Supply Chain Management Challenges of Singles' Day, China's (Bigger) Black Friday

    Posted by John Arkontaky on Jan 23, 2020 9:22:18 AM

    HJP_Singles-Day

    Singles' Day sales continues to shatter records year after year. Here's how supply chain managers are meeting the challenges of the world's biggest shopping day.

    When you think of the biggest shopping day of the year, what comes to mind? Most Americans would probably suggest Black Friday, Small Business Saturday, or Cyber Monday. However, another day earlier in November far surpasses these major shopping events.

    Though it originally began as an unofficial holiday in China for bachelors, Singles' Day — named for the date 11/11 — has become the largest offline and online shopping day worldwide. In 2018, Alibaba Group — China's answer to Amazon — reported record-breaking sales of more than $30 billion dollars, and 38.4 billion in 2019.[1]

    To put this in perspective: in 2018, Black Friday sales totalled around $25 billion, and Cyber Monday sales were just short of $8 billion. According to Alibaba Group, Singles' Day sales surpassed the $1 billion mark in just over a minute, and hit $10 billion in 30 minutes. In 2017, Singles' Day sales were nearly four times those for Black Friday and Cyber Monday combined.[2]

    Having spread to other countries throughout Asia, Singles' Day shows no signs of slowing down. In 2015, Alibaba's sales were about $14 billion,[3] meaning the company's revenue has more than doubled in a matter of years. This massive explosion in growth means that Alibaba and other retailers are also having to rely heavily on 3PL Solutions to stock and deliver all products in order to meet consumers' increasing demands.

    Singles' Day and Supply Chain Solutions

    Massive sales require efficient and flexible supply chain management, and Alibaba's astronomical success can be traced to a few strategic measures.

    First, Alibaba's approach to inventory management is simple: they don't have any. Instead, the company saves on capital costs by outsourcing inventory and warehouse management. In addition to co-founding its logistics affiliate, Cainiao, Alibaba has invested in a wide-reaching network of third-party logistics providers and courier groups to ensure that packages are able to reach its customers. According to some estimates, Cainiao delivers 30 million packages on an average day,[4] using big data to maximize route efficiency and — particularly in the case of Singles' Day — analyze and reroute the paths of courier services to avoid traffic jams

    Second, the no-inventory approach increases Alibaba's response time when trying to meet consumer demand, but the company works to offset this with a deep understanding of customer behavior. In China, for instance, consumers generally want to haggle over prices. So Alibaba created a chat application that allows customers to directly negotiate with vendors. The sales giant also backs this up with customer service enforcers who mediate disputes, ensure that websites stay up and running, and invite lucrative merchants to take part in marketing campaigns.

    Third, Alibaba uses strategic labor management practices. By rotating employees between business branches and units, the company familiarizes its workers with the different aspects and processes of the business. Instead of producing highly specialized workers, this labor management solution boosts inter-departmental collaboration and coordination.

    Addressing Future Challenges

    The size of Singles' Day creates a number of supply chain management concerns — including logistics challenges for shipping companies across China.

    Even with Alibaba's network of third-party logistics providers and courier services, workers often struggle to keep up with the intense inventory, warehousing, and parcel shipping demands. This year, in the days following Singles' Day, there were reports of warehouses overflowing, eCommerce companies pulling all-nighters to stay on top of orders, and high-speed passenger trains being repurposed for package delivery.

    In response to these logistical shortcomings, Alibaba announced that it would allocate an additional $3.3 billion into Cainiao to shore up the company's supply chain management network. The company also seems poised to incorporate AI and cloud-based computing into its transportation management solutions going forward.

    All of this points to the importance of streamlining key retail inventory management and warehouse management processes — especially when paired with the right technology solutions and an agile supply chain .

    Topics: eCommerce, supply chain solutions