Moving Ahead with IT Innovation

info@artificialinfotech.com 014469986 Kathmandu

The Future of Work - Automation in Alibaba

The Future of Work - Automation in Alibaba

03 Jan 2019 07:03

Research by: Nabaraj Giri
Title: The Future of Work
Date: 2019

Table of Contents

1.      Introduction. 1

1.1.       services of Alibaba. 1

1.2.       Alibaba Targeted Market and competitors. 2

2.      Literature Review.. 3

2.1. Pessimist View.. 3

2.2. Optimist View.. 4

2.3. Impact of Automation on Employment. 4

2.4. Analysis of Alibaba. 5

2.5. Optimist Viewpoint – Refocusing of Skills. 7

Conclusion and Recommendations. 8

Bibliography  9

Appendix  12


 

  1. Introduction  

Automation known as making process or machines self-moving or self-acting (Hills, Gale, & Ed. Virgil L. Burton, 2017. p77-80). Automation also referred technique of making machines, devices, procedures or process complete automated and more efficient than human (Hills, Gale, & Ed. Virgil L. Burton, 2017. p77-80). Nowadays, the terms of technological unemployment being popular due to automation in the various industries there are several examples to demonstrate (MGI, 2013) but in this report analyzing the case of Alibaba Group. Alibaba Group Holding Limited was established in 1999 by Jack Ma and his other 18 sisters and brothers. It is a Chinese multinational retail, e-commerce, AI, internet and technology company (Alibaba Group, 2018).  It provides business-to-consumer, business-to-business and consumer-to-consumer sales services via websites, as well as electronic payment services, cloud computing and shopping search engines services (Fortune, 2018).

  1. 1. services of Alibabaimages 2 : Alibaba Group Holding limited services, Source: (Alibaba Group, 2018)

  2. Alibaba Targeted Market and competitors

The Alibaba targeted market is global market and the company of Alibaba has more than 70 offices in cities in Singapore, China, India, Europe, USA and Japan (Havinga, Hoving, and Swagemakers, 2014)

images 3: Competitors of Alibaba. Source: William Carpenter (2016)


 

2. Literature Review

According to the Keynes (1933, p 3) over the past few years machines have substituted for number of different types of jobs, for example telephone operator job, book keeper job, and cashier job (Breshahan, 1999; MGI, 2013). Moreover, the very weak performance of the human labor market across developed economics have intensified the debate regarding technological unemployment between economists.

Woirol (2006, p.480) described that the "technological unemployment" initially written an article by Sumner Slichter in February 8, 1928 in the New Republic. Slichter, initially, did not trust in the existence of a negative relation among employment and automation. This article review by the American Economic, he stated that in several companies' essential technical advancement in the last six or seven years have been attended by extensive rises in the employment'.  Wicksell (1961) noted that fall in labor demand because of new labor saving automation may lead to a reduction in wages, encouraging rising in employment demand.

 

2.1. Pessimist View

According to the McAfee and Brynjolfsson (2011) the development rate of sophisticated technology and automation is very high, which is disturbing the labor markets by reducing in labor. Fary and Osborne (2017) also agreed with the view of McAfee and Brynjolfsson (2011) when technology started to replace the labor they impacted to technological and intellectual property.  

Levy and Murnane (2004) demonstrated a good example of automation which is totally replaced the human labor is autonomous Google's driverless car and they have also asked the questions "why peoples still matters? ". Goldin and Katz (2009) stated that some jobs have already disappeared with advancement in automation and several jobs are now about to be replace.  Pianta and Antonucci (2002) stated the based-on studies of 21 manufacturing companies in five European nations identified that job losses experienced between 1989 to 1993 trended to be heavier in businesses with high innovation strengths.

