introduction to logistic and supply chain management simulation of e commerce logistics park

In addition to satisfying the demand of consumers, time is considereda major problem when consumers now desire to receive their orders in a short timein a few hours or 1-2 days; therefor

INTERNATIONAL UNIVERSITY

SCHOOL OF INDUSTRIAL ENGINEERING & MANAGEMENT

INTRODUCTION TO LOGISTIC AND SUPPLY CHAIN MANAGEMENT

SIMULATION OF E-COMMERCE LOGISTICSPARK

Advisor: Assoc Prof Dr Ho Thi Thu Hoa

Student name& ID

Nguyen Khanh Nhan - IELSIU22301

Ho Chi Minh city, Viet NamAugust - 2023

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I also would like to acknowledge with much appreciation the crucial role ofour teaching assistant Mrs Doan Thuy Nha, who helped us to learn how to use andsimulate with Arena, proofreading our logical process of this simulation.

Many profound thanks go to all our teammates Nguyen Duy Thien, TranNguyen Khanh Nhan, Nim Tien Dat, and Trieu Kim Thanh who dedicate their timetogether and contributed to this simulating project.

After Covid - 19, e-commerce has witnessed booming changes when Vietnamesecustomers tend to do more shopping online than ever This forces Vietnameselogistics to develop more rapidly to adapt to the increase in the shopping-onlinedemand of customers And one critical factor for any logistics enterprises whowant to grasp these opportunities to be successful in this fierce competition is theapplication of technologies in logistics and supply chain management activities -E- logistics In addition to satisfying the demand of consumers, time is considereda major problem when consumers now desire to receive their orders in a short time(in a few hours or 1-2 days); therefore, an effective classification system must begenerated to respond to this need and a standouts sortation systems that can bementioned is Lazada Logistics Park sortation center.

In this project, we are going to simulate a sortation of an e-logistics

enterprise – Lazada Logistics Park which has been witnessed as a milestone in

the Logistics and Supply Chain Management industry of Vietnam in recent months.Our main targets are to use Arena (simulating software) and illustrate theperformances of sorting activities in this center Besides that, this project is alsodesigned to provide us with preliminary knowledge relating to Logistics, whichleads us to an overview of this developing industry This involves the process ofcollecting information about the functions of the company (machines working,human resources) and data, the simulating processes, and running our simulations.Several methods and processes involved are conceptual design, data collection,data analysis, and simulation.

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This simulation project is designed to provide the students in this major withan overview of a modern new sorting center which is seen as an adaptation for thechanges occurring in Vietnamese E-logistics; we also hope that this simulationproject can provide insights into the relationship between e-sellers and customers.

Keywords: E-commerce, E-logistics, Lazada Logistics, Simulation, Lazada

Logistics Park, Sortation Center.

LIST OF TABLES

Table 1.1 Difference between traditional and e-logistics 1

Table 2.1 Data of dimension of parcels 14

Table 2.2 Data of time of processes 15

Table 2.3 Table of the description of the models used in Arena 24

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LIST OF FIGURES

Figure 2.1 Lazada Logistics Park in overview 7

Figure 2.2 Automated system in the center 8

Figure 2.3 General In-out 9

Figure 2.4 Detail In-out 10

Figure 2.5 General flowchart 11

Figure 2.6 Detail flowchart 11

Figure 2.7 Inbound segment and manual procedure 16

Figure 2.8 Sortation segment 18

Figure 2.9 Outbound segment 19

Figure 2.10 Sortation Arena model – a… 21

Figure 2.11 Sortation Arena model – b… 22

Figure 2.12 The simplified layout inside Lazada Logistics Park… 23

Figure 2.13 Result of Arena 30

Figure 2.14 Animation in Arena 31

Figure 3.1 The average amount of time that Vietnamese consumers stayed when accessing mobile–based e-commerce websites or sales applications from 2016 to 2017… 33

Figure 3.2 Vietnamese e-commerce marketplace’s revenue from 2015 to 2019 (Billion USD) 34

Figure 3.3 Vietnamese e-commerce marketplace’s revenue from 2017 to 2022 (Billion USD) 36Figure 3.4 The distributions of types of products bought online 38Figure 4.1 The rank of E-commerce companies in June 2023 43

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VECOM Vietnam E-commerce Association

2.3.O PERATION DESCRIPTION .30

2.4.A RENA ANIMATION .31

CHAPTER 3 - SOLUTION DEVELOPMENT 33

3.1. C ASES .33

3.1.1.Case 1: Before the Covid-19 pandemic 33

3.1.2.Case 2: After COVID–19 pandemic 35

3.1.2.1.The change in shopping online behavior of customers after COVID–19 35

3.1.2.2.The distribution of types of products 38

3.1.2.3.Challenges of Vietnam e-commerce 38

CHAPTER 1 - INTRODUCTION

1.1.System requirement

1.1.1 Rationale

● Overview of E-logistics in the World:

With the rapid growth of electronic commerce (E-commerce), there is anenormous increase in the demand for customers that are difficult to predict andsensitive to price and service levels [Wang et al, 2004] with shrinking shipmentsize This development also shifts a significant change in the presented logisticswhich is now becoming E-commerce Logistics.

