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Lazada Group - Assignment 1 - Business Report

Perform surveying computations (Royal Melbourne Institute of Technology)

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ASSIGNMENT 1 – BUSINESS REPORT

Subject Code: OMGT2198

Subject Name: Supply Chain Management Strategy

Team Group: Lazada Group

Canvas Group: Group 2 - SGS

Student name + ID: Tran Xuan Thao - s3678450

Phan Truong Hoang Viet - s3697806

Tran Hai Ngan Ha - s3634973

Nguyen Thi Ngoc Lan - s3695550

Tran Thi Thu Huong - s3650974

Teacher’s Name: Mr. Bill Au

TABLE OF CONTENTS

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I. ABSTRACT 3
II. INTRODUCTION 4
III. BACKGROUND 5
IV. OVERALL ISSUES OF LAZADA 6
V. BUSINESS STRATEGY 7
VI. OVERVIEW OF SUPPLY CHAIN STRUCTURE 10
VII. SUPPLY CHAIN STRATEGY 15
VIII. STRATEGIC FIT ACHIEVING ANALYSIS 23
IX. EVALUATE STRATEGIC AND OPERATIONAL IMPLICATIONS 24
X. RECOMMENDATIONS 26
XI. CONCLUSION. 28
XII. REFERENCES. 29
XIII. APPENDIX. 34

I. ABSTRACT.
Aim/Purpose: This business report aims to analyze and discuss the real case study of
Lazada, which is the leading of Southeast Asia's e-commercial, from the business strategy
and supply chain strategy. And then findings and identify the strategic fit of the company.

Background: In the paper shows some issues in Lazada’s information system, especially
their limitation in terms of customer fulfillment which from delivery error and poor defective
goods handling during the supply chain.

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Findings: In terms of business strategy, Lazada aims to improve customer experience and
create competitive advantages in the e-commerce market. For that reason, their business
strategy has shown that they tend to add more values which increasing a variety of products
with committed quality, shipment nationwide. To understand the implied uncertain needs,
the report assesses the needs of customers and the impact on Lazada's potential
uncertainty. The result is high implied uncertainty. Moreover, Lazada has two supply chain
structure which is drop-shipping and last-mile. For the supply chain strategy, this business
report mainly analyzes information and technology systems in supply chain management.
After evaluating the strategy fit, business and supply chain strategy meet the strategic fit
zone but it is not meet 100 percent and some issues can occur in Lazada operation.

Methodology: This report used a research method through academic articles and
information from Lazada's website.

Contribution: The paper provides recommendations for Lazada. The automated picking
system and package design innovating, blockchain innovation are two main suggestions for
this case after analyzing and discussing in order to control and increasing the effectiveness
of the whole process.

Keywords: Lazada Vietnam, business strategy, supply chain strategy, implied uncertain
demand, strategy fit, Vietnam e-commerce, discussion case.

II. INTRODUCTION

Vietnam which is a developing country with a highly increasing in the population,

as well as people’s income, is a potential e-commerce market that not only domestic
terms but also foreign enterprises want to invest and expand in the market. In recent
years, there has been developing dramatically in Vietnamese e-commerce which is
predicted to hit US$ 33 billion by 2025 (World Bank). This situation has opened a large
market with many opportunities for Vietnam to reach the world standard, however, there
still exist many difficulties and challenges during the operation and management inside
the logistics industry which limits the growth itself. Lazada, which is Southeast Asia's

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number one online shopping and selling address, was established in 2012 and located
in 6 countries including Indonesia, Malaysia, the Philippines, Singapore, Thailand, and
Vietnam (Lazada Home page). In this report, we will cover the Lazada business
strategy, supply chain strategy and its own challenges during operation and
management in Vietnam’s e-commerce market. Then coming up with the strategy fit
which figures out the shortage inside the term to develop the optimal solutions.