2.2. Optimist View

Frey and Osborne (2016) presented the positive view on automation robots have high reliability and it can produce high quality goods and services similar to human labour. Frey and Osborne (2016) also stated that when the significant number of organizations enter businesses with high reliability and productivity, the number of demand of labor rises in order to maximizing the revenue.  As stated by Katz and Margo (2013) automation deduce the cost of the product, producing quality goods in limited time and cost, which create the more demand in markets that also create demand higher and lower skilled manpower. Company generate more profits which enables to pay higher wages which resulting in higher investment, consumption, production and more jobs (Katz and Margo, 2013).  

Nordhaus (2007) emphasized a positive link among automation and job creation. Furthermore, Dorn and Author (2013) and Manning and Goos (2007) also describes that skilled manpower cogitative tasks would gain the competitive benefits by creating employment as middle-level routine jobs would be increased.

2.3. Impact of Automation on Employment

Most of the study identified that technological innovation had a positive relationship on jobs. Burgess and Blanchflower (1998) find that, after 1990s, development of the new technology raised the number of employees in the affected invention of new technology by around 2.5% per year in Britain and 1.5% per year in Australia. Their investigation covers all most all kinds of businesses. Acceding to the study of Van Reenen (1997) he used 598 British manufacturing firms, identified that technological development was related with higher level employment in the period between 1976 to 1982.  Investigating the data of 1920 US manufacturing firms in the period between 963 to 2002 with high patenting activity, Rao and Coad (2011) also identified that technological innovation activity led to creation of employment. Regey (1998) investigated the data of Israeli industrial business the period between 1982 to 1993 finds that, while down sized as a group, high tech firms showed job creation in during the sample period.   


2.4. Analysis of Alibaba

Alibaba is a one of the biggest company to implement automation in the world.  McAfee and Brynjolfsson (2011) stated that demand of labor is being disturb by automation and labour are being reducing.  An Article by Pickering (2017) claimed that 70% Alibaba's jobs of the warehouse replaced by the robots. The rate of employ growth in Alibaba does not change most of the jobs are reducing in Wearhouse (Pickering, 2017).  A Journal by Abkowitz (2017) claimed that Alibaba has invest 5.3 billion yuan into robotic infrastructure and automation which will help to build most-efficient logistic network in china and all over the world. 

McKinsey (2017) jobs which pay less than 20$ are at risk. He also analysis that the 800 occupations more than 2,000 work activities are feasible to automating. McKinsey (2017 says that the physical activities that are feasible to to automation is roughly 78% in Alibaba. McKinsey (2017) include some findings:

  • 59% of manufacturing task could be automated. In this area the researchers say 90% of the task of cutters, welders, braziers and soldiers could be done by robot.
  • 73% of tasks accommodations and food service could be automated.
  • 53% of retail task, 47% of salesperson job, and 86% of accounting, book keepers and auditing job could be automated. 

It is more relevant to the findings of Frey and Osborne (2016) more than 70% Warehouse jobs of Alibaba has replaced by robots McKinsey (2017). McKinsey (2017) also stated that the self-charging robot help the Alibaba to reduce the 70% of human labour within 21,000 square foot warehouse. Twentyman (2017) Alibaba claims that the efficiency of warehouse has increased three-fold. In the traditional an employee expected through 1500 products within 7.5 hour, it required to walk 27,924 within that time. Now, they thanked to the mobile robot, they produce the 3000 products in the same time, it is fewer 2,563 steps a day.

Tobe (2017) stated effect of automation in revenue, 2013, 2014, 2015, 2016, 2017 and 2018 the revenue was $5.8 billion, $9.3 billion, $14.3 billion, $17.8 billion, $25.3 billion and in the May 2018 the revenue of Alibaba has increased by 61% (Russell, 2018).

images 5: Alibaba growth in last 7 years, Source: Statista (2018)

 

According to the above chart the automation at Alibaba has increased revenue in the previous 7 years. It can be confirmed that capitalization effect as stated by Frey and Osborne (2016).

