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Module: Supply Chain Strategy & Process

1. Introduction

This report intends to examine the cost related performance objective of two leading e-
commerce giants, Amazon and Alibaba. The basis of the report will lie in critically evaluating
and comparing the strategies of both organizations specifically with an emphasis on their
supply chain and operational performance. A group of products identified for Amazon is
consumer electronics, whereas for Alibaba, the group selected was clothing and accessories.
The understanding here is on how the two companies effectively keep their costs under control
and managed well within their global supply chains so as to remain competitive within their
markets.

Background Information

Company A: Amazon.com

Amazon.com, Inc. is an American multinational technology company based on e-commerce,

cloud computing, digital streaming, and artificial intelligence. The company was founded in
1994 by Jeff Bezos; it started as an online bookstore. Over the years, Amazon has diversified
its products and services into virtually all types of products and services through business
expansion. Now it operates a large-scale global supply chain to serve millions of customers
worldwide.
Amazon reported revenues of $513.98 billion in the year 2023, most of it being from its income-
generating arm, which includes online retails, cloud computing services under Amazon Web
Services, and other operations like digital streaming and artificial intelligence. With this, it is
very clear that the company has thrived in a technological and logistics innovative manner;
hence, it has managed to be among the most valued companies globally.

Competitor: Alibaba Group Holding Limited,

The other firm is Alibaba Group Holding Limited, which is also a large Chinese multinational
conglomerate specializing in e-commerce, retail, internet, and technology. It was founded in
1999 by Jack Ma and 17 friends and students in the aim of creating a marketplace to help
small businesses. In the era of founding, Alibaba has been able to rise to be one of the largest
e-commerce companies in the world, with business division categories of both B2B and B2C
e-commerce through sites like Tmall, Taobao, and AliExpress. In 2023 Alibaba reported a
revenue of $126.49 billion through its core commerce operations, cloud computing, and digital
media and entertainment segments. This would possibly have the most innovative business
model, as it has adopted technology to connect buyers and sellers globally.

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Both companies would have appeared to have entrenched themselves within their
marketplace as the leaders. Amazon would be the market leader within the Western
hemisphere and Alibaba would have successfully dominated within Asia. It is, therefore, a
demonstration of the remarkable growth and sustenance of effective business strategies that
the two companies maintained in 2023.

2. Global Supply Chain Structure

Supply Chain Integration and Coordination

Supply chain integration is the interconnection and alignment of business operations among
firms that are interconnected across the business environment (Wong, Boon-itt, & Wong,
2011). The members can thus improve performance in trying to meet set common objectives
while sharing information and resources effectively (Yu et al., 2014). This was what made
effective coordination possible, a kind of management of dependencies between activities and
dependencies between participants, limiting the overall level of performance (Christopher et
al., 2011).

The Supply Chain Resilience

The supply chain resilience comprises capacities to undertake plans that are capable of
response and recovery when they experience a disruption (Gurbuz et al., 2023). The risk
management part of resilience allows the organization to identify and assess risks in the
supply chain before taking action to forestall the identified risk (Juttner et al., 2003).
An example of a strategy for developing such a resilience includes diversification and flexibility,
even redundancy (Yu et al., 2019).

Measurement of Supply Chain Performance

Performance measurement is the critical factor in order to assess efficiency and effectiveness
within the supply chain and further development. The balanced scorecard approach,
developed by Kaplan and Norton (1992) through a mix of business activity measurements and
the realization of organizational vision and strategy, improves communication and
performance through monitoring against set strategic goals (Neely, 2007).

Supply Chain Strategies

Supply Chain strategies provide guidelines on the way to align the supply chain with the
business strategy in order to secure a competitive advantage (Ward et al., 1998). In general,
many companies follow one out of the three strategies in an attempt to lead over competitors
and fulfill the needs of customers.

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Sustainability in the Supply Chain

Sustainability focuses on balancing economic, social, and environmental performance in the

activity of the organization, known as the triple bottom line (Savitz & Weber, 2014). The term
refers to the approach where no sustainability negative impacts on the environment and
society yet profitability is maintained (UN, 2018).

