FOREIGN TRADE UNIVERSITY

……..***……..

MIDTERM REPORT

AN ANALYSIS OF ALIBABA’S CAINIAO SMART

LOGISTICS AND RECOMMENDATIONS FOR E-
COMMERCE ENTERPRISES IN VIETNAM

Group number: 7

Course: Logistics and International Freight Forwarding

Course ID: TMAE305.1

Instructor: Ma. Nguyen Thi Yen

Hanoi, December 2022

 TABLE OF CONTENTS
INTRODUCTION 4
I. LITERATURE REVIEW 6
1. An overview of E-commerce enterprises 6
1.1. E-commerce concepts 6
1.2. E-commerce business models 6
2. Logistics activities of E-commerce enterprises 7
2.1. Logistics concept 7
2.2. Logistics in E-commerce 7
2.3. The role of logistics in E-commerce 7
3. Characteristics of logistics in E-commerce 8
4. An overview of Cainiao Smart Logistics model 9
II. ALIBABA AND ITS CAINIAO SMART LOGISTICS NETWORK 12
1. An overview of Alibaba Group and its E-commerce activities 12
1.1. An overview of Alibaba Group 12
1.1.1. Establishment and development 12
1.1.2. Missions, visions, core values 12
1.2. Alibaba’s E-commerce activities 12
2. An analysis of logistics model with China Smart Logistics Network (Cainiao
Network) 13
2.1. An introduction to CHINA SMART LOGISTICS NETWORK (Cainiao
Smart Logistics Network) 13
2.2. Logistics activities of Alibaba with Cainiao Smart Logistics Network 13
2.2.1. Online order processing 13
2.2.2. Handling goods at the distribution warehouse 14
2.2.3. Delivery 15
2.3. Success of Cainiao Logistics Smart 16
2.3.1. Scale of logistics network 16
2.3.2. Service quality 16
2.3.3. Other added values 16
2.4. Contributions to the success of Cainiao Smart Logistics 16
III. RECOMMENDATIONS FOR THE APPLICATION OF CAINIAO SMART
LOGISTICS MODEL IN VIETNAM E-COMMERCE ENTERPRISES 21
1. Current situation of logistics activities of E-commerce enterprises in
Vietnam 21
 1.1. Strengths 21
1.2. Weaknesses 23
2. The potential of Cainiao Smart Logistics Model in Vietnam E-commerce
enterprises 24
2.1. Opportunities 24
2.2. Challenges 25
2.3. Recommendation 26
CONCLUSION 28
REFERENCE 29
 ● INTRODUCTION

In the era of peace and international integration, most countries in the world attach
great importance to economic development to enhance their country's position.
Therefore, logistics, used to be “the science of the movement, supply and maintenance
of military forces in the battlefield", has drawn more attention and is applied to
economics to solve difficult problems related to supply and management of goods.
Universities and colleges specializing in economics increasingly focus on inquiring,
researching and learning about logistics activities, implementing training programs to
further equip students with necessary knowledge in the economic integration period.

In the meantime, the logistics industry has proven its importance by contributing to
the great success of large companies and corporations around the world. Typically,
Alibaba Group, China's leading e-commerce enterprise, is one of the outstanding
examples that creative and effective application of logistics will help business
activities grow. That is the reason why group 7 has chosen Alibaba Group and its
Cainiao smart logistics network as an objective for analysis and evaluation, not only to
have a better understanding of logistics activities, but also enable readers to understand
the importance of logistics in today's integrated economy. 

Besides the introduction and conclusion, the report is divided into 3 chapters:
Chapter I: Literature review
Chapter II: Alibaba and its Cainiao smart logistics network
Chapter III: Recommendations for the application of Cainiao Smart Logistics Model in
Vietnam E-commerce enterprises

During the research process, due to the lack of solid knowledge and professional
skills, errors are inevitable. We look forward to receiving comments and suggestions
from Ms. Nguyen Thi Yen and other students.