2.5. Optimist Viewpoint – Refocusing of Skills

Alibaba still hiring the new employees and in 2016, total employee was 36, 450 and in 2017 it has increased by 37% and total number of employee was 50092. In the 2018 the number of employees raised by only 32% (66,421) (Russell, 2018). Now, Alibaba using 66 robots in the smart warehouses, it cutoff the 70% workforce (Pickering, 2017). While, Alibaba still developing the robots collaborating with SoftBank and Foxconn companies each company spend $117.94 million (Fortune, 2015).  According to the positive correlation of the Frey and Osborne (2016) rather reducing the number of workers, they tried to reinforce the skills and education of employees. It represents the increasing in employee with more skills and education as specified by Beaudry (2013) and argued the findings of Haltiwanger and Davis (1992) and Pissarides (2000).

images 6: Number of employee in Alibaba in 2017, Source:  Statista (2018)

According to the above discussion most of the industries trend to reducing the workforce it is resulting the huge job losses (Fortune, 2018). In the case of Alibaba, it is decreasing low skilled employees and increasing the number of robots it is correlated with the findings of (Frey and Osborne, 2016) which supported the Quartz (2017) findings.


Conclusion and Recommendations   

Automation has number of advantages and disadvantages. Implementation of the automation organization can create the high level of customers satisfaction by enhancing growth and efficiency as shown the case of Alibaba. There are some drawbacks of the automation such as it can create the threats in the mostly in the low skilled jobs and few high skilled jobs as well.  Nowadays, automation is must demanded for the retail company like Alibaba. It is also encouraging to implement more robots in the future to increase the efficiency, productivity and revenue. In the case of e-commerce Alibaba also major job provider and requires to also consider to hiring the high level of employees and do best management employee. Workforce should also enhance their skills and knowledge through higher training and education. Finally, base on this assessment, Alibaba should increase the robots and automation, Artificial Intelligence and utilize the big-data to compete in this developing world (Frey and Osborne, 2016).    


 

About Author: Nabaraj Giri is an IT engineer and entrepreneure, conducted this research when he was doing MBA in Unversity of Northampton, UK. 

Now he is also founder of Artificial Info Tech Pvt Ltd 

Visit author in Facebook: Nabaraj Giri

Linkedin: Nabaraj Giri


 

 