Lean and Agile Supply Chains

In essence, Agile and Lean represent conflicting paradigms. Where Lean supply chains strive
to take out waste from the supply chain and attain much greater efficiency, Agile supply chains
zero in on the pliability and receptivity of the supply chain (Christopher & Ryals, 2014). The
choice is relevant to its demand by customers (Chavez et al., 2013).

Amazon’s Supply Chain

Amazon's chain of supplies is one of the widest and efficient worldwide, including a number
of suppliers, completion centers, and delivery partners. This is because the supply chain of
the company is global-based. This is in the sense that it sources the products from its various
suppliers and distributes them through its wide-reaching network of fulfillment centers located
at strategic places around the globe (Amazon, 2023).

Supply Chain Members

There are supply chain members for Amazon. It may include:

 Manufacturers: these are the suppliers who produce the items that Amazon sells
directly to the customers or through the marketplace it has developed. Examples of
what they sell range from electronic equipment to clothing and household appliances.
 Third Party Sellers: This may refer to businesses or simply individuals who are using
the platform provided by Amazon to make their sales. In fact, many of these sellers'
orders are fulfilled by Amazon through the "Fulfilled by Amazon (FBA)" program, from
storage, packaging to delivery.
 Logistics Providers: They own a logistics network called Amazon Logistics and team
up with several third-party logistic providers in delivery and transportation services.
 Fulfillment Centers: It's the center of activity for much of Amazon's supply chain, a
fulfillment center where goods are stowed, picked, packed, and shipped to customers.
In doing so, Amazon has positioned itself with over 175 fulfillment centers around the
world.

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 Shipping and Delivery: Encompasses delivery fleets from Amazon, independent

delivery service providers, and traditional carriers like UPS and FedEx.
 Customers: The customer should be the driving factor in the demand set preferences
and demands for the driven operations and supply chain strategies of Amazon. With
leading technology at the helm, Amazon's supply chain is customer-driven. Supply
Chain Processes

Performance and Efficiency

The supply chain of Amazon that has been working globally, there are two critical highlights:
efficiency and speed. The company has recently invested billions in technology and
automation to ensure smooth operations with lower costs for better customer service
(Christopher, 2016). In the year 2023, Amazon revealed that it delivered strong performance;
its logistics innovations and effective supply chain management made it happen (Amazon,
2023).

Table 1. Amazon's Supply Chain Structure

Component Details
Manufacturers Those Suppliers who produce goods for Amazon to sell or for marketplace
sellers to use.
Third-Party In Businesses or individuals selling products on Amazon's platform, often
Sellers using Fulfillment by Amazon (FBA).
Logistics In Amazon Logistics and third-party providers for transportation and
Providers delivery.
Fulfillment Over the 175 centers worldwide where goods are stored, picked, packed,
Centers and shipped.
Delivery Amazon’s delivery fleet, independent delivery providers, and traditional
Partners carriers worldwide.
Customers In which, End consumers who drive Amazon's operations and strategies.

Table 2. Amazon's Supply Chain Metrics

Metric Value (2023)

Fulfillment Centers 175+
Logistics Providers 3,000+
Third-Party Sellers 2 million+
Revenue (USD) 514.0 billion

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Net Income (USD) 33.4 billion

Figure 1. Amazon's Supply Chain Graph

Alibaba's Supply Chain

The supply chain structure of Alibaba is unique by nature, functioning mainly on a model where
buyers and sellers are connected through a platform. The business environment of the
company hosts a large number of suppliers, third-party sellers, and logistic partners, permitting
them to deal with both domestic and cross-border trade (Alibaba, 2023; Christopher et al.,
2011).

Supply Chain Members

Alibaba's supply chain members. It may include:

 Manufacturers: On this one, Alibaba is pretty much like Amazon. It gets products from
various manufacturers. The company works much like a marketplace, with
manufacturers selling directly to consumers or businesses.
 Third-Party Sellers: A host of third-party sellers line up on Alibaba's Tmall and Taobao
offerings, reaching millions of customers.

