As integration between the internet and traditional industries goes deeper leading to new forms of business, the tobacco industry in China is actively embracing the so-called era of “internet plus” by intensively developing online operations in both manufacturing and marketing.
By Allen Liao
The recently unveiled “internet plus” action plan has become a very hot term in China. As far as its basic meaning is concerned, so-called internet plus refers to an in-depth integration between the internet and traditional industries and fueling economic growth by leveraging all information and communication technologies to promote transformation of established industries.
Some recent examples of such leveraging include internet+traditional markets, which has given birth to the Taobao e-commerce platform, internet plus traditional banking, which has given rise to the formation of the Alipay online payment system, and “internet plus” traditional social contact, which has led to the emergence of the WeChat messaging and calling APP. The significance of “internet plus” lies in its ability to promote creativity in the real economy while rapidly changing the pattern of sectors and industries, reducing costs, and increasing labor productivity.
In a government work report delivered in Beijing last march at an annual session of China’s national legislature, premier Li Keqiang said, “We shall formulate the internet plus program of action to integrate the mobile internet, cloud computing, big data, and the internet of things (IoT) with modern manufacturing, to promote healthy development of e-commerce, industrial networks, and internet banking, and to guide internet-based enterprises to increase their international presence.”
Although internet plus implies systemic transformation, it does not necessarily mean destabilization of traditional industries. Rather, it means promotion of traditional industries’ integration with the internet, upgrading traditional industries, and developing new points of economic growth.
In conducting an inspection of the tobacco industry of east China’s Zhejiang Province at the end of June 2015, director-general Ling Chengxing of the State Tobacco Monopoly Administration (STMA) – the regulator of China’s tobacco industry – raised demand for the tobacco industry, saying, “We need to take the lead in exploring internet plus. Specifically, we need to explore applications of big data to innovate management under the system of state tobacco monopoly, under the premise of adherence to the system; explore the application of the Alipay online payment system to innovate the process of account settlement; and explore operation of the internet of things, to innovate modes of international e-commerce.”
The cigarette manufacturing workshop of one of Chinese cigarette companies.
Internet Plus Tobacco Industry
Many tobacco manufacturers are aware of the great significance of internet plus to promote both manufacturing and marketing. The provincial-level corporations across the country have not only equipped production lines with data collection and processing systems, but have also developed application software to be used for marketing. While strengthening the marketing of brands, they have focused on collecting and analyzing information and data.
Nanning Cigarette Factory of China Tobacco Guangxi Regional Industrial Co., Ltd. managed to apply the policy of internet thinking in equipment management, effectively raising the efficiency of management of spare parts inventories. Internet plus spare parts management first of all means application of the 2D bar code technology in digital management of spare parts. For example, the factory completed the process of creating files of 2D bar codes for more than 17,000 types of equipment in 30 major categories on 235 storage racks in its spare parts warehouse. As a result, merely by scanning the bar codes with their mobile phones, workshop repairmen rapidly position the relevant racks for spare parts and inquire about the status of spare parts inventories, the status of inventories in other warehouses, and applications for planned reception of spare parts. They can rapidly check records of spare parts supply plans and files of warehouse entry-exit. Moreover, through terminals, managers can become aware of the average monthly use of spare parts by workshops, control the period of their circulation, and process applications for additional supply of spare parts online in a timely manner.
This internet technology can also be used to inquire about spare parts inventories at any time and in any place. No matter whether they are at the factory of if they are out on a business trip, workers can check spare parts inventories online, and can generate applications online for taking delivery of parts. When they arrive at the spare parts warehouse, they will be able to take delivery of the parts as scheduled.
By doing so, they can significantly reduce waiting lag. Moreover, the technology implements timely notice of arrival of supplies of spare parts. Once a shipment of parts arrives at the warehouse, a notice can be issued through the WeChat messaging and calling app to the spare parts planning staff, so that they could pick it up quickly.
As a result of applying the principles of 2D bar codes at Nanning, the rate of capital turnover for spare parts has reached a high of 128.46%, up 6.99% from 121.47% in 2014.
