As industry supply chain teams continue efforts in achieving 2017 year-end strategic, tactical, and operational line-of-business business and supply chain focused performance objectives, this is the opportunity for Supply Chain Matters to look back and review our prior 2017 Predictions for Industry and Global Supply Chains that we published at the beginning of this year.

Our research arm, The Ferrari Consulting and Research Group has published annual predictions since our founding in 2008.  Our approach is to view predictions as an important resource for our clients and readers, thus we do not view them as a light, one-time exercise. Not only do we research and publish our annualized predictions, but every year in November, we look-back and score our predictions for the year. After completion of looking back and scoring the current year projections, we will then transition into the unveiling of our 2018 Predictions.

As has been our custom, our scoring process is based on a four-point scale.  Four will be the highest score, an indicator that we totally nailed the prediction.  One is the lowest score, an indicator of, what-on-earth were we thinking? Ratings in the 2-3 range reflect that we probably had the right intent, but events turned out different. Admittedly, our self-rating is subjective, and readers are welcomed to add their own assessment of our individual predictions in feedback comments.

Prior postings in this series included Part-One- a look back at our 2017 overall global economic outlook and our specific predictions related to sourcing and procurement.

Part Two featured a revisit of our prediction related to a supply chain talent perfect storm as well as increased anti-trade geopolitical forces providing added sourcing challenges.

Part Three contained a revisit of our predictions relative to continued global transportation industry turbulence along with a prediction calling for a renewed renaissance in business systems and technology investments.

 

2017 Prediction: Amazon and Alibaba Would Continue to Position for Global Online Platform Dominance

Self-Rating: 4.0 (Max Score of 4.0)

Our prediction was that Amazon and Alibaba would aggressively continue to deploy strategies directed at global online buying platform dominance, but will remain cautious to perceptions of outright head-to-head competition. We further anticipated that both providers would step-up efforts to deploy respective B2C and B2B to B2C online buying platform capabilities among strategic geographies.

We concurred with Asia based business publications and industry observers earlier in the year that one of the primary battle grounds in 2017 will be India and Southeast Asia. We further anticipated an increased presence by Alibaba in the United States, offering U.S. businesses direct online platform presence across China and other Asian countries.

Indeed, both online dominants invested considerable sums throughout the year in securing strategic and tactical online capabilities within key Asian markets. By some estimates, the Southeast Asia e-commerce area is expected to grow twelvefold over the next 10 years to a level of $22 billion.

In August, Nikkei Asian Review acknowledged that shoppers and local online retailers in Southeast Asia have been long wondering when Amazon and Alibaba would start offering services in their local regions, and much of that became rather visible during the summer. In addition to a strong existing presence in India, Amazon introduced its two-hour Prime Now services in Singapore supported by a massive fulfillment center. While Amazon has exhibited a weak presence in the Alibaba dominated China online sector, both are actively investing for dominance in other Asia-based regions.

Thus far, Alibaba has elected to pursue strategic acquisitions and equity investments in existing online providers in India and Southeast Asia rather than Amazon’s strategy for building a meaningful presence in various local regions.

India

We had noted that India was on-track for becoming the third largest nation of Internet users over the next few years, given the rising middle class and prospects for large numbers of added consumers turning to online for the first time.  By some estimates, upwards of 75 percent of India’s Internet users span an age group of 15-34 years old, a population that aspires to growing aspirations and is quite comfortable in shopping online for the latest trends. The government of India restricts Foreign Direct Investment in that country’s established brick and mortar retail sectors, but not so for the online retail segment. Thus, online retail efforts come from joint investments, ownership alliances and technology exchange among existing in-country players and foreign investors which can benefit local online retailers. India’s overall logistics infrastructure is undeveloped, thus online providers must also take on localized delivery challenges through more direct control of last-mile fulfillment.