III. BACKGROUND

Lazada is a website developed by Lazada Group, which is one of Southeast Asia's

leading online shopping systems. Lazada is currently available in Indonesia, Malaysia,
the Philippines, Singapore, Thailand and Vietnam. The website is designated with the
main purpose of selling online. The system allows customers to have an effective
shopping experience and provides retailers with a simple and direct approach to the
majority of customers.

Lazada is designed as an online sales page in Vietnam with model B2C (Business to
Customer) and C2C (Customer to Customer) that allow suppliers to participate in the
process of selling products directly on the website. According to the reports of the
Ministry of Industry and Trade, Lazada was an online sales website with revenue
accounting for more than 1/4 of total sales in 2013 and the system has remained one of
the leading e-commerce websites in Vietnam

In early 2012, Lazada had an impressive launch in Vietnam's e-commerce market

with the slogan "One click, thousands utilities". At that time, Lazada quickly attracted the
attention of customers when introducing an eye-catching shopping website with proper
content and more than 50,000 items in 12 categories, ranging from mobile phones,
laptops, household appliances, cosmetics to fashion

Lazada was owned by Rocket corporation, which is a Germany enterprise. However,

Lazada was later acquired by Alibaba Group, which is China’s e-commerce tycoon, with
the value of $1 billion dollars in 2016. In March 2018, Alibaba announced an additional
investment of $2 billion in Lazada. At that time, the total number of Alibaba shares held

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in Lazada reached over 90%. Thus, in just over 2 years, Alibaba poured up to 4 billion
USD into Lazada with the ambition to dominate the Southeast Asian e-commerce
market.

After 3 years from the investment from Alibaba, Lazada is not growing but even
going to lose its No.1 position in the Vietnam market. According to statistics in early
2019, Lazada was ranked third among the most visited e-commerce companies in
Vietnam, behind Shopee and Tiki (Iprice Insights 2019). Besides, these two companies
also outperform Lazada in using monthly mobile applications. There are many reasons
for the causes of Lazada's market loss, lacking modern information and technologies is
one of the main reasons for the decline of Lazada in Vietnam market.

IV. OVERALL ISSUES OF LAZADA

In 2017, Lazada had three large warehouses in Ho Chi Minh City, Hanoi and Da
Nang with 34 distribution centers throughout Vietnam. However, the firm still had a
limitation network in terms of customer fulfillment that Lazada had to cooperate with
logistics partners such as Giao Hang Nhanh, VN post or Viettel Post. The reason for
this limitation was because most logistics firms did not have state of the art information
systems, leading to high logistic costs approximately 25 percent of Vietnamese annual
GDP (Vietnam Briefing, 2017). Furthermore, in 2019, Lazada dropped to third place with
29 million website visits behind Shopee (40.7 million) and Tiki (35.6 million) at the time
when e-commerce customer focus was converted from discounts and promotions to
delivery, payment, and after-sales services. Therefore, from numerous experts’ views,
the fail of this top e-commerce firm could be possibly from some problems such as
delivery errors or poor defective goods handling occurred in Lazada, which were
possibly caused by inadequate technologies in 2017 (Thai News Service Group, 2019).
To verify it, both business and supply chain strategy will be identified and compared to
see if the technology issue came from Lazada’s inappropriate supply chain strategy or
the company’s business strategy did not concentrate on customer needs.

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V. BUSINESS STRATEGY

When it comes to an e-commerce shopping site, customers are usually

categorized into 2 types including a “non-time-flexible” group for a physical shopping
and another is to expect to figure out some innovative products that could not be found
in nearby stores. As a result, since the first jump into the market, Lazada has originally
engaged their business to the value of offering a comfortably online shopping place
among thousands of possible qualified domestic and imported product selection at a
differentiated price range with a nationwide fast doorstep delivery service.

a) High variety of products:

