Refinement in Logistics creates Vietnam business opportunities

What is logistics?

The term "logistics" was first used by the military to describe the methods used by military personnel to acquire, store, and transport equipment and supplies.The phrase is increasingly often used in the corporate world, especially by organizations in the industrial sectors, to describe the management and movement of resources through the supply chain.

The greatest service to deliver and move items from the location of production to the customer is logistics, to put it simply. Specifically, planning and controlling the transportation of goods or information about raw materials from the point of origin to the point of consumption in accordance with client requirements is the responsibility of logistics firms. Companies must always work to improve and concentrate on the number, quality, timing, and pricing of services if they want to compete successfully in this market.

The logistics sector encompasses tasks including packing, packaging, warehousing, storing, rotating items, and handling damaged goods in addition to delivery and receiving.

Logistics in Asia

Logistics play an integral role in the development of a country’s economy through ensuring a smooth flow of goods. Many countries have been able to adopt successful logistics models that can maximize efficiency while keeping costs low. The Asian countries that have developed successful logistics models include China, Singapore and India. According to a study on logistics from the Ministry of Industry and Trade, these countries have taken great advantage of the strategic geographical location and applied digitalization in their processes while investing greatly in their infrastructure.

Current state of Vietnam logistics?

Vietnam's logistics sector has developed significantly over the past several years at a size of 40–42 billion USD/year and an average rate of 14–16%/year. The result of import and export of products reached a record high of US$732.5 billion in 2022, up 9.5% from 2021, thanks in large part to the growth in enterprises and the caliber of logistical services.

The Vietnamese logistics market is placed 11th out of 50 growing global logistics markets by Agility Ranking 2022. Vietnam ranks fourth in terms of "international logistics opportunities" because it is becoming a more popular location with plentiful Vietnam business opportunities trying to diversify their supply chains.

According to the Agency of Foreign Trade, there are more than 5,000 enterprises operating in the logistics market in Vietnam. 89% of which are small and medium-sized Vietnamese businesses, while 10% are joint ventures. Even though they only make up 1% of businesses, 100% foreign-owned companies with many of the top names in the world of logistics offer cross-border logistics services. Since the majority of logistics companies are small to medium-sized, there still present ample Vietnam business opportunities within this field. Vietnam presents many advantages to develop logistics yet still hold some limitations. However, these limitations can be overcome through strategic investment to take full advantage of the present advantages.

Limitations and future potentials

Potentials

Geographical locations

The East Sea, a crucial commerce "bridge" on the global nautical map, is just adjacent to Vietnam. 29 of the 39 marine routes that are now in use throughout the world cross the South China Sea. The East Sea region features one through route and five linked routes among the top ten maritime routes in the world. A quarter of all seagoing ships operating worldwide pass through the East Sea each day, which sees an average of 250–300 transits. Of these, more than 50% have a tonnage of over 5,000 DWT, and about 15-20% have a tonnage of 30,000 DWT or more.

There are various seaport development sites along Vietnam's 3,260 km east coast, some of which can be used to create deep-water ports, such Cai Lan and a few locations in the Ha Long Bay and Bai Tu region. A list of names: Long, Lach Huyen, Dinh Vu, Cat Hai, Do Son, Nghi Son, Cua Lo, Hon La, Vung Ang, Chan May, Da Nang, Dung Quat, Van Phong, Cam Ranh, Vung Tau, Thi Vai...

On the 140,479-kilometer Trans-Asian highway, Vietnam is situated. The distance along this route in Vietnam's territory is 2,678 kilometers. The Economic and Social Commission for Asia and the Pacific (ESCAP) launched the Trans-Asian Roadway with the intention of connecting Asia's motorways and fostering overland trade between Asian and European nations.

Vietnam is situated on the East-West Economic Corridor (EWEC), in addition. Geographically, the corridor's major axis is a 1,450 km route that runs through central and northern Laos, northeastern Thailand, and Da Nang (VN) in the east with Mawlamyine (Myanmar) in the west. This transportation route will serve as a lifeline, cutting across Southeast Asia's middle regions on the East-West traffic axis and, most crucially, bridging the Pacific and Indian oceans with an impossibly short distance. The East-West Economic Corridor was inaugurated in June 2009, enabling Vietnamese and Thai freight vehicles to transport and receive products in each other's countries. This opportunity has greatly increased the possibility for inexpensive, quick, and efficient delivery. The benefits of geographical location allows Vietnam business opportunities to trade with many countries within the Asia region and beyond.

Infrastructure development, creating Vietnam business opportunities for logistics

Mr. Tran Thanh Hai, Deputy Director of the Import-Export Department (Ministry of business and Trade), stated at the 2022 Annual Meeting of the Vietnam Logistics Association that Vietnam's logistics business has several advantages for development.

