| By Tim Foster | Managing Director, APAC Region | Chainalytics |
Alibaba, one of the world’s largest e-commerce marketplaces, understands the value of logistical efficiency. So it should be no surprise Jack Ma and his group are investing heavily in the sector in order to build a stronger, more connected network which seeks to optimise the delivery of more than 1 billion packages per week.
Similar to its competitors in Amazon and JD.com, Alibaba and Cainiao seek to gain more control over its supply chain with the $1.38B (USD) investment in Chinese-based ZTO, giving them 10% equity of the express delivery service’s company. The collaboration is a part of Alibaba’s larger “New Retail” initiative which will not only improve delivery options and services but drive down costs as well. Logistics currently make up approximately 15% of China’s GDP, but Alibaba hopes the development of their “smart” network will help lower that number to around 5%.
Ma’s efforts are just the latest step in his quest to achieve single-day delivery across China and 72-hour delivery across the globe. The company has already made significant strides in reducing cross-border shipping times, moving from 70 days to less than 10 in certain countries. While the smart network will certainly add value to Alibaba’s services, Ma believes the network will be beneficial for all logistics providers and manufacturers alike. He believes parcel deliveries will eventually grow from 1 billion per week to 1 billion per day as globalisation of their network continues. Alibaba plans to invest a total of $15.6B in the the coming years.
With that goal in mind, Alibaba believes investing in and developing the infrastructure necessary to achieve such a feat must begin today. And while Alibaba’s investment is focused primarily in China at the moment, other logistics companies throughout the region are also seeing large investments rolling in. Ninja Van, a logistics startup headquartered in Singapore, raised $87 million (USD) in series C funding earlier this year.
The investments across the region can only be expected to grow as ecommerce continues to evolve into the primary form of purchasing. Global retail ecommerce sales have steadily grown over the past several years, reaching $2.3T (USD) in 2017 with a projected total of $2.8T for 2018, approximately 15% of all retail sales across the planet. Ongoing network improvements will only increase ecommerce percentages in the years to come. In fact, Google announced a $550 million dollar investment in Alibaba’s top Chinese competitor JD.com, which they believe will only add to the growing retail infrastructure in the region.
Enhancements in parcel networks and the ongoing rise of last mile delivery startups continue to give shippers and retailers alike more options for fulfilling their transportation needs. Shippers now have the opportunity to diversify their delivery network and implement savings that may have been previously unavailable. The investments in logistics occurring worldwide continue to make delivery networks more efficient as omnichannel marketplaces continue to expand.
To identify savings opportunities and increase competitiveness, organizations should analyse their current service providers and their parcel spend level, as well as undertaking regular market-based assessments to determine the competitiveness of their current parcel arrangements. Doing so will help organisations ensure rate cards align with shipment profiles and business requirements in addition to internal compliance with parcel contracts. For additional help in this area, consider resourcing outside expertise to help implement advanced shipping strategies and delivery methods that allow for further optimise of parcel services.
Tim Foster, managing director of the APAC region for Chainalytics, has more than 20 years of supply chain experience as a consultant and as an executive with leading multinational manufacturers.
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