Question :

How does Cainiao Network solve the last-mile bottleneck? What is your evaluation of the solution? (Maximum 180 words)

Physical Flow in Alibaba Alibaba Group Holding Limited was founded in 1999 at Hangzhou, China, by 18 founders led by Jack Ma. big-data-powered data-sharing platform called the "Cainiao Logistics Cloud" through various interfaces Its first business, Alibaba.com, is a global wholesale for streamlining the logistics operation. Cainiao operates domestic fulfillment centers e-marketplace that opens a wealth of business op- dedicated to Alibaba's TMall Supermarket, serving portunities for firms regardless of operation scale. numerous vendors. Storehouses and bonded ware- The group provides business-to-business, business-to- houses use a warehouse management system to consumer, and consumer-to-consumer sales services raise efficiency by optimizing stock location manage- mainly via its web portals Alibaba.com, TMall.com, ment and minimizing honeycombing (unexhausted and Taobao.com, serving both Chinese and overseas space). Later, Cainiao runs new intelligent ware- markets. Its core commerce businesses together houses (some located at sites decided based on big generated a revenue of $53.13 billion for the twelve data) which are equipped with armies of automated months ending December 31, 2018. guided robots that move shelfing racks to warehouse China's online retail sales are expected to grow clerks following the guidance of RFID floor tags with from $1.3 trillion in 2018 to over $6 trillion in 2020. instructions received through Wi-Fi, doubling the ef- The 552 million active consumers of Alibaba Group, ficiency of product picking and packing and thereby growing in purchasing power, together contribute improving accuracy. sobiviin to a huge demand for frictionless long-distance de- Cross-border deliveries become easier and faster livery service across this giant country with varying thanks to electronic clearance through the special terrain. Most friction takes place in the last mile" (also known as "last kilometer") of the delivery. In government-backed China Customs channels. When e-commerce, this refers to the last leg of a pack- consumers buy from overseas retailers using Alibaba age's journey from a transportation hub to the final Group websites, the three essential pieces of in- destination, which is usually a customer's doorstep. formation that Chinese customs requires for every Customers expect the package to arrive as soon as order-transaction, payment, and shipping data-are possible, but they may not be at home all day to wait automatically sent to Cainiao's clearance system and for it. Failed delivery results in extra costs and more then to Chinese customs through a direct digital link pollution. Moreover, the last-mile service is a key for speedier custom processing and more accurate differentiator of online retailers in cutthroat compe- tariff calculation tition as it is the last-and perhaps the only-direct With the aid of standardized e-shipping labels contact with customers, thus leaving them with the integrating a Level 5 Customer Address Database, deepest impression in the whole online shopping ex- packages are sorted and grouped automatically by perience. If the customers' perceptions are negative, warehouse equipment for delivery consolidation by they switch to competitors without hesitation. different land-bridge transport operators. Delivery- In 2013, to fulfill its product delivery needs, persons can search for the precise location based on Alibaba Group founded a logistics affiliate, Cainiao the text-based address. Cainiao gives couriers real- Network ("Cainiao" means "rookie" in Chinese), with a consortium of logistics companies including 20 time logistics data and intelligence, such as smart major players and 8,000 smaller ones in the Chinese routing and dynamic forecasting, computed using an express delivery market, competing only on price. intelligence algorithm to maximize vehicle fill and Cainiao is a pioneering syndicate that collaborates minimize empty running (delivery vehicles return- with its partners through data infrastructure, tech- ing empty to the transportation depot), thus allowing nologies, and advanced intelligence. As a freight for- logistics partners to leverage their capacity and capa- warder, Cainiao provides various stakeholders-fulfil- bilities without expanding their transportation fleet. ment centers, overseas vendors, delivery companies, Cainiao also optimizes delivery routing and sched- merchants, and customers-with real-time access to uling with the aid of machine learning to fulfill the up-to-date logistics information from a cloud-and special delivery needs of individual vendors, such as direct store delivery and milk runs. a Merchants operating at any Alibaba marketplace arrive at the pick-up stations, SMS and email notifica. can access up-to-date delivery data from Cainiao, tions are sent to customers. They can collect the par- available in various data visualization and presen- cels any time they want, and as the delivery address tation formats, to see an overview of the nation- is not the customer's home or office address, this also wide warehousing and distribution network, which ensures better security protection of privacy. Pick-up supports daily operations such as replenishment stations located in rural, remote areas even help planning. The intelligent backbone supports data local residents pay their utility bills and facilitate exchange with partners to and from different types sales of their agricultural produce to urban areas. of databases using various computer languages pro- Cainiao is approaching the realization of its ulti- tected by data encryption. The system's high flex- mate goal of delivery anywhere across China within ibility helps vendors avoid huge investment in data 24 hours and anywhere in the world within 72 hours. marts. Tools The Cainiao Network website provides a global Sources: "Alibaba's Cainiao Launches China's First IoT Distribution order-tracking function by working with national Center," Xinhua Silk Road Information Service, January 23, 2019; post offices as well as its partners abroad. In 2016, it "Alibaba Revenue 2011-2018," www.marotrends.net, accessed March launched Cainiao Guoguo, a mobile app for custom- 28, 2019; James Melton, "Online Retail Sales in China Grew Nearly 24% in 2018, Its Government Says," and Digital Commerce 360, ers in China who wish to track their packages. In ad- January 24, 2019. J. Erickson, "Cainiao, Alibaba's Logistics Arm, dition, when placing orders in Alibaba Group- Opens Up," www.alizila.com, May 28, 2015, accessed October 28, related platforms, customers may select a self-pick- 2017, Goldman Sachs, "China E-commerce: The Next Leg of Growth, www.goldmansachs.com, July 2017, accessed October 28, 2017; up spot in China (there are more than 40,000 thanks www.alibabagroup.com, accessed October 28, 2017; www.alizila. to arrangements with individuals, convenience qui com, accessed October 28, 2017. stores, chain stores, and colleges). Once the packages Case contributed by Joyce Chan, City University of Hong Kong, and Christy Cheung, CASE STUDY QUESTIONS Hong Kong Baptist University 1. Identify the logistics problems Alibaba Group 3. What are the tactics Cainiao has adopted to deal faced. What are the issues raised by the last-mile with the information flow in daily logistics opera- bottleneck? tions? What are technological innovations or appli- cina brood cations employed? 2. What are the logistical activities supported by Cainiao Network? 4. How does Cainiao Network solve the last-mile bot- tleneck? What is your evaluation of the solution