Sincerely!
I. LITERATURE REVIEW
1. An overview of E-commerce enterprises
1.1. E-commerce concepts
E-commerce is known by many different names, such as "electronic commerce",
"online commerce", "paperless commerce" or business. e-business. However, "e-
commerce" is the most common term and is used consistently in documents or
research.
Currently, there are many accepted understandings and definitions of e-commerce
in the world. If approached in a narrow sense, “E-commerce begins with businesses
using electronic means and the Internet to buy and sell goods and services, transactions
can be between businesses and businesses ( B2B), or between businesses with
individual customers (B2C), or between individuals (C2C).
If approached in a broad sense, e-commerce is defined by international
organizations as follows: Organization for Economic Co-operation and Development
(OECD) defines e-commerce as including commercial transactions involving
organizations and individuals based on the processing and transmission of digitized
data through open networks (such as the Internet) or closed networks with gateways to
open networks (such as AOL) (Nguyen Van Hong, 2013).
Although their scopes differ, the general consensus is that e-commerce is a type of
commerce based on electronic means and networks.
1.2. E-commerce business models
There are many different criteria to classify e-commerce models/e-commerce
businesses, but the most typical is the classification by participants. According to Amir
Manzoor (2010), the current popular e-commerce models include:
B2B (Business-to-Business) is a type of commerce that takes place electronically
between businesses.
B2C (Business to Consumer) is a type of business that uses electronic channels to sell
goods and services to consumers. Consumer selection, ordering, payment and receipt
are done by electronic means.
B2B2C (Business-to-business-to-consumer) is a type of business that uses B2B
services to support B2C businesses. In other words, a B2B2C business provides
services (for example, a virtual store) that allow sellers to (here, B2C businesses) sell
to buyers.
C2C (consumer-to-consumer) is a transaction between individuals. Online auction
websites or online classifieds are the most well-known examples of this model.
There are also e-commerce models between businesses and government agencies
(B2G), between consumers and companies (C2B) and between businesses and
employees (B2E),... According to Amir Manzoor's classification, this essay will focus
on studying the logistics activities of B2B2C businesses.
2. Logistics activities of E-commerce enterprises
2.1. Logistics concept
According to a definition that is considered to be the most complete and commonly
used by the American Council of Logistics Management (Council of Logistics
Management), Logistics is the process of planning, organizing, implementing and
controlling the flow of goods. , stocking goods, services and related information from
the point of origin to the point of final consumption in an efficient manner and in
accordance with customer requirements (Hoang Van Chau, 2009).
2.2. Logistics in E-commerce
Logistics in E-Commerce is not just a transportation service but actually includes
much more. It is the process of strategic planning and developing all the necessary
elements of systems, processes, organizational structures and logistics to realize and
materialize e-commerce.
In other words, Joe Khoo (2013) said that logistics in e-commerce is the whole
process from the moment the customer orders the goods (Point of sales) to the time the
product is delivered to the consumer. If approached from the perspective of the
historical development of logistics, e-commerce logistics
Electronic logistics (e-logistics) is the next stage of the development of traditional
logistics, with the application of the Internet and the use of electronic means in
logistics activities (Doan Thi Hong Van, 2006).
2.3. The role of logistics in E-commerce
According to An Thi Thanh Nhan et al (2011), the specific role of logistics for an
enterprise is shown in:
Logistics allows businesses to move goods and services efficiently to customers.
Logistics not only contributes to the optimization of the goods distribution system
thanks to the distribution of a network of facilities in accordance with the movement
requirements of goods, but also optimizes the plan of storing and transporting goods
thanks to modern information systems, facilitating the delivery of goods to the place
requested by the customer in the shortest time with the lowest cost.
Logistics creates added value in terms of time and place. Each manufactured
product always has a certain form of utility and value for humans. However, to be
consumed by customers, most of these products need to be brought to the right place,
at the right time and be able to communicate with them. In the trend of globalization,
when consumption markets and supply sources become increasingly geographically
distant, the time and place benefits brought by logistics become especially necessary
for product consumption.
In particular, logistics effectively support mixed marketing activities and customer
care. In particular, in e-commerce, when choosing to buy products and making
payments is done only through a virtual network by simply switching from one screen
to another, the volume of goods is increasingly huge, the processing Handling tens of
thousands of products daily at the logistics stage is extremely important.
3. Characteristics of logistics in E-commerce
E-commerce logistics is a new development trend of logistics, so it also has the
characteristics of traditional logistics activities:
● E-commerce logistics is not a single activity but a systematic process consisting
of a continuous sequence of activities that are closely related and interrelated.
● E-commerce logistics is the thread connecting all stages of the business
activities’ operations in every enterprise, from procurement, and warehousing,
to order processing and distribution of goods to consumers.
● E-commerce logistics is not only related to the input of source of raw materials
but also their own resource factors of enterprises, including capital potential,
human resources, public infrastructure, information technology, and business
secrets.
●  E-commerce logistics can only develop when enterprises effectively apply the
achievements of science and technology to the process of logistics. With the
power of information technology, transportation processes have been optimized
for freight efficiency, quick order processing, and faster customer feedback
response, saving time and resources for enterprises.
Traditional vs. E-logistics: This revolution in traditional distribution methods has
made waves in many logistics areas. The main differences between a traditional
framework and e-commerce logistics include:

Characteristics Traditional logistics E-commerce logistics

Order/ shipment Focus is on full loads and Predominately packages and small
type goods consolidation loads

Customer Known and loyal  Unknown, variable and not very

loyal

Flow of goods Regular and visible Irregular and complex

Destination  Mostly companies or Mostly individuals, although E-

physical stores commerce B2B is the exception to
the rule

Demand Stable and predictable Fluctuating and difficult to predict

Characteristics of logistics in electronic commerce are evident in every logistic

activity:
● Distribution challenges are reflected in the delivery of several smaller logistics
units in different locations, so it is necessary to integrate all aspects of shipment
management, multi-modal distribution, monitoring of routes and timing, and
management of transit and receiving shipments. 
● Warehousing in electronic commerce implies the existence of warehouse
management system, which should enable easier tracking of products in the
warehouse and quickly preparation and sending the ordered products.
 Procurement system should be integrated so that follows requirements,
adequately manages inventory, monitors inventory by accounting inventory,
and plans the sale, so that the products that have the potential and frequency of
purchase are available, and that products that are not purchased do not create
additional costs. 
● Adequate documentation in the logistics and management of the delivery
process is necessary to provide shipment tracking and recognition of items, and
mobile applications should provide shipment tracking for all stakeholders
(including customers who purchased the product).
● The process of reverse logistics includes all mentioned activities in the process
of returning the product. The management of this process needs to answer the
question of what to do with the product that is returned, and find the right
solution for the customer that had returned the product. 
The main areas of the business logistics system include the implementation of
orders, inventory, warehousing, transportation, and packaging, which have new
dimensions in terms of e-commerce. Starting from orders, in electronic commerce,
orders are collected electronically, from customers on the website, and sent to
realization. Although E-commerce logistics has the same basic characteristics as
traditional logistics, E-commerce has placed higher requirements on business activities
for E-commerce logistics compared to traditional logistics, because logistics activities
in E-commerce enterprises face the complexity of handling huge volumes of
individual orders to odd locations every day, large destination quantity with wide
coverage and dispersion. Therefore, the speed of execution is required must be faster,
and human resources also need technical and electronic expertise. 

