Good for the Earth, Good for the Business

Analysing Alibaba Cainiao’s Smart Green Logistics Strategy

In November 2020, after the world’s largest online shopping festival, also known as Singles’ Day or “11.11 Global Shopping Festival” in China ended on a high note, the express delivery industry was again confronted with issues of burgeoning packaging waste and increasing carbon footprint from parcel deliveries. Cainiao Smart Logistics Network, a logistics arm of Alibaba Group, the largest e-commerce company in China, had been mitigating the impact caused by rapid e-commerce and logistic development. Green logistics was Cainiao’s proposition for corporate social responsibility.

Established in May 2013, Cainiao played a critical role in logistics and fulfilment to support the Alibaba’s Group’s global and domestic e-commerce businesses. Daniel Zhang, Chairman and CEO, affirmed the importance of logistics in delivering top-tier customer service and supporting the Group’s New Retail strategy of providing seamless online and offline shopping experiences.

As an ecommerce logistics platform, the primary function of Cainiao was to connect Alibaba marketplaces, warehousing systems, merchants, and third-party logistics service providers. As of 2020, its network comprised 3,000 partners, including the top 15 carriers in China and three million couriers. Decentralised and horizontally integrated with third-party logistics service providers, Cainiao’s integrated strategy had the prime advantages of being asset-light and scalable.

Pursuing sustainability through collective efforts across the value chain was a key approach of Cainiao’s green logistics campaign. As the initiator of the green campaign, the company aimed to lead the industry towards change in two ways: bringing about better customer experiences and engaging the industry in sustainable development.

The first of such large-scale initiative started in 2016 when Cainiao took the lead to launch the Go Green campaign, the largest environmental protection campaign in China involving 32 industry partners. Targeting to reduce 3.5 million tons of carbon emissions by 2030, the campaign planned to promote green logistics through green packaging, green recycling, green technology, and green distribution.

Cainiao continued its efforts in lowering its ecological footprint with the digitalisation of operations and its smart logistics infrastructure, underpinned by emerging technologies. To reduce the environmental impact of packaging waste, it developed an artificial intelligence (AI) algorithm to increase packing efficiency and maximise space utilisation of carton boxes. Cainiao also began pushing the boundaries of traditional warehouse management through big data analytics, AI, Internet-of-Things (IoT) and edge computing. To make transportation process greener, the company invested in an environmental-friendly fleet of delivery vehicles to reduce energy consumption and air pollution.

As governments around the world laid out plans for a green recovery from Covid-19 crisis, organisations and businesses could do their part by contributing to their countries’ transition to greener economies. Meanwhile, Cainiao had started researching into ocean conservation as plastics from packages contributed to land waste and would end up in the sea. Separately, it also worked hand-in-hand with the government, non-profit organisations, supply chain partners, and consumers to explore more ways to lower the ecological footprint and mitigate the damaging effects of rapid e-commerce and logistic development.

Much work remained to be done, but at a cost. How could Cainiao strike a balance between the costs and benefits of going green? What would be the right mix between optimising economic and ecological goals?

This case study, written by Liang Hao, SMU Associate Professor of Finance and Lee Kong Chian Fellow; and Dr. Cheah Sin Mei at The Centre for Management Practice (CMP) at SMU, evaluates how Cainiao, a smart logistics platform enabled by technology, implements its smart, green logistics strategy while seeking to balance efficiency and economic profits. The case also analyses the ways in which companies can facilitate green logistics and identify opportunities to pursue sustainability across the entire supply chain.

To read the case in full, please visit the CMP website by clicking here.