Amazon Founder Jeff Bezos visited India in 2014 and since that time, Amazon has plowed upwards of $5 billion in current and planned future investments. In 2017, Amazon India reached out to local suppliers and local retailers to partner with added programs to reach into smaller towns.  India’s Standard Times reported this week that Amazon has made its third capital infusion this year, amounting to $2.6 billion and may well exceed its original $5 billion commitment, a continued indicator that Bezos will not concede in India. Amazon’s Alexa voice assistant has now been programmed to speak “Hinglish,” a blend of Hindi and English with a noticeable Indian accent and reportedly has added 10,000 additional skills native to the country. There are currently a reported 41 fulfillment and delivery centers across 13 cities across India. Amazon India has further boasted that 90 percent of its more than 200,000 online sellers utilize Amazon’s logistics services.

Meanwhile, Alibaba has taken a reported 60 percent control of India’s E-Commerce Paytm platform placing the Chinese giant closer to a formal entry into the country, competing with local online providers Flipkart, Snapdeal and Amazon India.

The Wild Card

We predicted that Alibaba would likely be the proverbial wild card in its built-out capabilities for supporting large-scale mobile payments based transactions in online B2C commerce along with its network of logistics infrastructure delivery vehicles and delivery persons who navigate complex or vague delivery addresses or who must utilize ingenious means to transport these significant volumes of packages among dense urban streets, alleyways, or rural addresses. The rest of Southeast Asia still lacks cohesive or dominant online payment systems.

In 2017, Jack Ma and his team have concentrated investments in various existing online Asian e-commerce platforms in India, Singapore, Thailand, Pakistan in efforts directed at establishing a common regional platform payments and logistics system. In April, a $1 billion investment was made for majority control of Lazada which operates in Singapore, Malaysia, Thailand, and Vietnam. Bloomberg declared that this development was tantamount to the expected Alibaba and Amazon clash for control of Southeast Asia.

The United States

After the election of President Trump, Alibaba founder Jack Ma visited Trump Towers to meet with the President-elect to jointly announce a program to help U.S. small and larger businesses the ability to market and sell their products more directly in China. Some of these capabilities were demonstrated in this year’s Singles Day online shopping holiday across China.

Based on all the above, our prediction turned out to be on the money.

 

2017 Prediction: Business Self-Interest Will Fuel Continued Efforts in Supply Chain Sustainability Actions and Focused Initiatives

Self-Rating: 4.0 (Max Score of 4.0)

Despite the campaign declarations by U.S. President Trump that climate change has not been proven to be an issue, we predicted that individual business and supply chain self-interest needs, along with the track-record of benefits to-date, will continue multi-industry green and supply chain sustainability initiatives and momentum.  There was literally too much positive momentum on a global basis to motivate senior executives to derail such efforts in 2017.  We believed that the need remained compelling and indeed, that is what has occurred for most of industries and businesses.

The evidence of climate change impacts on business increased in 2017, both in the occurrences of unprecedented flooding and more catastrophic storms, and in evidence of the continued warming of the planet. Today, the United States and war-ravaged Syria remain the only countries that have not joined the UN’s Global Climate Initiative.

When President Trump announced the US withdrawal in June of this year, which takes effect in 2020, the United Nation’s chief climate negotiator ended up thanking him. “It provoked an unparalleled wave of support for the treaty,” stated Christiana Figueres. “He shored up the world’s resolve on climate action, and for that we can all be grateful.” Many U.S. states and major cities have also elected to continue with pledges to curb climate change and adhere to the tenets of the COP 21 Climate Change Agreement.

Throughout 2017, companies continued to report progress on sustainability goals, some even accelerating plans related to supply chain focused sustainability in agriculture, commodities, and manufacturing practices.  New alternative energy businesses continue to thrive across the globe and sustainability practices have led to added innovation.

Once again, this was a prediction that was bound to occur and indeed, it did occur. The business case remains compelling.

 

In our next and final blog posting in this series we will look-back and self-rate our 2017 industry-specific supply chain predictions.

 

Bob Ferrari

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