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Nestle works with Cainiao to increase supply chain efficiency in China

Swiss food group Nestle has teamed up with Cainiao, the logistics arm of online marketplace Alibaba, to streamline its e-commerce supply chain in China.

The two companies designed and implemented a new all-in-one inventory solution that integrates Nestle’s warehouse stock across Alibaba’s platforms into an analytics-driven, shared inventory.

Dubbed ‘One Inventory,’ the solution increased the percentage of Nestle products available for second-day delivery from 30% to 70% in its first 20 days since implementation.

Rebecca Wang, vice president and head of e-commerce at Nestle China, said, “Through combining resources across multiple channels, we hope to build a smarter, new supply chain. This will form the foundation of our ‘New Retail’ efforts and provide a strong boost for our online business.

“We were very troubled by some issues involving our Tmall Supermarket supply chain, such as low efficiency and slow shipping times, so both sides came together to develop the ‘One Inventory’ collaboration seen today. Cainiao provided a logistics perspective, while Nestle offered views from the brand side, coming from our experience in New Retail business strategies and understanding of supply chain infrastructures,” Wang added.

Nestle sells products via four different channels on Alibaba’s e-commerce platforms, including Tmall, Tmall Supermarket, Rural Taobao and Lingshoutong, an initiative to modernize China’s small family-run shops.

As part of the new partnership, Nestle cut its four distributors in China down to one and moved all of its stock on the online marketplaces Tmall and Tmall Supermarket to nearly a dozen Cainiao warehouses across China. The next stage will involve integrating offline channels Rural Taobao and Linshoutong into a single, streamlined platform as well.

Leveraging consumer and sales statistics from the half-billion daily active users visiting Alibaba’s platforms, Cainiao consults Nestle on smart stock allocation, suggesting the best warehouses to place products that will most-likely be purchased by nearby consumers.

Cainiao also offers Nestle real-time supply-shortage alerts and inventory forecasts. Nestle said it expects to save an estimated US$1.57m in annual supply-chain costs by the end of the year.

Yura Zou, head of e-commerce supply chain, Nestle, said, “We used to see one warehouse sell out completely, while another region had excess inventory. Each channel had its own inventory we had to manage separately. Integrating these different inventories meant improving agility in a replicable model that would remove a major pain point for the industry.”

February 21, 2018

Written by Daniel Symonds

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