According to My (2018), 44% of consumers are interested in a variety of products when

shopping on Lazada. Nowadays, Lazada has 12 product groups including electronics,
clothing, health & beauty products, sports and travel products, and home appliances.
And the total number of products in 2018 of Lazada Vietnam is nearly 80 million
products (Viyasa 2018). In particular, the two main products most bought on Lazada are
fashion and beauty products (Rita 2018). For that reason, Lazada decided to focus on
increasing the variety of fashion, cosmetics and beauty products in 2019-2020. At this
time, they have received the companion of the sellers and increase the number of
sellers 10 times higher than in 2018. Specifically, Lazada has cooperated with famous
brands, reputable sellers. One of them is ACFC - top 3 fashion distribution companies in
Vietnam with fashion, cosmetic and beauty brands such as Calvin Klein, Adidas, Dune,
Diesel, Vichy, Laneige (My 2018). And in the future, Lazada will continue to cooperate
with famous brands to provide a variety of goods, especially with foreign brands.

b) Nationwide doorstep delivery and reducing lead time:

The lead time is one of the most important factors with Vietnamese people when buying
the products online (Jaime & Abareshi, 2017). With that reason, Lazada aims to fast
delivery to customers everywhere, even in rural areas and smaller towns. Lazada has
its transportation team (LEX), as well as they also cooperate with giaohangnhanh,

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Vietnampost. Delivery time will greatly depend on the customer's region. However,
Lazada is always committed to delivering goods to customers in the fastest time. For
Hanoi and Ho Chi Minh City, delivery time will not exceed 48 hours, suburban areas will
be delivered within 72 hours and 120 hours for rural areas (Lazada, n.d). For customers
who choose a normal delivery service, the fee of delivery is usually free in the same city.
Moreover, customers who want to deliver within around 24 hours, Lazada has provided
Lazada Express service for customers inner Ho Chi Minh City and Hanoi areas with
affordable delivery prices in the range of 15,000 VND - 30,000 VND depending on the
products and the region of the customer. The goal for Lazada in 2020 is that they want
to expand Lazada Express service in Binh Duong, Dong Nai and Da Nang.

c) Committed quality of the products:

To achieve high quality of selling products, Lazada uses strict policies to recruit quality
sellers. Lazada requires sellers to provide accurate information about products,
certificates or genuine goods commitments (Visaya 2017). With this strict policy, Lazada
always ensures to provide genuine products with good quality to customers. Also,
Lazada has policies to support the customer's services and the return products,
especially for defective products due to manufacturers, products that are not the same
as the pictures, poor quality goods and old products (Lazada, n.d). After notification via
Lazada, for customers in Ho Chi Minh and Hanoi areas, the carriers will come to the
customer's home to pick up goods at a free cost, extremely convenient and fast. For
rural areas, customers need to bring the products to the post office to send back to the
seller. After 2 to 3 days, customers will receive new goods or receive cashback or bank
transfer from Lazada.

d) Analyzing implied demand uncertainty:

Implied demand uncertainty is a result of uncertainty in the supply chain relates

to the portion of the demand in the supply chain that must handle and customer needs
about the products and services of the company (Chopra and Meindl 2010). This is a
first step for the strategic fit to understand customers by mapping the customer demand
on the implied uncertainty. To do that, the set of objectives, which have been pointed out

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in Lazada’s business strategy, will be assessed below to see how fulfilling customer
needs will affect the Implied demand uncertainty of Lazada.

Customer Needs Causes Implied Demand Uncertainty of

Lazada

Short lead time (Lazada offers last-mile Increase because it is difficult to fulfill
service) numerous customer orders in a short
amount of time

High variety of products (Domestic and Increase because online users will have
imported products are sold on Lazada more buying options contributing to less
website cover plenty of categories) concentration on one specific product

Expanding delivery services throughout Increase because the firm can reach to
the country different customer segments from
different areas leading to fluctuations in
demand

Given the vast variety of product offering, the high level of service and rapid
delivery, it could be characterized that Lazada’s implied demand is marked in high
uncertainty level

In terms of supply chain capability, the supply source should be broken into 2 groups
including Low-value and High-value product for a better evaluation. For Low-value
product group, Lazada has an enormous network of possible and potential suppliers on
the market, which helps create a flexible supply capacity where the company can
offer their customers a set of similarly substitute products once there is a supplier
leaves the market or out of stock cost. However, the large supplier availability still
causes struggling to Lazada regarding quality control as well as service level. As a
result, the supply source capability for this group is indicated as medium implied supply
uncertainty.