4. An overview of Cainiao Smart Logistics model

Cainiao Smart Logistics Network Limited (Chinese: 菜 鸟 网 络 科 技 有 限 公 司 ),
formerly known as China Smart Logistics Network, is a Chinese logistics company
launched by Alibaba Group, jointly with eight other companies, on 28 May 2013. As
part of its commitment to creating customer value, it adopts a collaborative approach
to logistics that aims to improve efficiency and customer experience for all players
along the supply chain. Cainiao provides a logistics information platform, linking
logistics providers, warehouses, and distribution centers, optimizing the performance
of China's logistics industry. The Cainiao platform allows participants to securely and
confidentially share information about orders, delivery status, and customer feedback.
Information flow and data analysis tables enable logistics companies to improve the
efficiency of their customer service. Cainiao's model allows this information network
to spread throughout China, even in the most remote areas of the country. Cainiao does
not own a vehicle or participate in any logistics. This allows Cainiao to grow and adapt
quickly, while capital requirements, as well as business risks, are minimal. It carries
forward Alibaba’s mission of making it easy to do business anywhere by aiming to
deliver anywhere in China within 24 hours, and across the globe within 72 hours. 
Since 2013, there is increasingly fierce competition in domestic E-commerce
logistics. The establishment of Cainiao logistics means that the domestic E-commerce
business has systematic planning of logistics background, and accelerates the e-
commerce business logistics industry reshuffle. On May 28th, 2013, Alibaba Group,
Yintai Group joint with Fosun, Fortin Holdings, China Post, S.F. Express, TTK
Express, STO, ZTO, YTO, YUNDA, Home delivery, and related financial
organizations jointly announced, “China Intelligent Logistics Backbone Network”
project was officially launched, the joint establishment of “Cainiao Network
Technology Co., Ltd.” was formally established. The Chinese smart logistics backbone
network (CSN), represented by Cainiao, hopes to fully stimulate the enthusiasm of all
parties through the integration of industry resources and provide. 
“Rookie” seems like a small concept, aimed through 5 to 8 years to improve a
nationwide logistics infrastructure, and its open, social operation of a “smart backbone
network” aims to support the future average of 30 billion yuan every day, 10 trillion
yuan per year in network retail sales, and to ensure that within 24 hours of delivery to
any region of the country. Not only will Cainiao save waiting hours, but it also
improve the precision of the match between express and network nodes. In the near
future (three to five years), CSN’s physical structure will be built and made into a
platform, which covers all manufacturers, e-commerce providers, and 3PL providers.
As of May 2018, Cainiao was one of the largest unicorn companies in China, valued
at 100 billion yuan. Cainiao is cooperating with more than 15 leading Chinese logistics
groups with more than 3000 forwarding companies participating in the network. More
than 2 million delivery staff are located throughout 31 provinces and 600 cities with
more than 6.1 million routes and 40,000 pickups in operation. More than 6.1 billion
orders have been transacted through the system, or 54% of parcels in China, according
to a 2015 Post Office report. One of the numbers showing Cainiao's strength is that the
system has completed 156 million orders during Singles' Day 2014, China's largest
online shopping holiday (compared to an average of 16.6 million orders/day). This
shows the strength and flexibility of Cainiao's distribution system. In addition, Cainiao
is also working with global partners to conduct cross-border sales services to more
than 217 different countries.
II. ALIBABA AND ITS CAINIAO SMART LOGISTICS NETWORK
1. An overview of Alibaba Group and its E-commerce activities
1.1. An overview of Alibaba Group
1.1.1. Establishment and development
Alibaba Group was established on June 28, 1999 in China by 18 people led by Jack
Ma - a former English teacher from Hangzhou, China. Since the launch of the first
website supporting exporters, Chinese manufacturers and small businesses, today
Alibaba Group has grown to become a global leader in the trade online and mobile
commerce. Currently Alibaba and its related companies are in the lead not only in the
online wholesale and retail market but also in the markets providing online business
support services such as advertising & marketing, electronic payments, cloud services
and other mobile solutions.
1.1.2. Missions, visions, core values
Mission: “Make it easy to do business anywhere” (To make it easy to do business
anywhere). Alibaba aspires to become The world's largest electronic trading platform,
effectively supporting businesses Small businesses in connecting with customers.
Vision: Be the first platform for data sharing & Become a business with the
happiest employees and maintain for at least 120 years
Core values:
● Customer-centric: Benefit of the user community and membership is the
company's top priority.
● Teamwork spirit: expect all employees to work together as a team to
accomplish a common mission. Believe that teamwork can help ordinary people
often do extraordinary things.
● Embracing change: Being in a developing economy like a storm requires
employees to maintain flexibility, constantly improving to adapt to new
business conditions.
● Honesty: Honesty is the core of business activities of the company
● Passion: Employees are encouraged to maintain a positive attitude towards and
never give up on what they believe.
● Commitment: Hope our employees prove the professionalism of the company
and constantly strive to become outstanding (Source Alibaba Group : 2015)
1.2. Alibaba’s E-commerce activities

