Alibaba Group Holding is pioneering a new manufacturing concept: the Xunxi digital factory, where artificial intelligence (AI), robotics and other advanced technologies are used in the production process. The Global Times published a report on an Alibaba factory in Hangzou producing tailor-made clothes. Designers can view analog renderings of so-called digital fabrics on a computer screen, without the need for a time-consuming dyeing process. Garment workers have high-tech assistants, such as AI-enabled cutting machines and networked sewing equipment, which help them to fine-tune their work. Managers can track progress remotely on a computer or via a mobile phone, without the need to stay on site.

Powered by Alibaba’s cloud computing infrastructure and Internet of Things (IoT), the Hangzhou-based factory, which was unveiled in September after three years’ preparation, offers small- and medium-sized enterprises (SMEs) a digitalized end-to-end manufacturing system that allows for fully-customized, demand-driven production. The data and technology used by the Xunxi factory lead to enormous reductions in lead times. It usually takes 90 days for the goods to be ready for delivery to stores. Now they can decide which products to manufacture and the scale of production within just two weeks, thus reducing the accumulation of inventory. Alibaba claims to be able to reduce the order delivery time by 75% through its solution.

Digitalization is clearly one of the leading strategic priorities for companies globally, according to a report by Baker McKenzie. Moreover, the Covid-19 pandemic has accelerated this trend, while competitive pressures increase. Data from the Chinese Ministry of Industry and Information Technology (MIIT) showed that the added value of the manufacturing industry in 2019 reached CNY26.9 trillion, accounting for 28.1% of the world’s total, helping China remain the world’s largest manufacturing country for ten consecutive years. But after 40 years of development, this model is gradually facing challenges. The labor shortage in domestic manufacturing has increased year by year, and rising labor costs have further led to a new round of production migration to Southeast Asian countries with lower labor costs.

China aims to promote the modernization of its industrial chain, and improve the quality, efficiency and core competitiveness of its economy. “Data is the core of new manufacturing and harnessing data insights is the key to capturing new opportunities in the shift in consumer preference for personalized rather than mass-produced goods. New manufacturing transforms traditional manufacturers with data-driven intelligence and technology to move toward a more agile model of production based on real-time demand,” said Alain Wu, CEO of Xunxi Digital Technology Co. under Alibaba Group.

The apparel industry is the starting point of Alibaba’s Xunxi model, as it is one of the biggest product categories on Alibaba’s platforms, facilitating the sale of one out of every four pieces of clothing purchased in China. Wu noted that the factory can help businesses better understand changing consumer preferences, reduce research and development (R&D) costs and capture the fast-evolving opportunities around personalized manufacturing. In the past, excess inventory has led to a 30% loss in revenue across the industry. Alibaba said that its ultimate goal is to become a one-stop production solution provider for apparel merchants on its Taobao and Tmall markets.

On September 14, 2020, the World Economic Forum (WEF) included Alibaba’s Xunxi in its Global Lighthouse Network. Lighthouse factories are at the forefront of the world in large-scale adoption of new technologies, and they have excellent and in-depth innovations in business processes, management systems, and industrial internet and data systems, the Global Times reports.