In the field of High-value group, such substitute solutions could not be performed
effectively due to the obvious consumer psychology that they expect a level of service

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that fits their spend. Besides, the number of suppliers in this group is also quite poor
and unpredictable as the strict regulations of quality control of Lazada, along with a
frequent breakdown toward new released technologies, which consequently cause the
high implied supply uncertainty to the supply chain.

VI. OVERVIEW OF SUPPLY CHAIN STRUCTURE

Currently, Lazada has two types of distribution network, which comprises the
dropshipping network and last-mile delivery service. Each network is designed
differentially for disparate types of products with the different number of supply chain
partners, level of complexity, advantages, and disadvantages. To be more specific,
these structures have been clarified below.

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Figure 1. Lazada’s drop shipping service for non-FBL (Fulfillment By Lazada) products

In this distribution network, Lazada is playing a role a drop-shipping service

offerer, where customer orders are firstly made on Lazada’s website and move
uninterruptedly to sellers. When the order is received, sellers will prepare the product
and have three shipment options which are shipping privately, shipping by using
Lazada’s 3PLs or combining between private and Lazada’s 3PL shipments. In terms of
private shipment, sellers will have to package and deliver their products directly to

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customers by themselves. Therefore, it means that the delivery is fully controlled by the
seller which can potentially save costs in the long term. Regarding Lazada’s 3PLs
Shipment, instead of taking all responsibilities in product delivering, sellers can use
Lazada services to ship their packages. Specifically, the company will send shippers to
the seller’s store to pick up the package and deliver it to exact customer destinations.
This will help sellers concentrate more on their online stores without having to manage
packages delivery. Finally, in terms of the combination of private and Lazada’s 3PL
shipments, sellers have to be in charge of shipping their packages to Lazada’s
warehouses. After that, Lazada will deliver them directly to customers’ places based on
customer orders. From this process, the seller does not have to find customers’
locations which is time-saving, but this service requires to pay delivery fees from
Lazada. Overall, after customers receive their packages, products will be paid by cash
or online payment through Lazada’s website leading to increasing seller’s online store
revenue.

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Figure 2. Last-mile service for FBL products

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In terms of Lazada’s distribution network for Fulfillment By Lazada (FBL) products,

Lazada is responsible for executing most merchandising steps on behalf of sellers
including handling, pick and pack process, order fulfillment, product returns and post
customer services towards those sellers' inventory deposited in Lazada's warehouse. In
particular, Lazada will come and pick up deposited inventory at the sellers' store and
carry them to the company’s warehouses. These batches then have to overcome quality
control testing at the put-away stage, otherwise being rejected and returned to the
supplier's store. The inventory now is stocked in Lazada's warehouse and expected to
be delivered if orders are placed by customers. The process of order fulfillment consists
of order picking, consolidating, packaging and ultimately delivering, which is
accompanied by Lazada's 3PL partners such as GiaoHangNhanh or Viettel post. The
payment then is conducted through cash or online website which is similar to the former
distribution network (Figure 1).

VII. SUPPLY CHAIN STRATEGY

Therefore, Lazada would be in a much better position if the company’s supply
chain gets balanced between the cost of inbound logistics and level of service by
effective last-mile service and flexible inventory management investing, which is likely to
be gained by the utilizing of information technology into supply chain management ( E-
supply chain management)

a. E-supply chain management definition

Managing the supply chain efficiently is a huge challenge which is not only for
small organizations but also for for top firms. If the scale of business gradually becomes
larger, the more complex that supply chain network will be. According to GreenBiz,
Sony, a world brand company, had a major loss in 2001 from shipment failure, which
was worth approximately $160 million. This is because Sony’s products (PlayStation)
have contained cadmium that exceeded the limit from the European Commission’s
regulations. Thus, the organization had to recheck 6000 factories due to poor supply
chain transparency that took about 18 months with a high cost in the process
(Shoemaker, Christensen, 2013). From this lesson, it shows the extreme difficulty in