Alibaba is considered a giant in the field of e-commerce not only in the Chinese
market but also in the global market with the speed of development like a hurricane.
Unlike Amazon which is the leading retailer in the world, Alibaba does not directly
trade in any kind of goods, but only acts as an intermediary between the seller and the
buyer.
 Alibaba's customers are businesses or individuals who have a need to open a store
on Alibaba's e-commerce exchanges, and Alibaba will provide an environment and
services to support sellers in marketing, payment, and transportation for goods to reach
the final buyer, and help buyers simplify and facilitate the process of searching and
shopping online.
Being the first B2B website, Alibaba has so far developed an extremely effective
ecosystem to support e-commerce activities. Overview of Alibaba Group's e-
commerce ecosystem includes:
● Taobao E-commerce platform (www.taobao.com)
● Tmall E-commerce platform (www.tmall.com)
● Juhuasuan.com
● Alibaba.com E-commerce platform (www.alibaba.com)
● TMĐT AliExpress E-commerce platform (www.aliexpress.com)
● 1688.com E-commerce platform (www.1688.com)
● Alimama (www.alimama.com)
● Alibaba Cloud computing (www.aliyun.com)
● Alipay (www.alipay.com)
● Ant Financial Services Group
● China Smart Logistics (Cainiao Network)

2. An analysis of logistics model with China Smart Logistics Network (Cainiao

Network)
2.1. An introduction to CHINA SMART LOGISTICS NETWORK (Cainiao
Smart Logistics Network)
Alibaba is China's largest e-commerce site with 636 million regular users, 50
million orders per day. Alibaba is not directly involved in the delivery of goods, but
relies on a third party to do it. Before 2013, Alibaba was completely dependent on
external logistics partners, which made the development of Taobao or Tmall meet
many limitations. Therefore, in 2013, Alibaba and its Logistics partners established
Cainiao Logistics with the mission of providing a logistics intelligent platform that
connects logistics service providers, warehouses and distribution centers to optimize
and improve the operational efficiency of China’s logistics industry.
2.2. Logistics activities of Alibaba with Cainiao Smart Logistics Network
2.2.1. Online order processing
Order generation and processing: Buyers place orders online -> Alibaba confirms
the order -> Sellers choose a delivery partner -> The delivery partner handles the
delivery process -> After-sales service.
 Step 1: Buyers place an order online and choose a delivery method. After placing
an online order, the buyer can see Delivery time prediction. Based on the database of
the seller and the buyer, Alibaba can estimate the time when goods are shipped from
the seller to the buyer's address. Buyers can opt for a longer delivery time at a lower
cost, and Alibaba estimates the average time to complete delivery to the last buyer is
48 hours. Regarding the form of delivery of goods, buyers can choose between Door-
to-door service or receive goods at the Self-service Pick-up Points.
Step 2: Alibaba customer service staff will have to confirm the orders and the
buyers will have to authenticate, then the orders will be officially entered into the
system .
Step 3: Buyers confirm the order on Alibaba and then the seller will choose the
delivery partner who delivers and performs end-to-end delivery service. The logistics
partner selected by the seller will carry out the entire logistics operation from picking,
warehousing, transporting goods by road and last mile delivery. Sellers who have a
large number of daily orders can choose multiple delivery partners. In this process,
both buyers and sellers, through the data system of China Smart Logistics, are able to
keep track of the goods (Delivery tracking information) from the time the order is
placed until the goods are delivered.
Step 4: Logistics partners proceed to pick up goods from sellers, deliver them to the
distribution center, packing, marking, and then shipping to the buyer.
Step 5: After-sales and after-delivery services. Once receiving the goods, the buyer
can evaluate the quality of the delivery process and show customer satisfaction
through the system. All parties including Alibaba, sellers, logistics partners and other
buyers have access to read these reviews. Also through the system of China Smart
Logistics, the sellers are aware of the quality of delivery services, customer
satisfaction rates as well as complaints to improve business services and select 
appropriate logistics partners. Logistics companies can also access these customer
reviews to make a comparison with their competitors in terms of market share and
delivery time, thereby implementing appropriate measures to improve their logistics
services.
2.2.2. Handling goods at the distribution warehouse
- Distribution system:
Alibaba takes advantage of its logistics partners’ nationwide network of distribution
centers, and Cainiao also invests in the construction of some distribution centers in
important provinces. The location of the distribution centers is considered based on
many factors such as: population, income per capita, e-commerce usage rate, and
existing logistics infrastructure. Currently, the warehouse network of China Smart
Logistics has more than 1800 distribution centers of different scales, in which the
largest center is 1.37 million square meters in Tianjin. This center has been supporting
42 freight stations delivering goods in 1 or 2 days for residents of big cities like
Beijing, Tianjin or Hebei.
 - The process of handling goods at the distribution warehouse:
Alibaba is not a retailer. Actually, Alibaba acts only as an intermediary connecting
sellers and buyers, therefore, Alibaba does not stock, goods are placed at the seller's
warehouse. After an order is confirmed, the seller will proceed to select logistics and
delivery partners. The deliveryman of selected logistics companies will arrive at the
seller's premise to pick up the goods. Goods will be gathered at freight stations, then
moved to larger distribution centers. Alibaba warehouse operates with the help of only
60 Quicktron robots (AGV - Automated Guided Vehicle). Robots connected with wifi
receive the guidance to identify and move the goods shelves to packing staff. Once the
staff finish packing and marking, the robots will continue to receive instructions from
wifi to return the shelves to their original positions.
- The technology of handling goods at the distribution warehouse:
The most important factor that helps the distribution centers of China Smart
Logistics operates efficiently with a technology software of a huge data computer
called Warehouse Management System - WMS. WMS is designed to optimize the
efficiency of picking and packing operations (pick-and-pack), for order fulfillment and
shipping transportation. This intelligent software analyzes data on a regular basis to
identify products that buyers often buy at the same time, using this information to
determine the optimal placement for stacking more than 30,000 product categories.
The purpose of the WMS system is to minimize the distance and time that the pickers
are normally required to complete an order. For example, washing powder and
shampoo products will be nearly located because shoppers tend to buy them together
when shopping online. With this system, the arrangement of goods in the distribution
centers will be flexibly adjusted on a real-time basis based on the seasonal, regional
and other variations in the consumers’ habits.