E-commerce Logistics (or E-logistics) is presented as logistics concepts

applied through Internet use and it means necessary processes for supporting theacquisition of material, warehousing, and transportation and enables distributionthrough routing optimization with inventory tracking Song and Hu [2004] studiedthe differences between traditional and e-logistics and the results of their researchare summed up in Table 1.1:

Table 1.1: Difference between traditional and E-logistics

Source: Song and Hu [2004]lOMoARcPSD|39211872

Having mentioned above, the growth of e-commerce leads to a significantincrease in shipped parcels in recent years, and the fact that the parcel serviceindustry has become one of the fastest-rising segments of logistics services.However, to deliver the right parcel to the right place, the process of gatheringparcels from different places and distributing them to the precise location alsoplays an important role in the parcel service industry This process is known as

Sortation and a place where all activities of this segment occur is known asSortation Center (Sortation Hub), and its goal is to classify items according to

their destination and move different items to the corresponding output ports si chen et al, 2020].

[Tzu-Some corporations integrate sortation segments in their distribution centerswhile others also open a specific sortation center The most stand-out company thatwe can mention is Amazon, which has extended its fulfillment centers by addingsorting centers that sort packages into zip code orders for faster delivery by theU.S Postal Service (UPS) Moreover, in Vietnam, the recent sortation center ofLazada in Binh Duong which is able to sort 1 million parcels per day has beenobserved as an important step forward in Vietnam’s E-commerce logistics industry.

● Overview of E-logistics in Vietnam:

In Vietnam, the concept of E-logistics is still new By comparing e-logisticswith the traditional logistics field in Vietnam, we can see the biggest difference isthat while most of the order processing and traditional logistics quotes in Vietnamare done manually, e-logistics wants the implementation of procurement andfulfillment handled by information technology Processes in e-logistics areautomated to satisfy millions of orders per day, and delivery progress within 1-2hours or in a day.

According to the Ministry of Industry and Trade, in 2017, there were 50enterprises providing e-logistics services Up to 2022, the number reached morethan 3000 enterprises registered to operate in the logistics segment, of which 89%are domestic enterprises, 10% are joint venture enterprises and 1% are foreignenterprises.

1.1.2 Problems

While a growing sector, the Lazada Logistics Park is not without its share ofchallenges E-commerce is developing more rapidly than ever, which goes hand inhand with the increase in the demand of consumers Albeit the fact that LazadaLogistics Park is one of the best sorting centers currently, it does not ensure that:1 With the increase in the demand of Vietnamese consumers, can Lazada Logistic

Park be still an effective hub in the future, especially when the customers’behavior is changing unpredictably after the COVID-19 pandemic?

2 With the number of technologies now, is it possible to fulfill the need ofcustomers after COVID–19 when e-commerce is developing rapidly? These aretwo principal problems relating to the relationship between the hub andconsumers that we take into account.

In this simulation project, we will use a simulation software – Arena tosimulate the activities inside the sorting hub of Lazada After simulating the modelof this sortation center, we desire our model to be able to illustrate performancesand functions inside the center.

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Besides that, we want to demonstrate the relationship between the sortationcenter with e-commerce in general and with e-sellers (individuals or enterprises) inspecific.

1.3.Scope and limitations

1.3.1 Scope

In a practical sorting hub, the main activities around the hub are bringingpackages after collecting from e-sellers along Vietnam for sorting processes intobatches for delivery work later on, which can be a direct delivery to 4 Lazadareceiving hubs located in Ho Chi Minh city (located in District 11, District Go Vap,District 1, and District 7 respectively) and then bring it to Ho Chi Minh Cityconsumer’s doors.

The data of Lazada Logistic Park that will be used in this report is recordedas average in one day (which are: the sizes of parcels, the number of parcelsarriving at the hub in one day, and the time difference between parcels) and comesfrom mainstream newspapers, published information on Lazada’s websites andpractical observation from the enterprise.