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observing and controlling the total supply chain network when there are numerous
factors occurring at the same time. Therefore, upgrading the supply chain to e-supply
chain will be an optimal solution for transparency and performance improvement in the
future. The e-supply chain can be easily understood as the implementation of
technology in supply chain activities including e-procurement, warehousing
management, order processing (Ivanovska, Lidija, Kaleshovska, Neda, 2013).
Furthermore, information systems will bring benefits including utilizing human resources
and capital equipment to increase profits; reducing inventory costs and enhancing cycle
times for supply chain efficiency; decreasing lead time, increasing product availability
with better demand forecasting for market responsiveness. Some examples of
technologies are commonly applied in the supply chain such as Cloud Database (GT
Nexus) or ERP - Enterprise Resource Planning (SAP) (Pagano, Gyimah, 2016). To
understand more about this, the next part of the report will show the distribution network
of Lazada and how the company applied technologies in their distribution.

b. Technology implementation in Lazada’s supply chain strategy analysis

To improve supply chain responsiveness, Lazada has applied some technologies
for different parts of their supply chain structure, which is discussed in the table below.

Technologies Part of supply Implementation

chain
improvement

Seller Center Collaborative ● In 2013, Lazada has launched an online platform, which is
Supplier called “Seller Center”, for the purpose of reducing selling
Relationship effort (Inquirer.net, 2015). Sellers and Lazada can track
Management – their products and orders through Seller Centre website to
Inventory manage selling efficiency. In addition, the system also
Visibility + runs in real time, so it can contribute to reducing order
Demand processing time.

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Forecasting

● Seller Center can also collect data from online stores and
analyze it, which help sellers see their overall
performance.

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Barcode Inventory ● Lazada uses barcodes to manage products in inventory.

management – Each of them will be attached to products and contain
Inventory real-time product information before stocking, which
Traceability possibly improve inventory visibility.

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Inventory ● In the picking process, each employee will have a special

Barcode management – barcode scanner that can not only scan the barcode to
Picking Picking process identify products but also manage customers’ orders
Scanner through the device. Therefore, this technology can
potentially boost the process faster than before.

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Automated Inventory ● After picking process, products will automated conveyor

Conveyor Belt management – belt system to be shipped to the packaging area instead of
Order picking delivering them manually. This can save more time and
and improve picking efficiency.
consolidating

Growth Center Collaborative ● Grow Center is one of the functions in Seller Center that
(Web-based Supplier gives some recommendations to improve selling
collaboration - Relationship performance. The system will assess different aspects of
Seller Center) Management online stores such as Image Quantity or Product Rates, so
that sellers can make changes in their own stores.

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Figure 11. Growth Center 1 (Lazada, n.d)

Figure 12. Growth Center 2 (Lazada, n.d)

Warehouse Inventory ● In Lazada, WMS is used to control the flow of product

Management management information in real-time inventory, enhancing operation
System (WMS) visibility (Lee, Ho & Choy, 2018). Furthermore, it is
connected to different devices through IoT such as
Barcode scanner (Figure 9) or the machine producing
barcodes for registering products (Figure 7). The
importance of this system has been shown clearly by a
Lazada Express’s representative that the firms wanted to
recruit potential employees who understood about
barcode and WMS (VNS, 2019).

Order tracking Online store ● Lazada has also created an order tracking system for
system - management customers in their mobile app and website that can
Lazada Mobile (Order provide real-time status of packages. From this function,
App/Website Fulfillment – the technology can potentially increase customer trust by
Order visibility) giving them a clear vision of order processing.

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Figure 13. Order tracking on Lazada’s Mobile App (Lazada, n.d)

Figure 14. Order tracking on Lazada’s website (Lazada, n.d)

Electronic Online store ● Customers can make the payment directly through the
Payment management online payment system, which is integrated with Lazada’s
(Product website. Also, the firm has collaborated with different
payment) types of online banking such as VISA, Mastercard or JCB
to increase the variety of payment methods contributing to
achieving better customer experience.