2.2.3. Delivery
- The logistics model:
Alibaba, with its China Smart Logistics network, has adopted the hub-and-spoke
logistics model with variations to suit the needs and conditions of the business.
While Amazon innovated the hub-and-spoke model by investing in building 6 super
hubs (large distribution centers), Alibaba, with a nationwide network of partners, has
built a multi-hub network including many distribution centers of different scales
hierarchized by region, province and district.
- Delivery process:
Operating as an intermediary between sellers and buyers, Alibaba has provided
efficient logistics services to both individuals and businesses. Sellers are not required
to deliver goods in small quantities to separate addresses, instead, goods of different
sellers will be gathered at Alibaba's freight stations, then transported to distribution
centers for categorization and allocation before being delivered to buyers.
 Besides, to facilitate the operation of logistics companies, China Smart Logistics
provides a route analysis system by real-time based on location of distribution centers,
delivery routes and expected order volume. In addition, it also provides weather
forecasts allowing the users to know the weather conditions in highways, cities and
provinces in China. This data enables logistics companies to optimize warehouse
operations, transportation and human resources to meet customer needs.
2.3. Success of Cainiao Logistics Smart
2.3.1. Scale of logistics network
Cainiao is currently cooperating with 15 leading Chinese logistics enterprises and
3000 companies participating in the network. In 2018, nearly 10 billion orders were
delivered by Cainiao which accounted for more than 50% of the total orders in China.
Cainiao processes an average of 50 million orders per day, equivalent to nearly 12
billion orders a year.
However, Cainiao's true power is only shown on 11/11, the Singles Awareness Day,
when processing 1 billion orders within 24 hours. This number is equal to Amazon's
total orders in 2018. This record has proved that Alibaba and Cainiao are already No.1
in China and are still becoming a rival to Amazon, one of the biggest global
companies.
2.3.2. Service quality
Delivery time is the most important factor of an e-commerce site and Alibaba or
Cainiao have excellently performed their tasks. Delivery time in 30 major cities is
within 1 day, orders in 200 other cities will be delivered within the next day. Users can
also opt for slower delivery at a lower cost. However, the average delivery time is only
2 days, much lower than 7 days compared to the year 2013.
2.3.3. Other added values
In addition to having a fast and stable delivery speed, Cainiao also offers customers
with other utilities such as: Real-Time Tracking, Estimated Delivery Time.
Real time tracking:
This is a system that uses the global positioning system GPS. Buyers, sellers or any
logistics partners are able to track the goods throughout the delivery process. Currently
in Vietnam, users can only check if the goods are in stock
or have been transported, not the exact position of the goods.
Estimated Delivery Time:
Based on Big Data of previous deliveries, AI will predict a relatively accurate guess
about the time the goods arrive at the buyer's hand.
2.4. Contributions to the success of Cainiao Smart Logistics
Cainiao’s great technology platform, AI and automation technology have enabled
Cainiao to create an intelligent logistics network to optimize the delivery process.
Demand prediction, inventory management and delivery optimization are 3 steps
contributing to the success of Cainiao Smart Logistics.
 Demand Prediction:
AI will analyze users’ needs based on Big Data of customers. AI will use the Time
Series Model: AR Model to analyze the demand for each type of goods, Over-fit with
goods with strong fluctuations, Under-fit with popular goods sold on a regular basis.

How AI calculates to predict the final outcome

After many times of Machine Learning C1, C2, C3, AI will make predictions to
give the final result. It is estimated that the error of the prediction will reduce by 20-
25% in comparison with the non-AI method. Obtaining the predictions about
customers’ demand for goods transportation, it will be much more straightforward for
Cainiao to proactively source goods, be ready to deliver to customers as soon as
possible.
Inventory Management:
Cainiao's smart warehouse has robots called AGVs. The entire system of AGVs is
operated smoothly thanks to AI direction. Each goods box will be affixed with
separate barcodes, classified and routed by AI from the beginning of the process.
AGVs will be controlled by AI to move goods boxes to the staff, then put onto a
packing conveyor belt and finally stacked by robotic arms. AI and automation
technology have almost completely replaced humans in the management of goods in
the warehouse. This has reduced the time by triple and saved costs by almost a half
compared to the previous conveyor systems.

Delivery Optimization:
Optimizing the delivery process: 2 software used by Cainiao during its delivery
process is Vehicle-Cargo Matching and Route Planning.
Route Planning: 50 million goods per day and the huge number of vehicles are
supposed to create different ways to transport goods. Therefore, Route Planning is
used to detect the most efficient and least time-consuming routes of delivery for
Cainiao drivers.
Vehicle-Cargo Matching: This software will build a 3D picture for the most
reasonable cargo loading on the vehicle.