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 Logistics Partners: Alibaba wholly owns the logistics affiliate Cainiao, which
coordinates delivery and shipping across the platforms. The company also has
cooperation with quite a number of third-party logistics providers.
 Cross-border Partners: Alibaba trades with cross-border partners who take care of
anything from customs clearing to international shipping for international trade.
 Customers: Alibaba's customers are the businesses and the individual consumers,
who are directly served by the e-commerce giant through its platforms.

Supply Chain Processes

The Alibaba supply chain processes focuses on the enhancement of its role as an
intermediary, platform-based logistics, and facilitation to encourage global trade
(Harrison,Hoek, & Skipworth, 2014).

The major key processes involve:

 Platform Operations: Alibaba carries out its operations through various platforms,
including Tmall, Taobao, and AliExpress, respectively serving the different markets of
consumers.
 Logistic Coordination: The platforms work on a business-to-consumer, consumer-
to-consumer (C2C), and this includes delivery services coordinated across various
logistics providers with the intent to optimize shipping routes and lead times.
 Alibaba on Cross-Border Trade: It offers cross-border trade services ranging from
customs clearance to global shipping and local customer support.
Supply Chain Finance: They assist suppliers and vendors in matters of trade financing
and payment processing.

Table 3. Alibaba's Supply Chain Structure

Component Details
Manufacturers The Suppliers who produce goods for Alibaba's marketplace or for
direct-to-consumer sales.
Third-Party In Businesses or individuals selling products on Alibaba’s platforms
Sellers (e.g., Tmall, Taobao).
Logistics They have Cainiao and third-party providers for transportation and
Providers delivery.
Cross-Border They have partners facilitating cross-border transactions, customs
Partners clearance, and global shipping.

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Customers Their Business customers and individual consumers across various

Alibaba platforms.

Table 4. Alibaba's Supply Chain Metrics

Metric Value (2023)

Marketplaces 3 major platforms
Logistics Providers 2,000+
Third-Party Sellers 10 million+
Revenue (USD) 134.6 billion
Net Income (USD) 23.1 billion

Figure 2. Alibaba's Supply Chain Graph

Performance and Efficiency

Alibaba is oriented towards flexibility and efficiency through the platform in its supply chain.
The financial data reflects the asset-light model being practiced in a strongly coordinated world
of global trade and logistics (Alibaba, 2023). This platform-based model would, therefore, avail

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Alibaba more flexibility in adapting to market changes and be less structured in the cost they
incur.

Applications in Practice

Amazon

Amazon exemplifies of supply chain strategies and processes that are integrated towards a
more customer-focused supply chain. The company focuses on operational efficiency with the
aim of furthering customer value through the use of technology and innovation alongside cost
leadership (Amazon, 2023). The business objective of Amazon, Earth's most customer-centric
company, reflects very well in its supply chain strategy, which mainly targets efficiency, speed,
and reliability (Chopra & Meindl, 2015).

Alibaba

Alibaba’s supply chain was mainly built around a platform approach—gearing toward
facilitating global trade. The company's supply chain strategy is designed such that global
business and consumers connect through partnership and technology, making logistics
flexible and able to be optimized (Alibaba, 2023). From this point, it is evidently clear that the
main focus of the business objective of Alibaba is to provide means by which small- and
medium-sized enterprises (SSMEs) can compete at the international level through cross-
border trade and the integration of supply chains (Harrison, Van-Hoek, & Skipworth, 2014).

4. Operations Performance Objective: Cost Efficiency

Amazon's Approach to Cost

The operations are excellent with cost efficiency by use of automated warehousing, inventive
delivery methods, and economies of scale. The company leverages its base through
continuous improvement and streamlined operations while costing less but makes the
customer even happier (Chopra & Meindl, 2015; Slack, Brandon-Jones, & Johnston, 2016)

Cost Structure

The cost structure of Amazon is highly influenced by the logistics network and technological
investments. Its 2023 annual report has shown remarkable investment in automation and
technology aimed at making the fulfillment centers more efficient, hence resulting in decreased
labor costs and improved throughput. Human data analytics help to optimize inventory
management, hence minimizing holding and obsolescence costs. Efficient supply chain

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management and technology, according to Heizer, Render, and Munson (2017), have an
effect on good chains' performance internationally, coupled with cost reduction in most cases.