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Figure 15. Online Payment Processing (Lazada, n.d)

Figure 16. Payment Methods (Lazada, n.d)

C. Analyzing supply chain responsiveness

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According to Kime, Suresh and Hillmer (2013), the supply chain responsiveness
focuses on how the supply chain can fulfill customer demand. Therefore, it is vital for
Lazada to plan supply chain strategy that can match Vietnamese consumer
expectations. Based on those technologies that have been mentioned in the supply
chain strategy above, these technology strategies will be assessed to see how they
affect the supply chain responsiveness through different parts of supply chain in
Lazada. Thus, the analysis has been conducted below.

Technology strategies related to Causes supply chain to be

Inventory management Responsive because using WMS,

automated conveyor belt, barcode and
barcode picking scanner can contribute to
reducing lead time

Collaborative supplier relationship Responsive because Seller Center and

managmenet Growth Center are technologies that can
help sellers react fast to the variation of
customer demand on their online stores

Online store manamgent (For customer Responsive because online payment

experience) and order tracking systement can
enhance customer service
responsiveness leading to adapting
demand uncertainty.

From the analysis, all Lazada’s technology strategies for three different supply
chain parts have made the supply chain become more responsive (Figure 17).

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VIII. STRATEGIC FIT ACHIEVING ANALYSIS

For a company’s overall success, achieving strategic fit between supply chain
and competitive business strategy becomes the most essential drive (Lee HL 2002).
According to Chopra and Meindl (2010), strategic fit refers to ‘the consistency between
the customer priorities that the competitive strategy hopes to satisfy and the supply
chain capabilities that the supply chain strategy aims to build’. Applying to Lazada’s
cases, both business strategy and supply chain strategy will have to achieve strategic fit
to make sure their objectives can be accomplished from suitable supply chain
operations contributing to high business performance in the future. Therefore, the level
of strategic fit of Lazada’s strategies will be shown below.

After analyzing, these two strategies have met the strategic fit zone because the
implied demand from their business strategy is identified to be uncertain, which matches
the responsiveness of Lazada’s supply chain strategy. However, despite the strategic
fit, the business strategy and supply chain strategy cannot meet 100 percent all the
time. Some issues can potentially occur in daily operations which shows that some

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parts of the supply chain strategy are not appropriate in actual situations. Thus,
evaluating the strategy of supply chain is crucial to avoid these problems.

IX. EVALUATE STRATEGIC AND OPERATIONAL IMPLICATIONS

a. Order processing

Lazada has invested a huge capital in associated technology system involving

inventory management in order to accelerate the order processing and accordingly
reduce the lead time to customer while still remain optimizing cost efficiency. The
installation of warehouse management solution provides Lazada a real time information
sharing network between authorized departments/ people, which as a result help reduce
the cost of communication as well as offer the inventory visibility management
(Inquirer.net, 2015). Furthermore, the Barcode solution also is applied into Receiving
and Picking process in particular in order to support the visibility and effectiveness of
the product flows (Finale Inventory n.d). Lazada also sharpens its warehouse
management system into a semi-automated, which not only drives a faster order picking
process but also reduces picking associated accidents and labor cost as well (Tuong G
2016). The company in additional cling tightly to the “last mile” delivery model where the
orders will be consolidated in small batches in order to respond to customer
expectations (Khoahocdoisong 2019). However, in a report of the Department of
Competition and Consumer Protection (2018), Lazada has to carry stacks of customer’s
complaint about the inconsistency between the orders and actual shipments in
terms of quantity and appearances. The problem is caused due to plenty of reasons,
including both internal and external factors (Vietnamnet 2019).

The first reason could result from human picking negligence (Vietnamnet 2019). As
Lazada has merely sharpened their picking method as a semi-automated system,
therefore, there is still labour intensive involving in most material handling steps in the
supply chain. As a result, it is no doubt that the mismatch of shipment and order is
influenced by this human involvement during the picking or consolidating steps, which
leads to incorrect pick quantity and/or wrong delivered products.