Cainiao's Optimized Route Plan

In addition, IoT and Blockchain Technology becomes a very intelligent complex

with a large-scale management system. Shopping festival is an overloading day of the
year for databases. However, in China, billions of orders can be quickly processed
thanks to the “Cainiao Smart Logistics” system developed by Alibaba and logistics
partners. The system applies Internet of Things (IoT) technology and Blockchain for
order confirmation, pick-up and delivery. Typically, Alibaba's warehouse has hundreds
of robots activated with IoT system, automatically receiving customer order
information, then automatically moving, picking up, unloading… based on the
programmed target. With this technology, Alibaba's smart warehouse is 50% more
efficient than traditional warehouses. Cainiao even goes further by putting the tracking
system “Sky Eye” on trial. The goal is to connect all warehouse cameras and delivery
partners across the country in order to monitor, ensure the quality of the goods
delivered to buyers.
III. RECOMMENDATIONS FOR THE APPLICATION OF CAINIAO SMART
LOGISTICS MODEL IN VIETNAM E-COMMERCE ENTERPRISES
1. Current situation of logistics activities of E-commerce enterprises in
Vietnam
1.1. Strengths
In Vietnam, e-commerce activities under the B2C model have made many
significant developments in the past 5 years. With a low starting point of about 2.2
billion USD in 2013, but thanks to the growth rate for 5 consecutive years at nearly
25% per year, the size of the B2C e-commerce market in 2019 reached about 10.08
billion USD.
Unit: billion USD

The percentage of Internet users who have made an online purchase at least once
accounts for 67% of the population and especially nearly 65% of them are satisfied
with this form of purchase.
The type of goods bought and sold the most online are clothes, shoes, cosmetics
(61%), followed by books, stationery, and gifts (46%)... Spa services are rarely used in
most forms of e-commerce transactions. When paying for these products, 82% of
consumers still use direct cash payment (COD) and 48% use ATM and Internet
Banking payment methods. E-wallets seem to be quite new to Vietnamese consumers.
In e-commerce, logistics is always a very important foundation, one of the key
factors determining the profits of enterprises. The increase in the number of goods
transacted online in Vietnam has led to an increased demand for logistics in e-
commerce, even at times beyond the capacity to meet. Currently, some large
companies in the field of logistics in e-commerce in Vietnam can be mentioned as:

Tiki DHL
 Lazada FedEx

Shopee TNT

Sendo Scommerce

VN Post Ninja Van

Viettel Post Giaohangtietkiem

Typical services of logistics companies in the field of e-commerce in Vietnam

include:
(1) Courier service (CPN): letters, documents, items, domestic and international goods
of Viettel Post, VN Post…
(2) Instant delivery service: exclusively for customers wishing to transport goods
within the city with 3 criteria: Savings - Express - Guaranteed, such as Foody.vn's
"NowShip" service, Sendo's super-fast delivery, Tiki Now by Tiki and Super Fast
Delivery by Lazada. Depending on different order timelines, customers will receive
the goods in the same, detailed time frames.
(3) Companies undertake last mile delivery: involving two important logistics
operations, transport - delivery row and sorting center divide - select.
In which categorization and selection operations play a key role in a company's
capacity and service quality. Some e-commerce logistics companies have established
and run centers for classifying, dividing, and choosing goods. Examples include: 
- LEL Express, which Lazada's forwarding unit built and ran at the Hateco logistics
center in Sai Dong, Long Bien; 
- Vietnam Post, which opened the center in Hiep Phuoc; 
- Fast delivery (GHN), which owns an automatic sorting facility in Ho Chi Minh City.
 According to internal calculations at GHN Service Joint Stock Company, the
shipping cost per order tends to decrease rapidly, while the delivery time has seen a
very significant improvement in the period 2015-2017. Specifically:

Change in Order Costs Change in Order Completion Time

In 2015, the average cost of an order was around 45,000 VND per order, and the
typical delivery time was 4.3 days. By 2017, the average cost per order had dropped by
33,000 VND/order, with a 2-day delivery time. It is obvious that the demands for
logistical activities are increasing and becoming more complex.