Bibliography

  • Alibaba Group. 2018. Alibaba Group. [ONLINE] Available at: http://www.alibabagroup.com/en/about/overview. [Accessed 02 May 2018].
  • Alibaba Named to FORTUNE's World's Most Admired Companies List | Alizila.com". Alizila.com. 19 January 2018.
  • Alyssa Abkowitz. 2018. Package Deal: Alibaba Takes Control of Network With Two Million Couriers - WSJ. [ONLINE] Available at: https://www.wsj.com/articles/alibaba-takes-control-of-cainiao-pledges-around-15-billion-logistics-investment-1506418357. [Accessed 08 May 2018].
  • Beaudry, P., Green, D.A. and Sand, B.M. (2013) The great reversal in the demand for skill and cognitive tasks. Tech. Rep. Working Paper No. 18901, National Bureau of Economic Research.
  • Bresnahan, T.F., 1999. Computerization and wage dispersion: an analytical reinterpretation. Econ. J. 109 (456), 390–415.
  • Burgess SM and Blanchflower DG (1998) New technology and jos: comparative evidence from a two-country study. Economics of Innovation and New Technology 5(2):109–138.
  • David Rotman. 2018. How Technology Is Destroying Jobs - MIT Technology Review. [ONLINE] Available at: https://www.technologyreview.com/s/515926/how-technology-is-destroying-jobs/. [Accessed 30 April 2018].
  • Davis, S.J. and Haltiwanger, J. (1992) Gross job creation, gross job destruction, and employment reallocation. The Quarterly Journal of Economics, 107(3), pp.819–863.
  • Dorn, D. and Autor, D.  (2013) The growth of low skill service jobs and the polarization of the US labor market. American Economic Review.103 (5) pp.1553-1597.
  • Farmington Hills, MI: Gale, & Ed. Virgil L. Burton, 2017. Encyclopedia of Small Business.
  • Fortune. 2015. Alibaba Softbank and Foxconn Partner To Sell Pepper Robot | Fortune. [ONLINE] Available at: http://fortune.com/2015/06/18/alibaba-pepper-robot/. [Accessed 10 May 2018].
  • Frank Tobe, 2018. The Robot Report. Robots two-pronged role in Alibaba's $25.3 billion Singles' Day sale - The Robot Report. [ONLINE] Available at: https://www.therobotreport.com/robots-two-pronged-role-alibabas-25-3-billion-singles-day-sale/. [Accessed 09 May 2018].
  • Goldin, C., Katz, L.F., 2009. The Race Between Education and Technology. Harvard University Press.
  • Havinga, Hoving, and Swagemakers, 2014; Alibaba: A Case Study on Building an International Imperium on Information and E-Commerce.
  • Jasper Pickering (2018) Look inside Alibaba's smart warehouse where robots do 70% of work - Business Insider. [ONLINE] Available at: http://uk.businessinsider.com/inside-alibaba-smart-warehouse-robots-70-per-cent-work-technology-logistics-2017-9. [Accessed 08 May 2018].
  • Jessica Twentyman. 2018. Ecommerce giant Alibaba opens ‘China’s smartest warehouse’ | Internet of Business. [ONLINE] Available at: https://internetofbusiness.com/ecommerce-giant-alibaba-opens-chinas-smartest-warehouse/. [Accessed 09 May 2018].
  • Keynes, J.M., 1933. Economic possibilities for our grandchildren (1930). Essays in persuasion. pp. 3–373.
  • Kleinknecht A, Brouwer E, Reijnen (1993) Employment growth and innovation at the firm level: an empirical study. J Evol Econ 3(2):153–159.
  • Levy, F., Murnane, R.J., 2004. The New Division of Labor: How Computers are Creating sthe Next Job Market. Princeton University Press
  • Manning, A., and Goos, M.  (2007) Lousy and lovely jobs: The rising polarization of work in Britain. The Review of Economics and Statistics, 89(1), pp.118–133.
  • McAfee, A., Brynjolfsson, E., 2011. Race against the machine: how the digital revolution is accelerating innovation, driving productivity, and irreversibly transforming employment and the economy. Digital Frontier Press, Lexington, MA.
  • MGI, 2013. Disruptive technologies: advances that will transform life, business, and the global economy. Technical Report. McKinsey Global Institute.
  • Nordhaus, W.D. (2007). Two centuries of productivity growth in computing. J. Econ. Hist. 67 (1), pp.128
  • Pissarides, C.A. (2000) Equilibrium unemployment theory. MIT press.
  • Quartz. (2017) Does Amazon create jobs? Well, it hired 75000 robots in 2017. Quartz [online]. Available from: https://qz.com/1107112/there-are-170000-fewer-retail-jobs-in-2017-and-75000-  more-amazon-robots/ [Accessed 10 May 2018]
  • Rao R and Coad A (2011) The firm-level employment effects of innovations in high-tech US manufacturing industries. J Evol Econ 21(2):255–283.
  • Regev H (1998) Innovation, skilled labour, technology and performance in Israeli industrial firms. Economics of Innovation and New Technology 5(2):301–323.
  • Statista. 2018. • Alibaba annual revenue 2010-2017 | Statistic. [ONLINE] Available at: https://www.statista.com/statistics/225614/net-revenue-of-alibaba/. [Accessed 09 May 2018].
  • Van Reenen J (1997) Employment and technological innovation: evidence from U.K. manufacturing firms. J Labor Econo 15(2):255–284.
  • William Carpenter (2016) BABA: Who are Alibaba's Main Competitors?
  • Woirol, G.R. (2006), "New data, new issues: the origins of the technological unemployment debates", History of Political Economy, Vol. 38 No. 3, pp. 473-96.

 

 

 

Appendix