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Regarding external factors, risks in FBL last mile service and drop shipping service are
2 critical elements that drive the order inaccuracy (Vietnamnet 2019). In the yield of
3PLs service associated hazards, Lazada is still following the traditional packing method
using the folded carton package box (Lazada 2019). This approach is obviously
convenient and cost efficiency, yet, make the order vulnerable easily by outside threats
including thefts or accidents (Dinh K 2019). On the other hand, in terms of drop-
shipping products, the damage can also occur due to supplier irresponsibility. Therefore,
ensuring the accuracy of the shipment is the essential point that Lazada should
consider properly.

b. Quality controls of supply sources

As Lazada’s supply chain inventory is entirely outsourcing, where there is no presence

of an actual production line but it is still handling a variety of products unloaded every
week at the docks. However, Lazada’s physical warehouse is responsible for only FBL
products, while other products are still remaining at the seller’s location, which is served
for drop-shipping purposes (Lazada n.d). This decision is likely to benefit the sellers
in terms of inventory demission, which supports the company’s competitive strategy to
widen its supplier network. Yet, the fully empowering of inventory management to the
sellers might result in unsuspected risks involving quality controls and late delivery
(Johnson T, 2019). According to Dinh K (2019), the loss of supply source quality control
is the biggest problem so far that shakes the reliability and accordingly affect the leading
position of Lazada on the market forcefully due to the fact that Lazada’s e-platform is
fueled by the tight connection between buyers and sellers together. Therefore, once
there is a quality associated problems occurs, Lazada will be the agent that loses profit
the most heavily. However, it is a big concern about getting proper product quality
controls for those dropshipping suppliers. Hence, the company has to seriously take
responsibility for well qualifying its outsourcing supply sources in order to enhance the
responsiveness of service level and customer loyalty.

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X. RECOMMENDATIONS
a. Automated picking system and package design innovating

Lazada has utilized the Barcode Scanning technology in order picking steps so as to
improve the level of accuracy and productivity, thereby, the incorrect shipment is more
likely to occur from the last touch point of order consolidating, where the picked orders
are moved on the conveyor belt waiting for sorting and packing, which is still manually
performed through human-intensive (Ha T 2019). In order to solve this problem, the
recommendation is made Lazada to invest in automated picking system. The
application of this system will provide several advantages in which set the company to
the edge of minimizing labor and energy cost and boost up the productivity. As the
picking process can function itself 24 hours continuously automatically, the manual
handling can be eliminated as a result, which, therefore, increases security and lower
cost of labor and supervision. The automated picking system in addition can also help
improve product flows visibly as well as offer optimized space utilization due to the
elimination of unnecessary parts/ space involving picking purpose such as truck lift
parking space or conveyor belt system.

In terms of orders damaged by 3PLs services, it is recommended to generate a tough

package design that is not easy to be penetrated instead of the current loose carton
packaging solution with a single tape line across the box. One of the best ideas
suggested is the use of a big metal carrying box, which accommodates all delivering
orders and gets locked by a digital code locker, which is only deactivated by passwords
sent personally to customers. However, this solution seems to be extremely costly.
Therefore, for a cheaper answer, the utilizing of automatic stretch wrapping machines
should be seeking in order to not only create cost-saving on new package design but
also increase the certainty for the package.

b. Blockchain innovations

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In order to tackle the struggle of dropshipping quality controls, the suggestion of

blockchain application should be firstly considered. According to Stambolija R (n.d),
one of the differentiations of blockchain technology is to ‘streamline business processes
and reduce the friction between parties involved in the exchange of information.’ As
blockchain can upraise the level of trust between parties within the business network, it
allows Lazada and the sellers to build collaboration without any additional physical
guarantees (Stambolija R n.d). In specific words, sellers and their supply chain
network are required to upload verified sources of component materials, Certificate of
Origin, along with any associated documents that are necessary for gauging product
authenticity. The data then can be shared within a cloud database where every member
of a supply chain can access. The data will feed in continuously in a secure and
transparent way whenever a transaction happens, where customers can track the left
amount of inventory in all batches as well as trace the product authenticity. Therefore, it
mitigates the trust issues arising from online shopping nature and reduces the hazards
of quality controlling that lazada has to carry towards dropshipping