1.3.2 Limitations

A number of limitations in simulating a particular sorting hub that can becovered through are unable to access practical data and statistics that are practicaland objective to the actual market’s situation Moreover, the narrowing of themarket range is a noticeable detail in understanding and simulating the hub

Therefore, the missing assurance of the resemblance to practice is also a majordrawback in this project, as well as the lack of time in the making and simulatingof the project Nevertheless, the sample size is too small in order to cover amassive number of the practical flow of packages every day and everywhere.

Difficulties in reflecting the entire project in an exact process areconsiderable due to the purpose of simulating the project and the missing neededinformation from the sorting hub Moreover, the data used in this project will lackaccuracy since many data can only be observed by assumptions A noticeabledetail is the weight scanners, in which parcels went through them duringsimulation cannot be scaled dimensionally due to the limitation of the computingsystem.

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CHAPTER 2 - SYSTEM DESCRIPTION

2.1 Conceptual design

● Overview of Lazada Logistics Vietnam:

Lazada Logistics Vietnam, a member of Lazada Corporation, is the pioneerin Vietnamese E-logistics with the application of technologies in logisticsactivities, offers a diversity of logistics solutions, and is a credible partner ofbrands and e- sellers in Southeast Asia During the previous decade, the logisticsnetworks of Lazada Logistics Vietnam have reformed the background of E-commerce With the target of offering comprehensive logistics services based onthe technological foundation and continuous innovation, Lazada Logistics Vietnamalways commits to improving and enhancing Logistics services, and providingcustomers with optimal, effective solutions With extensive space and bases in bothHo Chi Minh and Ha Noi: Fulfillment Center and Sorting Center in Ha Noi;Fulfillment Center and Sorting Center in Ho Chi Minh, Lazada Logistics is able tofulfill orders efficiently throughout the country.

Lazada Logistic Park which was officially inaugurated on March 2023 It islocated on 10 Street, Song Than industrial area, Di An City, Binh Duong province,and is possessed by the E-commerce company Lazada Logistics Vietnam.

Figure 2.1 Lazada Logistics Park in overview [1]

With the main purpose of supplying effective logistics services, LazadaLogistics Park has impressed by the recording of the ability to sort 1 millionparcels per day and is the most modern logistic center in the province And thanksto modern and automatic technologies, the Lazada Logistics Park can enhanceoperational efficiency and mitigate labor costs Regarding the 99 percentautomated sorting system, parcels can be quickly and accurately sorted andmanaged, thereby cutting down the delivery time "This new sorting center is notonly a breakthrough in the development process of Lazada Logistics but also marksa milestone in the development of Lazada Logistics in the e-commerce logisticsindustry in Vietnam in general […].” (Vũ Đức Thịnh, CLO, Lazada LogisticsVietnam, VNS).

[1] VnExpress (2022, March 18) 10 năm thương mại điện tử Việt thay đổi nhờ công nghệ

vnexpress.net.https://vnexpress.net/10-nam-thuong-mai-dien-tu-viet-thay-doi-nho-cong-nghe- 4433950.html

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Figure 2.2 Automated system in the center

2.1.1 Idea

2.1.1.1 General In-Out

The Lazada Logistic Park possesses groups of trucks with containers thatplay a role in picking up the parcels from E-sellers along Vietnam and thenbringing them into the sorting center (in case E-sellers and E-buyers’ addresses aredifferent from each other) in Binh Duong province and then, it will be delivered toconsumers in Ho Chi Minh city Having been sorted and selected into suitablegeographical destinations, packages are delivered either directly to online buyers orto 4 receiving hubs in Ho Chi Minh City and then to consumers as finaldestinations by Lazada Logistics or by third-party logistics.

2.1.1.2 Detail In-Out

Figure 2.3 General In-out

When the parcels are arrived at the sortation, at the inbound stage, there is asystem of telescopic conveyors used for the unloading of parcels from trucks Theparcels after that are moved in the singulators – a part of automated logistics andmanaged by reordering and allowing one parcel to come to the Dim-WeightScanner at one time Lazada also uses DWS to determine the lengths of 3dimensions and weights precisely and figure out the barcode effectively.

At the sorting stage, cross-belt works to sort the parcels into accuratedelivery areas (the big one is upper and the small one is lower, and they are set upparallel) At the end of this stage, the parcels’ barcodes are read automatically bythe auto- reading barcode software which will update the in-out status of parcels onthe main system.