Another manufacturer, Shanghai Tobacco Group (STG), started studying internet plus and has begun to focus on results that it delivers across the tobacco industry. Presently, STG is actively developing an internet plus process reengineering plus cost reduction and efficiency increase model, to further promote its development of technological logistics, human-centered logistics, and lean logistics. Under the internet plus concept, the company actively promotes application of the IoT technology. Using mobile internet technology, the company has managed to solve the problem of information-isolated islands, steadily promoted the process of smart storage and step up the development of technological logistics. Through process reengineering, the company actively works in the area of redistribution of human resources. What’s more, STG adopted the idea of lean thinking, designed its management and control processes around it, and strengthened operation of logistics to lower the cost of operations, raise efficiency, promote efficacy, and realize development of lean logistics.
Internet Plus Tobacco Trade
There are many tobacco industry commercial enterprises across China that have also started their process of studying the model of internet plus tobacco operation and scenarios of its application. Some commercial enterprises have even put their operation model into practical application.
Zhejiang Provincial Tobacco Company (ZPTC), which doubles as Zhejiang Provincial Tobacco Monopoly Administration, has made it clear that efforts will be made to take advantage of its favorable geographical location as a leading place of origin of e-commerce in China and as a region with rapid development of the internet industries to further deepen reform, realize innovation, give full opportunities to the leading role of information technology, bring into play the support role of the latest information technology, including big data, cloud computing, and mobile internet, in order to promote systemic transformation and upgrading of its corporate management models in an in-depth way, and turn itself into a smart enterprise with higher efficiency in management that employs the internet plus tobacco trade of Zhejiang under State monopoly principle.
Overtime, ZPTC intends to deepen its cooperation with the Alibaba Group – the leading Chinese e-commerce company. First of all, the company will introduce the Alipay online payment system for accounts settlement throughout its entire wholesale and retail processes to optimize its customer service system. And secondly, the company will make a use of the payment system to collect customer information and analyze marketing data in retail and consumption to improve its precision marketing system and brand development mechanism. In this endeavor, ZPTC will launch pilot projects in Hangzhou and Wenzhou – two leading cities in the same province. Once the results are in and if they are positive, the company will proceed to expand its operations across the entire province.
Commercial enterprises have already made a use of the large quantities of relevant data collected to accurately analyze the replenishment of goods, the sales volume, and inventories on the part of retailers, and also to gauge consumer preferences; ascertain the relationship among crucial factors including the types, prices, and flavors of cigarettes; and, at the same time, provide powerful support at the level of real marketing data in order to better guide development of competitive tobacco brands. Moreover, making use of market prices data, social inventories, and the social stock-to-sales ratio collected through terminal data collection systems, as well as sales data, they can provide accurate information to support decision making in such core business areas as demand forecast, procurement of supplies, and supply of goods to the market.
Internet plus does not only mean application of high-end technology including cloud computing, but also represents interaction and consumer experience. Through the policy, tobacco companies of prefecture-level cities can pay more attention to guidance over marketing and crucial factors capable of impacting consumer satisfaction including value-added service. By means of developing mobile apps, providing graphic and visual marketing guidance interfaces they can provide their clients with unique experiences. They can also manage to increase new channels for interaction between clients and consumers, upgrade customer service, and provide clients with valuable profit-making models by integrating the functions of positioning with the geographic information system (GIS) and consumer placement of orders online and taking of delivery offline, to win confidence from clients.
Meanwhile, many retailers have also become aware of the great significance of internet plus to marketing, and have begun to actively make a use of the internet plus WeChat messaging and calling app model. They have mostly established their own websites using their personal computers, posted images of brand-name products they sell on the websites, and have established WeChat circles of friends with clients in the vicinity, advertize for the brand-name cigarette products they sell, enlarge their channels for cigarette sales, and attract consumers in the vicinity.
Internet plus has not only brought many new challenges to the tobacco industry in China, but it has also, more significantly, brought many new business opportunities. In response, the industry quickly sized up the situation in a comprehensive manner and has actively applied the model of internet thinking in developing internet plus operations in both manufacturing and marketing, ushering in a new round of business development. By developing internet plus operations, the tobacco industry can enable consumers to get fully involved, design new products that better meet the demand of consumers, raise efficiency in both cigarette production and sales, and realize its systemic transformation, upgrading and innovative development, which will help the tobacco industry fucus on embracing the new era.