1.2. Weaknesses
The business and working size of E-commerce enterprises in Vietnam are still
small, with little capital, which limits the investment and application of information
technology in enterprises. According to the Vietnam Association of Logistics Service
Enterprises, the majority of logistics and express delivery businesses in Vietnam are
small businesses, 90% of which have capital of less than 10 billion VND, and 5% have
capital from 10 to 20 billion VND. For these businesses, the ability to participate in the
E-logistics supply chain is extremely difficult. This makes Vietnam's logistics market
relatively large, but 80% of the market share falls into the hands of foreign enterprises.
Operations in the main stages are still manual, and still cannot apply automation
technology, leading to errors and high logistics costs, equivalent to about 20.9% of
GDP and accounting for about 30-40% of enterprises’ product costs, while in countries
like Thailand and Malaysia accounted for 6% and 12% respectively, compared to
Singapore, the cost was 3 times higher. Financial constraints also make it difficult for
E-logistics businesses to invest in a warehouse system to manage inventory and
stockpile goods.
In the Vietnamese E-logistics industry, the quality of human forces is unable to
meet the demand and requirements of the market. Although E-logistics human
resources are young and energetic, they are still lacking in quantity and experience,
professional qualifications are weaker than regional countries in terms of deep
expertise, especially the limitation of foreign language ability, professionalism and
discipline have made it challenging to promote the application of information
technology in activities.
E-logistics businesses have been unable to apply technology, automate stages, and
still perform many stages manually, affecting delivery time, counting errors, receiving
ideas slow customer understanding, etc. The level of technology application of
Vietnamese E-logistics enterprises is still at a low level, the size of enterprises is still
small and medium, and the financial capacity of enterprises is limited, consequently,
there are many barriers to digital transformation.
2. The potential of Cainiao Smart Logistics Model in Vietnam E-commerce
enterprises
2.1. Opportunities
The race to expand the logistics market share is getting hot when foreign businesses
have continually been pouring capital into and scaling up their operations in Vietnam.
The market has witnessed the entrance of many large players in recent years. The
speed of product delivery is increasingly important as is the quality for both customers
and merchants. As the market continues to grow, it becomes increasingly clear that the
long-term prospects of Vietnamese e-commerce lie in the development of a good
logistics system to facilitate the sector. Last-mile connectivity is crucially important
for e-commerce businesses who know that customers expect fast and reliable
deliveries. Currently, several e-commerce platforms such as Lazada, Tiki and Grab
have their own logistics department including warehousing, package, and shipping.
Nevertheless, most firms involved in e-commerce cannot handle logistics alone,
creating a demand for third-party logistic providers (3PLs). Firms such as Shopee and
Sendo use 3PLs partners. Regarding the Cainiao Smart Logistics Models, not only
does Cainiao have advantages in the innovation, but it also shares the results in its
fourth-party logistics (4PL) and asset-light model. 4PL is a new concept that was
raised by Accenture in 1998, meaning providing logistics and supply chain solutions.
In this part, we will investigate the potential of this model considering its breakthrough
compared with existing logistics activities of E-commerce enterprises in Vietnam
The cost of shipping on some E-commerce platforms in Vietnam is considered
rather high along with the long and slow process of delivery which can take weeks,
sometimes even months. As the implementation of Cainiao Smart Model reduces the
operating costs of the entire supply chain, this will in turn solve the problem of high
shipping cost and the delays in shipping. The unique business model and the power of
an open platform rapidly establishes industry partnerships and scales its logistics
services for businesses and consumers. These horizontal partnerships mean that we are
able to capitalize on the wealth of experience of established companies and aggregate a
diverse range of logistics resources ranging from chartered flights, trains, cargo ships
to local last mile fulfillment service providers to support cross-border shipment, trade
and minimize supply chain disruptions. Regarding the improvement in the shipping
process, if Vietnam establishes its partnership with Cainiao, new sea freight routes are
expected to be launched to meet the surging e-commerce demand from consumers in
the region. New consumer purchasing behavior, which typically reflects higher
purchasing frequency of small and lighter items online, indicates local consumers’
preference for more economical shipping options. Cheaper shipping options means
that shipping costs remain low relative to the item cost, thereby reducing barriers to
purchase. As a result, businesses and consumers in Vietnam benefit from a more stable
and diverse logistics service, with greater transparency and competitiveness in pricing
and customer service with the implementation of Cainiao.
Due to the complex nature of supply chain and cross-border logistics, Vietnam
SMEs often face pain points such as cooperation along the value chain, cost
management and real-time tracking. Cainiao aims to mitigate these pain points by the
optimization of processes through technology. Cainiao’s business model facilitates the
digitalization of the logistics value chain that encompasses a seamless first-mile, line-
haul shipping, overseas warehousing, customs clearance and goods inspection process,
connecting merchants, logistics firms and consumers to establish a globalized supply
chain and parcel network. By operating a total of five networks through Alibaba
Cloud, Cainiao offers data-driven services for every stakeholder in the supply chain.
Through these networks, shipping companies and express carriers are armed with a
data platform to perform such analysis as best route algorithms. Warehouse and
domestic fulfillment centers employ AI-enabled smart supply chain development tools
that track supply and demand. For instance, a global network monitors international
packages and a last-mile system shows packages' real-time location in the last mile of
transit. Finally, a rural interface ensures that even the most remote areas are accessible
for two-way shipping. In addition, Cainiao is promoting the upgrading of industrial
chains. For example, thousands of Cainiao stations will be upgraded to digital stations
providing life services. To bring logistics closer to consumers, these stations will
provide group-buying, laundry and recycling services. Furthermore, the digital
platform keeps expanding its international services, largely increasing its speed in
sending international parcels.
During the time of the COVID-19 pandemic, Vietnam experienced an accelerated
pandemic-driven logistics and supply chain crisis, following the country’s various
lockdown and quarantine measures. Implementing Cainiao Smart Model will help to
speed up the time needed to send goods during the time of possible pandemic in the
future. Cainiao’s innovations in synergy and digitalization are speeding up the time
needed to send goods, helping many people and firms during the pandemic.Synergy is
about building a synergetic relationship with express firms and airlines, improving the
efficiency in the platform’s operations. For instance, Cainiao can establish its
relationship with airlines brands in Vietnam to form a group fighting against the
pandemic. Secondly, the increasing transport speed is the result of Cainiao’s seven-
year effort in digitalization. To be more precise, the appearance of eHub was crucial –
a digital free trade zone, mainly designed to speed up global trade.
2.2. Challenges
One of the main challenges regarding the implementation of Cainiao is the
requirement of a vital role of technology in logistics. To fully participate in the e-
logistics supply chain, companies must invest millions of dollars in goods sorting
lines. In addition to investing in an automatic classification system, companies
operating in the field of e-logistics must also be equipped with management software
to connect information infrastructures. The cost of such synchronous information
technology infrastructure investment is too great a burden for small and medium
logistics enterprises. The requirement for warehouses, for branches throughout
Vietnam, for high-quality laborers to participate in the supply chain that demands new
technological knowledge of e-logistics is also a huge obstacle, leading to the inability
to enter the field of e-logistics of small and medium logistics companies. With such
cost requirements, e-logistics has also proven to be a difficult field for traditional
logistics companies. Vietnam's logistics cost/GDP is at more than 20%, double the
world average due to limited infrastructure.
Since Cainiao taps partners' capabilities to deliver orders as well as the demand of
customers in diverse areas, the challenges in Vietnam may stem from the less
developed fulfillment network. By 2021, about 70 per cent of e-commerce orders were
delivered to inner-city locations and the number of buyers from the suburbs and rural
areas did not grow as fast as expected. The high percentage of COD orders – above 90
per cent – also indicates that buyers’ trust in e-commerce needs to be improved. The
delivery system of some online shopping platforms fails to ensure quality and connect
buyers with sellers.
Long-term productive resources in the ecommerce market are also one of the
considerable barriers to the ecommerce industry. For this purpose, the ongoing need
includes warehouse management, branding & marketing, payment & shipping
processes. Consequently, all of the elements should require enterprises to keep the
non-stop funding on continuous losses. Along the same lines, small and medium-sized
enterprises can not afford long-term competition versus the ecommerce giants in the
market. For instance, international names like Alibaba, JD.com, or Amazon create an
enormous distance for other SMEs to overtake. In general, the capital investment race
invisibly makes large ecommerce businesses more robust and extensive. Meanwhile, it
oppositely generates more barriers to the ecommerce industry in Vietnam due to the
lack of sufficient capital in the long term. Following this, depending on each
organization, there will be many issues when operating an e-business.
2.3. Recommendation
In the era of international integration, logistics activities ranging from production to
consumption are playing an increasingly important role in enhancing the
competitiveness of  not only manufacturing and service industries but also of the
whole economy. It is especially necessary to mention logistics activities in e-
commerce. However, Vietnam's e-commerce is a new market with many potentials
and opportunities, yet facing various challenges.

