Why is the cost so high? According to Vietnam Freight Forwarders Association (VIFFAS), reasons for the high cost of Merchandise Transport (MT) in Vietnam are due to unhealthy competition of some businesses, poor and inadequate transport infrastructure, inconsistency of MT vehicles, and lack of standardized packaging regulations, etc.
The merchandise transport market seeks healthy competition
Why is the cost so high?
According to Vietnam Freight Forwarders Association (VIFFAS), reasons for the high cost of Merchandise Transport (MT) in Vietnam are due to unhealthy competition of some businesses, poor and inadequate transport infrastructure, inconsistency of MT vehicles, and lack of standardized packaging regulations, etc. The unhealthy competition of Vietnam’s MT market is increasing MT costs.
The transport market situation may be divided into 2 groups.
The first group is accepting overloaded transport, gathering items that are not allowed to be included in the same freight to reduce transportation costs so as to compete. This shows the particularity of the transport market surviving through law dodging such as overloaded transport. But when conducting overloaded transport, drivers have to pay a lot of unofficial fees. And to offset such unofficial costs, drivers must make more trips and work overtime. As a consequence, a series of dreadful traffic accidents related to trucks or container trucks having occurred from the beginning of the year is a concrete proof. Even stealing the merchandise is a solution to offset their losses. In fact, there have been many cases of extracting goods from trucks, container trucks, etc.
The second group is willing to pay the true cost to ensure compliance with transport standards of tonnage, cargo classification, etc., without prioritizing the option to optimize cost and fail to satisfy transport standards. The division into two groups shows the unhealthy competition in the current MT market of Vietnam.
The fact that some companies or individuals arbitrarily increase their prices in the peak season and are ready to accept unchecked overload transport, willing to make huge discounts in the low season, has caused great risks to companies that handle the rent of transportation and distribution on their own. The development of Vietnam's road traffic systems and facilities has not kept up with the pace of socio-economic development and the boom of the MT industry. Traffic jams regularly occur in major hubs and cities, and transport vehicles are only available at fixed timeframes. Businesses will spend more on transport and be passive about time, leading to infringements in delivery contracts, resulting in many additional costs.
Ms. Luong Pham Tuyet, Chairperson of the Board of Directors of Cong Thanh Service, Freight Forwarding, Transport and Trading Company Limited, said: “There are great pressures in the transport industry, especially on how to deliver on time and in full quantity (OTIF - On time in full). The traffic jams and port congestion usually put us in a tough position, more like sitting on fire. There many cases in which we have to ship by air instead of by sea to ensure delivery time. In those cases, losses are inevitable, but we still have to carry on to keep our reputation with customers.” Developing industrial parks and seaports without developing traffic systems with high connectivity also increases the MT cost.