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Commerce, the parcels are moved to an outbound area where they have beenready to be delivered to the local hub (or directly to consumers) The sensors ateach output entrance help redirect the conveyor when loading bags are full andnotify the workers to manage them Moreover, auto-outbound functions ( updatingthe status of parcels) and mobile telescopic are necessary to load parcels intotrucks, which will shorten the waiting time.

Figure 2.4 Detail In-out

2.1.2 Flowchart

2.1.2.1 General flowchart

Figure 2.5 General flowchart

As the trucks arrive, parcels come into the inbound process, at which theyare loaded on telescopic belts Their barcodes then are scanned for information, aswell as weighed and measured their sizes After that, parcels are transferred to thesortation system for distribution to Lazada storage In the outbound sequence, theauto-outbound function takes charge of updating information on the generalsystem, while parcels will be pulled into bags And these bags, once full, will beloaded on trucks to the 4 Lazada storages in Ho Chi Minh City.

2.1.2.2 Detail flowchart

Figure 2.6 Detail flowchartlOMoARcPSD|39211872

● INPUT SEGMENT: When parcels on trucks arrive at the sorting hub, they

will first come to the inbound process, where telescopic conveyor beltstransfer parcels into the main hub for separation, distribution, andarrangement After that, since every parcel has a barcode for distinction, theywill be scanned for In-Out status for the general system If there is a barcodethat cannot be read, the parcel will be transferred to the management area forpractical manual procedure, which must be done by hand These parcels arethen rechecked for compulsory information such as destinations, phonenumbers, etc., printed new barcodes, and sent back to scanners to readbarcodes again If it can be read, parcels will be sent to the dimension-weight scanner for scaling weights and 3D sizes Consequently, due to theirlength, they are separated into two types: over 30 centimeters and under 30centimeters.

● SORTING PROCESS: Following, they are brought to the sortationprocess, in which parcels are sorted by their geographical destinations Onthe other hand, their In-Out status is updated frequently by a dedicatedbarcode scanner located on each belt.

● OUTPUT SEGMENT: Finally, when it comes to the outbound sequence,the parcels’ information will be updated on the Lazada database forcustomers to keep track of their orders Later on, parcels whose length ofone side is larger than 30 cm will be loaded into baskets or on pallets, whilethe under – 30 cm will be loaded into bags which are linked to sensors thatwork when the bags are full to notice the workers to load it on pallets andreplace the new bag In the end, parcels are distributed to 4 Lazadawarehouses around Ho Chi Minh City on telescopic conveyor belts leadingto trucks, which enclose the sorting hub flowchart.

2.2 Physical Model

2.2.1 Data collection

In this section, as the data needed for this project belongs to the privacy andsecurity of a company, we decided to collect data from mainstream newspapers andpractical tours during March and April 2023 These are the following data:

- Data of dimensions of each of parcels: see more in Appendix.

- Time data of processes (parcels arriving, loading parcels into singulators,sorting in the cross-belt system, the manual procedure for unreadable barcodes, loading into trucks):

+ Data type: Time (minute)+ Products: parcels

+ Flow: In one minute there will be 693 parcels arriving at the sortation

center The staff will receive these parcels and load them onto telescopics with 60 parcels per minute Then, parcels will be loaded onto singulators; there are 12 singulators and there will be 83 parcels loaded onto each singulator in one minute There will be 10 DWS machines for examining the dimensions of parcels and no delay for this process During the sortation process, the number of parcels sorted (for both over and under 30 centimeters) is 200 to 400 parcels per minute For the scanning process, there are 50 parcels scanned in one minute Finally, it is expected to have 693 parcels per minute loaded onto the trucks Additionally, for unreadable barcodes which are approximated from 3 to 5 per 1000 parcels scanned successfully.

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2.2.2 Input data

During the data collection, due to the privacy and limitation of resourcesfrom websites, we are advised to assume our data In addition, as the license Arenathat we use in this simulation project is Student license, we have to down-scaledata to be suitable with the software so that the process can run To be morespecific, the number of parcels at the input process in our project is 150 parcels perday.

Because of the fact that this simulation project can not cover all the flow ofparcels, we only choose some important segments and their data in this process.

Table 2.1 Data of dimension of parcels

OrderName of attribution

Table 2.2 Data of time of processes

OrderName of the processValue[min, max]

Average valueUnit

2.2.4.1 About Arena simulation software

Arena Simulation software is an effective simulation technology based on thediscrete event simulation model It was developed by System Modeling and lateracquired by Rockwell Automation software company under the “FactoryTalk”brand Arena is used for simulating modeling systems in various fields, typically

a primary tool helps to employ a proven five-step method to simulate variousprocess scenarios using 2D and 3D modeling and real-world data to ensure thesuccess of our simulation project.

