Lazada Group Assignment 1 Business Report
Lazada Group Assignment 1 Business Report
TABLE OF CONTENTS
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.
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
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 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 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.
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.
V. BUSINESS STRATEGY
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,
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.
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.
in Lazada’s business strategy, will be assessed below to see how fulfilling customer
needs will affect the 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
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.
Figure 1. Lazada’s drop shipping service for non-FBL (Fulfillment By Lazada) products
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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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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.
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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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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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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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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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.
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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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.
a. Order processing
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.
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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.
b. Blockchain innovations
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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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XIII. APPENDIX.
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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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