Introduction
Supply chain risk management is systematically identifying and mitigating potential risks at each stage of the supply chain, including but not limited to initial manufacturing, packaging, storage, shipping, operations, and disposal, to keep the chain running smoothly (Bier et al., 2019). Alibaba Group is a vast online marketplace with a complex supply chain to distribute products and services between its many online marketplaces (Falcone et al., 2019). Effective supply chain risk management is crucial to the business’s performance because of the complex nature of its supply chain, which includes a web of suppliers, producers, logistics providers, and dealers.
Imminent Risk in Alibaba Group Supply Chain
Global pressure is still generated by the existing supply chain issues that the COVID-19 epidemic exacerbated. Lockdowns and restrictions hinder the smooth transport of finished products and raw materials along the supply chain. After the worldwide lockdown brought on by the COVID-19 epidemic three years ago, Alibaba’s supply network faced several difficulties (Han et al., 2022). In this time frame, logistical problems and Supply Chain Price Dynamics posed two significant threats to Alibaba.
Transportation and Logistics Problems
The ease of international trade allows businesses to expand into new markets and win over new customers, improving their commercial prospects. Meanwhile, this has prompted an expansion of their supply chains’ use of international transportation and logistical systems. Delays further down the supply chain are possible as a result.
Failure in other systems may impair the transportation supply chain. An example is a natural disaster like an earthquake or landslide. The affected locations could impede significant transportation routes as a result. Because of this, there will be a lag in the supply chain when systems are updated.
The coronavirus epidemic is another recent case in point. Lockdowns implemented to stop the spread of the pandemic to other nations result in more challenges in getting products to customers (Han et al., 2022). Additionally, resource movement throughout the supply chain becomes slower. Due to transportation delays caused by regional lockdowns and limitations, Alibaba could not fulfil its declared delivery time frames.
Mitigation for Transportation and Logistics Problems
Transport Diversification
Alibaba should consider working with various transportation companies to increase options and response speed, reducing the magnitude of setbacks spurred by factors like strikes, adverse weather conditions, or unforeseen delays. According to Ivașcenco (2023), Risk distribution is a cornerstone of supply chain risk management, and diversifying aligns with this concept.
Monitoring and Surveillance in Real Time
The company should invest in cutting-edge tracking technologies for real-time monitoring, which is required to improve supply chain transparency, facilitating early detection of possible disruptions and prompt remediation. Ivanov (2021) affirms that supply chain risk management depends on the principle of end-to-end visibility.
Safety Stock
The company should ensure an adequate reserve and safety inventory at significant points in the supply line to safeguard the continuity of product delivery in the face of unforeseen circumstances. Bier et al. (2019) state that using safety stock is a risk-reduction approach to inventory optimisation to deal with uncertainty.
Flexible Supply Chain
The Alibaba supply chain should be adaptable to changes in demand and consider alternative shipping and sourcing alternatives. It guarantees flexibility amid obstacles such as closures of roads, strikes, and sudden shifts in transport routes. The concept of supply chains adaptable to changing demands is consistent with enhancing agility strategy for reducing risk (Ivanov et al., 2014).
Collaboration
Alibaba should ensure open lines of communication and close partnerships with its manufacturing, logistics, and supply chain partners. Establishing transparent avenues for information exchange facilitates speedy resolution of issues and decision-making amid disruptions. Risk mitigation depends on efficient teamwork, highlighting the value of exchanging data across the supply chain (Bier et al., 2019).
Supply Chain Price Dynamics Risk
Policies regarding the economy and emerging markets affect pricing, a significant risk in the supply chain (DuHadway et al., 2019). A major threat to Alibaba’s supply chain is price instability, mainly impacted by international financial regulations and the geographical spread of its vendor network. Alibaba operates on a worldwide scale, with suppliers in many different areas. Exposure to various economic policies increases the possibility of price changes among suppliers beyond Alibaba’s setting (Han et al., 2022). The prices of raw materials may rise or fall from the shifts in supply and demand. Moreover, the emergence of new markets could culminate in political instability, which can cause inflation and disruptions in the supply chain. Political unrest in these countries raises the risk of higher prices and supply chain disruptions, threatening Alibaba’s business operations.
Mitigation Strategies for Supply Chain Price Dynamics
Supplier Diversification
The company should create a global supply network that considers regional economic stability, which helps reduce the possibility of price swings due to regional economic policy shifts. According to Bier et al. (2019), diversifying provides options in situations of economic uncertainty and aligns with the risk prevention concept of risk spreading.
Price Adjustment Clauses in Long-Term Contracts
When entering long-term agreements with suppliers, there should be provisions that allow for price increases or decreases to be implemented due to changes in economic policy, as it ensures fairness and consistency in all pricing arrangements. This approach is supported by the contractual safeguards principle of risk management and serves to deal with price variations (Ivașcenco, 2023).
Economic Policy Monitoring
The company should initiate a framework to track and assess national and international economic policies. It should be aware of possible modifications that might influence prices and proactively cope with them. The risk reduction strategy, described as “staying ahead of potential disruptions,” supports the proactive monitoring concepts (DuHadway et al., 2019, p. 2).
Emerging market risk mitigation
There should be backup strategies customised to the unique risks emerging markets pose. If political unrest causes prices to rise, it is essential to be prepared with backup supply chain routes and sourcing methods. The concept of risk mitigation, which advocates for being ready for unforeseen disruptions, correlates with the practice of emergency preparedness (DuHadway et al., 2019).
Conclusion
Alibaba Group faces significant risks in its global supply chain due to logistical issues and price dynamics, particularly following the COVID-19 pandemic. Alibaba should employ transportation diversification, real-time monitoring, safety stock management, flexible supply chain solutions, and collaborative efforts to mitigate these challenges. Additionally, the company should address price instability caused by economic policies and emerging markets, which can impact raw material costs and operations. The supply chain’s overall resilience and efficiency are improved by applying these methods to proactively detect, react to, and rebound from logistical challenges.
References
Bier, T., Lange, A., & Glock, C. H. (2019). Methods for mitigating disruptions in complex supply chain structures: a systematic literature review. International Journal of Production Research, 58(6), 1835–1856. https://doi.org/10.1080/00207543.2019.1687954
DuHadway, S., Carnovale, S., & Hazen, B. (2019). Understanding risk management for intentional supply chain disruptions: risk detection, risk mitigation, and recovery. Annals of Operations Research, 283(1-2). https://doi.org/10.1007/s10479-017-2452-0
Falcone, E., Kent, J., & Fugate, B. (2019). Supply chain technologies, inter-organizational network and firm performance. International Journal of Physical Distribution & Logistics Management, 50(3), 333–354. https://doi.org/10.1108/ijpdlm-08-2018-0306
Han, B. R., Sun, T., Chu, L. Y., & Wu, L. (2022). COVID-19 and E-Commerce Operations: Evidence from Alibaba. Manufacturing & Service Operations Management, 24(3). https://doi.org/10.1287/msom.2021.1075
Ivanov, D. (2021). Digital Supply Chain Management and Technology to Enhance Resilience by Building and Using End-to-End Visibility During the COVID-19 Pandemic. IEEE Transactions on Engineering Management, pp. 1–11. https://doi.org/10.1109/tem.2021.3095193
Ivașcenco, I. (2023). BUILDING SUPPLY CHAIN RESILIENCE AND ANTIFRAGILITY: STRATEGIES AND TECHNOLOGIES FOR MITIGATING DISRUPTIONS. Eastern European Journal for Regional Studies (EEJRS), 9(1), 70–76. https://www.ceeol.com/search/article-detail?id=1131036
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