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2.2.4.2 Logical model

There are 3 sequences below divided from the detailed flowchart of the fullprocess The first yellow one is Inbound which also contains a green area for themanual procedure, the following blue one is Sortation, and the last purple one isOutbound:

Figure 2.7 Inbound segment and manual procedure

Input Parcels from all E-sellers or sales organizations around thecountry.

Parcels arrivedand unloaded

When trucks with parcels arrive, workers will unload parcelsand put them on telescopic conveyor belts.

Parcels are separated, transferred intothe hub, and arranged evenly

The singulator will separate and make the distance betweenparcels before transferring them into the further inbound sequence in order to help the DWS work properly.

Checking barcode readability

Each conveyor belt has a barcode scanner to confirm that the parcels have arrived at the sorting center.

Manual

procedure (byhand)

● Management area (reject): The area gathers all

parcels that the barcode cannot be read and waits forworkers to handle them.

● Recheck parcels’ information: The workers then find

important information about the inferior parcel such asdestination, phone number, receiver’s name, etc.

● Print new parcel barcode: After checking the

information, the worker will print a new barcode forthe parcel and send it back from the beginning to startthe inbound process over again

Sort by

dimension (L xW x H) size:

Each belt has a DWS to weigh and measure the parcel’s 3D size.

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Figure 2.8 Sortation segment

Updating In-OutStatus

(Dedicated Barcode scannerfor each belt)

Parcels’ barcodes are scanned one more time to confirm thedestination that the parcel will come to.

Update

information onthe database

The previously scanned information is transferred to thecompany’s database for customers to keep track of theirbought parcels.

Sort by destination

After scanning, parcels are brought to the cross-belt sortingarea to sort into particular geographical destinations.

Figure 2.9 Outbound segment

Loads parcels into bags Parcels whose dimension sizes are smaller than 30 cm are

loaded into bags.

Check the capacity of thebag by auto- outbound function

There is a sensor working for each bag If the bag is weighed more than 30 kg or the sensor is covered by a parcel, it will make a signal for workers to check its capacity.

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Load on next bag The sensor does not signal (red light) means that the bag is

capable to stack more parcels.

Load bags onpallets

When the sensor is on, the worker wraps up, puts the bag onthe conveyor belt, and replaces a new bag At the end of theconveyor belt, another worker loads full bags on pallets.

Loadparcelsinto cages/pallets

Parcels whose dimension sizes are larger than 30 cm are pushed down the slides and loaded into cages (or pallets).

Trucksloadingand delivering

The cages (or pallets) are then loaded on trucks and delivered to 4 Lazada hubs located in Ho Chi Minh City.

Output 4 Lazada hubs located in Ho Chi Minh City.

2.2.4.3 Arena model

Figure 2.10 Sortation Arena model – alOMoARcPSD|39211872

Figure 2.11 Sortation Arena model - b

● Build the model simulation by Arena software:

Our simulation will base on the detailed flowchart above Each logicalmodel in the used flowchart will be converted into a logical model in Arena withthe same function Because of some limitations, it is probably impossible tosimulate the practical center precisely; therefore, we decided to establish the modelthat is most relevant to the one in the flowchart.

● The simplified layout of Lazada Logistics Park center:

Figure 2.12 The simplified layout inside Lazada Logistics Park

This layout is the outcome of collecting practical information from Lazadaabout how they arrange their center For more specific names, functions, andengineering data of each of the machines, we put it in Appendix.

There are 3 main areas in this layout: Inbound, Sortation (containing A, B,and C zones with the same functions), and Outbound However, due to the C zonemaintained and the limitations of Arena software, we will not indicate this zone inthe layout.

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● Model description (go from the left to the right):

Table 2.3 Table of the description of the models used in Arena

(parcel) for the system

attributes including weight, height, length forlater sorting

different outputs

District 1, District 2,District 3, District 4

geographical destinationattributes for 4 items output for later sorting

Load onto the conveyor Process Use to simulate the workermanually flipping the barcode to the correct rotation and load it onto the conveyor

item within the system andaccess the conveyor A to begin the sorting process

for the next module by conveyor

o-belt system separate items with any side above 30cm into a differentconveyor belt and oneslOMoARcPSD|39211872

below 30cm into anotherone

obelt to entire the cross- belt sorting

within the system and grant access to the cross-belt sorter for separate large and small items.

Access large item conveyor, access smallitem conveyor

Access