OPPORTUNITIES AND CHALLENGES. Logistics was introduced into Vietnam about 20 years ago. Although income from logistics is still at a low level, accounting for about 2-4% of GDP per year (the remaining 80% lies in the hands of foreign multinational companies), the growth rate of logistics is relatively fast, reaching around 20-25% per year.
OPPORTUNITIES AND CHALLENGES
Logistics was introduced into Vietnam about 20 years ago. Although income from logistics is still at a low level, accounting for about 2-4% of GDP per year (the remaining 80% lies in the hands of foreign multinational companies), the growth rate of logistics is relatively fast, reaching around 20-25% per year. This is an indispensable industry for production, circulation and distribution in this world. It is also the driving force to promote sustainable and harmonious development of seaports, marine economies, contributing to improving the socioeconomic efficiency of a country. Logistics activities account for 10-15% of GDP per year in developed countries in Europe, North America and Asia-Pacific.
The century’s trend of logistics development is globalized on the basis of applying modern IT, e-commerce, and extensively using the “pull” logistics management method to gradually replace the traditional “push” method, with the intention of creating added values to lower the cost of transport and expand the hiring of services from professional logistics companies. In the context of the global economic crisis, with no sign of recovery and the country's macro-economy is struggling from the risk of inflation, it is essential to consider the favorable opportunities and difficult challenges before making relevant decisions.
Although opportunities and challenges are interwoven in the development process, the basic factor of opportunity and advantage is always in favor of Vietnam’s logistics. Besides the constant trend of expanding the logistics industry globally, Vietnam is a market garnering many interests and a fertile ground for logistics development in the coming decades.
Vietnam has succeeded in building a national deep-sea port system (Seaport group No. 5), which is gradually put in operation with the advantage of modern techniques and equipment for loading and unloading, advanced global IT, thoroughly offsetting the previous disadvantage in which our import and export goods had to be transshipped at some major ports in Southeast Asia. With the current maritime transport route being established straight to Europe and North America, the journey time of the ship and the circulation time of goods has been shortened. That is not to mention the relief from factors such as psychology, diplomacy, etc.
Container development is expected to reach 17% per year and national export turnover may even be raised to 500 billion USD in the coming years. In parallel, the cost of maritime transport is expected to be lowered to the same level of the international market (current transportation costs account for 40-60% of total logistics costs of Vietnam), stabilizing and developing logistics into an important industry in Vietnam, having a contribution rate of 15% to national GDP per year.
Although Vietnam has about 1000-1200 logistics businesses (more than Singapore and Thailand), only 80% of them have a registered capital of around 1-1.5 billion VND, a modest figure. It shows our capital inadequacies and explains the reason why Vietnam only managed to occupy 20-25% of the logistics market in our home turf. Therefore, it is necessary to recognize that Vietnamese logistics activities are very fragmented, small, exuding the vibe of every person for themselves, and lacking in professionally consistent connection, thus provided services are limited to: freight forwarding, warehousing, tallying, customs clearance, short-haul transportation, etc. in other words, operating as hired and outsourced 3PL logistics for foreign countries. On the other hand, because the traffic infrastructure has just been invested for upgrade or renovation, it does not meet the demand. Furthermore, our mechanisms, policies and legal corridors are not clear enough and still in waiting of macro-level solutions. Of course, it is difficult to implement, while the potential is still not fully unearthed. However, prolonging this situation will be detrimental to the development of Vietnam's seaports, affecting the marine economy. The most feasible solution is to continue to invest to the best of our ability and circumstances, along with the harmony of the interests from the State and logistics businesses in Vietnam, to develop a logistics center in necessary areas to support logistics, enabling them to make a stand and go towards integration.
FORMATION OF THE LOGISTICS CENTER
What is a Logistics Center? A Logistics Center is an area covering all activities related to transportation, logistics and distribution of goods, both domestically and internationally, carried out by various entities. Logistics centers must be equipped with machines and equipment suitable for logistics activities, multi-mode transportation activities. And they should be conveniently connected to regional seaports and globally connected through modern IT, ensuring two-way communication, data collection and receipt through Electronic data interchange (EDI). In terms of functionality, the center may be divided into three parts: • Cargo handling functions, such as: Loading, unloading, warehousing, preservation, packaging, labeling, cleaning, checking quality of goods. • Transport and distribution functions, such as: Carriage, collection and distribution of goods by various means of transport. • Support functions, such as: Customs clearance, procedures, documents, consultancy, finance, insurance, repair and maintenance of transport vehicles, gasoline supply, accommodation for partners, customers. In terms of structure according to the technological process of operation, there are 5 small centers (or so-called service departments), such as: Department of goods, Department of transportation vehicles, Department of logistics services, Department of information, and various agencies, service providers (state agencies, branches of commercial banks, insurance companies and insurance agents, companies providing quality assurance and tallying services, brokerage firms, agents, consultants, etc.)
In terms of scale and role, the center may be divided into 5 levels of logistics center:
- Global logistics centers, often located at global transport hubs, close to the global commercial and economic centers, with a scale of 100-150ha, providing logistics services to a continent or worldwide, such as Rotterdam, Bremen, Los Angeles, Antwerp, Singapore, Hong Kong, etc.
- Regional logistics centers, often located at regional transport hubs, close to regional commercial and economic centers with a scale of 20-50ha. These centers often provide services for economic – commercial development to countries in a certain region or for business activities of multinational corporations.
- National logistics centers, located at the main transport hub, close to the economic - commercial centers of the country, with a scale of 10-30ha, often providing services for economic – commercial development of the country or for business activities of large economic corporations.
- