It is well known that China has been the biggest producer of goods for many years. From children’s school supplies to the contents of every handyman’s toolbox, “Made in China” is found in small print. However, China’s labor costs, much due to its economic growth from manufacturing, have risen to the point that the competition from nearby Asian countries is taking some of that manufacturing business. These shifts, along many others over the last two decades, have been heavily influenced by the conglomerate Alibaba, affecting the supply chain of companies worldwide.
Before Alibaba existed, manufacturing in China was cheap but not easily accessible. Transactions were only available if a company had existing connections in China or could afford to make them. This meant taking 18-hour flights, hiring fluent Chinese speakers, and understanding the culture of an ancient society. Each step of the manufacturing process resulted in more travel and arduous communication. With the arrival of the internet, Alibaba’s founder Jack Ma worked to change this process.
The initial goal of Mr. Ma was to help small businesses in China be competitive by harnessing the powers of the internet. He accomplished this goal by allowing buyers and sellers to meet and make deals online. Today this includes C2B, B2B, and a plethora of other online services that Alibaba has either created or acquired. Each one affects thousands of supply chains throughout the world.
How Alibaba.com Works Today
Although the Alibaba Group now owns several massive companies, Alibaba.com still operates the same way. At the top of Alibaba.com’s home page there is a search bar that welcomes inquiries for products from bookmarks to motorcycle tires, most of which offer customizable options. From there, a buyer can either browse a list of companies that offer those manufacturing services, or he or she can create a RFQ (Request for Quotation) that will be sent out to thousands of companies. Creating a RFQ typically generates 100 or so emails within a day or two with quotes for the product to be manufactured.
After pairing up with a manufacturer, it’s only a matter of days before a product is shipped out (if a buyer is willing to reply as fast as their counterpart seller). Communication isn’t perfect, but with Google Translate major hiccups are avoided. Even payment is smooth with most companies allowing for international credit cards, e-checking, or of course, Alipay. With Alibaba, the supply chain is simplified. Big companies save money, and small companies thrive.
Alibaba Now and in the Future
Alibaba has always embraced technology. The internet was the first, obvious game-changer. But today they are using big data, AI, and cloud computing to improve small business transactions. For example, big data and AI help potential buyers find products they might want. Big data also makes it possible to match up customer’s RFQs with businesses that can actually manufacturer the desired products.
With China’s decline in the percentage of manufacturing retail products, Alibaba is taking action to turn challenges into opportunities. Opening Chinese retail shops, acquiring new companies, and opening international technology institutions are all a part of that plan. But behind it all is the acceptance and use of newer technology. Alibaba will continue to change the supply chain by embracing big data, the internet of things, or whatever else the future reveals.
Jacob Roberts is a freelance writer, content creator, and travel enthusiast. He graduated from Brigham Young University with a B.S. in Economics and a double-minor in Business Management and Music. When he is not traveling to a new city or country you can find him reading a new book, training for a triathlon, or improving his ping-pong skills.