Competitor Analysis

Compared to Alibaba, the cost structure of Amazon represents huge fixed costs led by a mass
logistic network. However, the virtue of this structure allows Amazon to adhere to shorter
delivery times and keeps control in terms of customer experience (Christopher & Ryals, 2014).
Further, the company's penchant lies in its unbeatable value and commitment to offer fast and
reliable delivery with widest selection across categories, mandating the firm to ensure that
there are significant investments in warehousing and fulfillment infrastructure.

Financial Performance

Financial performance is the clear reflection of operational excellence in focus at Amazon.

Therefore, yes, there is certainly an increase in operating expenses, but the same is being
pumped into logistics and technology, and yet, the resultant revenue grows vigorously.
Actually, by far, North America contributed about 60.79% of the firm's net sales in FY 2023. In
that year, Amazon's net sales from its e-commerce and subscription services activities
amounted to approximately $513.98 billion, while the reported net income realized was $21.33
billion.

Alibaba's Approach to Cost

On the other hand, Alibaba has used its platform model for cost cutting by outsourcing its
logistics services to their partners. Its core focus is to be the center of focus for its core
strengths like technology and platform services (Ferdows & De Meyer, 1990). Savitz and
Weber (2014) are clearer in their statements of the fact that the above-mentioned outsourcing
and cooperation might be too heavy strategies for every company willing to stay both flexible
and reduce costs within the frame of their supply chains. The company has, however, put an
emphasis on a focus of 2023 for the annual report to build on its potential to save on cost by
consolidating partnerships and shared services. The company leverages one of the logistics
affiliates, Cainiao, for its supply chain operations, thus minimal direct exposure to logistic
operations and associated high operational costs (Ellram, Tate, & Billington, 2004). This
platform-based approach provides Alibaba with an asset-light cost structure, allowing it to
maintain lower fixed costs compared to Amazon in 2020.

Cost Structure

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The annual report squarely outlines that the saved cost is largely through partnerships and
shared services. Take supply chain operations, for example; they are managed via the
logistics affiliate Cainiao, hence reducing direct involvements in logistic and operational costs
(Ellram et al., 2004). This asset-light structure of the platform-based approach leaves Alibaba
with very low fixed costs when compared to Amazon.

Competitor Analysis

On the other hand, the cost structure of Alibaba is more variable in an assertion that it is an
asset-light company. This cost structure hence benefits from much lower capital and
operational expenses while at the same time allows flexibility and possibility for rapid scaling
in response to market demands (Neely, 2007). On the other hand, Alibaba's would focus on
third-party partnerships for logistics and thus avoid potential capital outlay on infrastructure.

Financial Performance

This unveiling the financial performance of Alibaba, it showcases the key diligence of on
platform service and flexible management of the cost. For the fiscal year 2023, Alibaba
unveiled the revenue amounting to 134.57 billion dollars and the net income of 20.28 billion
dollars. Even with the base cost for operating, Alibaba's flexible business model does help in
marking substantial revenue on the base of the large ecosystem for e-commerce and
technology services.

Comparative Analysis

Amazon and Alibaba cost a fee for their services, and both are e-commerce giants; however,
they differ greatly in their global supply chains.

Cost Comparison

Amazon's intense focus on operational excellence and investments in technology ensures

superior efficiencies in all aspects, with a disadvantage only on costs that are fixed. On the
other hand, Alibaba, through its platform-based model and strategic partnership, tries to cut
down their cost, since it is a variable factor by nature (Yu, Chavez, Jacobs, & Feng, 2018).
The table and graph below indicate their cost structures and financial performance.

Table 5. Cost Comparison of Amazion.com and Alibaba

Company Net Sales (Billion USD) Net Income (Billion USD) Cost Structure
Amazon 513.98 21.33 High fixed costs
Alibaba 134.57 20.28 Variable, asset-light

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Conclusion
The approach of Amazon is very cost-efficient in operations, which tells the increased fixed
cost of the firm but quick and reliable delivery with much variety in its product lines. On the
other side, Alibaba is flexible and wants to set up a partnership with a more variable cost
structure and quicker response to changes in the marketplace. This being the case, it
establishes a perfect match in both cases for the companies: their approaches and their
strategic market position.

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