate our supply chain headlines?
1) It cracked the APAC eCommerce market
2) Its has almost 3xs the merchandise volume of Amazon
3) It looks set to crack the global market, and is by no means shy about using start-up technology to get there
Can we conclude anything from our #supplychaindarlings?
From our cursory analysis, there are a few keys to becoming a supply chain darling –
1) Disintermediation can be a very successful business model
2) The Consumer’s experience really matters
3) Blending tech with logisitcs has been an effective recipe for success
Who’s the next #supplychaindarling?