According to a research conducted by Vietnam Report, it is essential that

Vietnamese businesses prioritize improving the quality of logistics services, increasing
the application of technology in business activities and building a competitive pricing
policy because developed countries follow the current trend of implementing E-
logistics, green logistics, electronic documents and applying cloud computing,
blockchain technology, using artificial intelligence or robotics in some services, such
as loading or unloading containers, loading and unloading goods in warehouses and
yards.

Therefore, through the analysis and evaluation of Alibaba's smart logistics model,
some applicable advantages for Vietnamese enterprises are drawn:
- Application of smart warehouses: In order to improve the efficiency in
warehouses,the usage of Internet applications, big data, edge computing and artificial
intelligence (AI) is highly recommended. These tools will help determine warehouse
storage capacity and the height of stacked boxes, as well as monitor traffic by guiding
trucks to empty parking spaces. Besides, warehouses will be equipped with sensors
that can detect water, electricity, temperature and humidity conditions throughout the
park and send alerts to property managers if something needs to be fixed. Currently,
the core products of intelligent development include ASRS, classification tools and
automated guided vehicles (AGVs). With the integration of IoT and AI technologies,
such devices will be able to read and process information as well as more efficiently
plan and determine the best routes and locations.

- Use of sorting equipment: Sorting equipment can be classified into two main
categories: conveyor sorters and arm sorters. In particular, the application of smart
robots will contribute to promoting the development of the express delivery field.

- IoT (Internet of Things) and Blockchain technology: Currently, there are a number
of projects applying blockchain technology to add value to international logistics,
through promoting transparency in supply chains and automation in administrative
procedures. Blockchain technology is expected to bring even more benefits when it is
accompanied with new advancements in the future. The application of blockchain can
be further exploited in the IoT era – automating payments between systems (like two
interconnected systems, negotiating prices and applying prices based on logistics
operational efficiency).

In addition, to develop the national logistics system, Vietnam needs to invest more
in logistics infrastructure, diversify investment portfolio and call for economic sectors
to participate in logistics infrastructure investment. In reality, many large projects in
Vietnam are not yet completed. Therefore, it is necessary to recognize the investment
in infrastructure as a must in the development of the logistics system as well as the
economic development.
 ● CONCLUSION

It can be said that one of the reasons for the success of Alibaba is an effective
logistics network system, called " China Smart Logistics” or “Cainiao Network” which
is the association between Alibaba and delivery partners across the country. Cainiao's
model enables this information network to spread throughout China, even to the most
remote regions. Cainiao neither owns a vehicle nor participates in any logistics
procedures. This makes Cainiao grow and adapt quickly as capital requirements as
well as business risks are minimal. This logistics model has proven its effectiveness,
resulting in clearly positive changes and contributing to the increasing growth of
Alibaba.

It is undeniable that logistics activities play an immense role in the current

economy. Updating logistics trends in e-commerce has created an effective
competitive environment for businesses. Alibaba has become a global empire,
penetrating many markets of different scales around the world with convenient and
excellent services. Besides, Alibaba's decisions and policies are bound to be a valuable
source of reference as well as a driving force to help promote logistics activities in
Vietnam enterprises.

Vietnam has encountered a number of limitations and challenges in logistics

activities, however, many domestic and foreign experts recognize an opportunity for
Vietnamese enterprises to easily sell goods online in foreign countries in the context of
globalization and the development of technology for logistics. Therefore, Vietnamese
e-commerce is still a potential land for domestic enterprises, including start-ups.
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