For instance, many communities currently have plans and master plans for the development of logistics. In addition, the trend of Vietnam business opportunities in the logistics sector is rising quickly, which is evident in infrastructure initiatives like highway building, investment in the Long Thanh airport, seaport growth, and the development of new logistical facilities. Moreover, this involvement includes capital from foreign-invested businesses as well as local investors and state funds.

“When foreign enterprises see Vietnam's logistics market as a highly profitable market, the speed and capital inflow into the logistics industry will be huge. Increased investment also creates a transformation in terms of infrastructure, then, service businesses have better development conditions, "said Mr. Tran Thanh Hai.

The commercial output in Vietnam is rebounding and growing extremely well, which is the next benefit. Vietnam's record-breaking total import-export turnover initially surpassed $ 700 billion on December 15. This is viewed as a major benefit for the logistics sector since it will raise demand for logistics services as the number of commodities produced, locally circulated, and exchanged with international trade rises.

Limitations

Agility's research from 2021 reveals that more than 20% of Vietnam's GDP is spent on logistics. While the global average cost of logistics is just approximately 11% of GDP.

Transport infrastructure and technology infrastructure make up the bulk of the logistics infrastructure system. Along with auxiliary systems like highways, railway stations, airports, and seaports, transportation infrastructure encompasses air, water, land, and train routes. Infrastructure for information technology comprises software programs and electronic tools for inventory, process, and transportation management.

The infrastructure in Vietnam is still underdeveloped and lacks synchronization in the present. Specifically, the layout of warehouses and seaports is still dispersed and unconnected, as is the road infrastructure (especially the highway) linking towns. This presents a significant obstacle to the expansion of operations related to material transportation, warehousing, and complete supply chain management in Vietnam today.

The present infrastructure bottleneck at airports, seaports, and warehouses, according to Ms. Le Thi Ngoc Diep, Commercial Director, SLP Vietnam Company, has not been standardized and distributed. The planned warehouse system, in particular, differs between the North and the South, which places restrictions on the ability to transfer commodities throughout the nation.

The majority of logistics tasks performed by Vietnamese businesses nowadays follow the established standard procedure. Although the use of smart technology can increase flexibility in logistics services in Vietnam, the scale and corporate culture of businesses are ultimately to blame for the dearth of creative solutions. Because of the shortage of human resources and the complexity of managing and implementing logistics services, even after using digital transformation solutions, the supply chain process is not optimized.

The fact that Vietnam's human resource base still falls short of actual demands in terms of both quality and quantity is one of the main obstacles facing the logistics sector. The Vietnam Logistics Business Association (VLA) survey found that only around 5-7% of all personnel that work in the logistics sector are appropriately trained.

Upcoming trends in logistics

The COVID-19 outbreak has increased awareness of and support for the trend of digital transformation. Particularly in the logistics sector, organizations are increasingly wanting to exhibit their whole supply chain as technology goes beyond "track & trace" – management and tracking. A poll by Alloy Technologies found that 92% of executives from logistics companies believe that supply chain management is crucial for success. Only 27% of them, however, were able to properly digitalize their companies. This demonstrates that while digital transformation is a necessary trend for the logistics sector, not all businesses can successfully implement it. However, if done right, it can really push the Vietnam logistics industry, allowing for great expansion in Vietnam business opportunities.

Masan logistics - Supra

The retail sector demands a special and extremely complicated supply chain due to its features of high order frequency, wide diversity of product categories, and high volume of items. WinCommerce's "huge" system of approximately 3,500 businesses, more than 30 million monthly customers, and millions of goods that must be swiftly sent to 62/64 provinces around Vietnam make logistics a crucial component of the supply chain.

Instead of utilizing just people, Supra uses AI & ML techniques to place orders for sel ect products and is steadily growing. To help keep shipping costs as low as possible, machine learning technology analyzes the database to identify the stores with the highest product consumption, from which to order shipment and determine the best delivery route.

Supra is in charge of delivering 45% of WinCommerce's dry products, which helped to reduce supply costs per product for WCM by 13% in the first year of operation and lower retail pricing for consumers. Artificial intelligence is being used by Supra to properly plan the supply, preventing shortages and excess inventory.

However, Supra's most significant contribution is to WinCommece's ability to centrally manage product quality at the DC warehouse system, assuring constant and consistent product quality across the whole system of WinMart/WinMart+ shops and supermarkets.

The percentage of items offered in WinMart supermarkets, WinMart+ outlets, and WIN has climbed from 65% to 80% since Supra began operations. As a consequence, as WCM extends its system and aims to establish 5,000 points of sale spanning fr om urban to rural areas by the end of 2023, it will help generate a long-term competitive edge.