XI. CONCLUSION.

In conclusion, Lazada has successful in managing the logistics and supply chain,
especially in the information system aspect. Understanding deeply into the service
process, the system shows an uninterrupted flow from the order receiving, product
preparing until the shipment. Lazada has done a very good role in its logistics and
supply chain according to their business and supply chain strategy. However, there still
exist issues during the operation process which relate to lacking information systems.
Due to the challenges, it leads to poor defective goods handling and delivery errors. And
the result is Lazada drop to third place in Vietnam e-commerce. These factors might
affect the brand which Lazada has built for many years and also impact the growth in
the future market. Therefore, to improve these situations in the future, two
recommendations are suggested. The first step is investing in automated picking and
packaging system, and the second step is using the blockchain system to apply and
develop the activities on the process to maximize the efficiency in the performance of
the firm. However, the blockchain is currently a new concept which can apply in different

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industries besides e-commerce such as banking or healthcare, so that heavily research

investment is required to achieve this technology in the future.

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Ratko S, 2019. “Five Ways Blockchain Can Transform Traditional Business and Impact
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Impact the Market in the Future”, Medium.

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XIII. APPENDIX.

Appendix A: Over 20 million shopped Lazada’s Singles Day sales.

Lazada on 11.11 (Reproduced from SupplyChain Asia)

November 11th is known as a megasales on e-commerce sites. In Lazada's latest report,

Lazada sold more than 20 million items on that day, with the fastest time to pack a
parcel was 25 seconds after receiving the order. On 11.11, technology and lifestyle
brands are the two main best sellers in that day. To meet the huge demand for goods,
Mr Felix Hochgesand, Lazada ELogistics CEO said logistics and warehouse have an
important role in this success. With the logistics sector, Lazada Vietnam has cooperated
with VietNamPost, the national courier company with the pervasive around the country.
Besides, with the network of warehouses throughout Vietnam, the supply of goods is
always available to meet the needs of all customers. According to MrFelix Hochgesand,
Lazada Vietnam has new plans in the coming years: building new generation fulfilment
centres with more automation. Moreover, for Southeast Asia, Lazada plans to build the
first fully automated sorting center network of the five markets in Singapore, Malaysia,
Thailand, Philippines and Vietnam. As well as 72-hour cross-border delivery for major
cities in Southeast Asia.

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Appendix B: Alibaba Invest a Further $2 Billion in Lazada to Accelerate Region’s

E-Commerce.

Lazada Group owned by Alibaba Group since 2016. ( Alizila.com)

In 2016 and 2017, Alibaba continuously invested a total of $ 2 billion in Lazada, to hold
an 83% stake to control Lazada. With the competition in the Southeast Asian market,
where Amazon began to join in Singapore market and Shopee of Sea Ltd. expanding to
gain market share, Alibaba invested dramatically to Alibaba to control the Southeast
Asian market. In 2018, Alibaba Group has invested a total of 4 billion USD in Lazada.
This new investment from Alibaba will give Lazada more money to develop technology,
increasing customers experiences and attract more customers. This is part of Alibaba's
overseas development strategy, and this time it is to direct Lazada's operations.

Southeast Asia was once a logical step when Alibaba took control of Lazada at the time
it was the largest e-commerce company in the region, with a price of $ 1 billion in 2016.
Thereafter, Alibaba continued to increase by 1 billion USD for Lazada in 2017 and
another 2 billion USD in 2018. On the surface, these are quite the right steps. The
rapidly growing e-commerce market of the region with 650 million people is expected to
scale to $ 23 billion in 2018. Not to mention, many countries in this monsoon region
have cultures and the economy is similar to China.

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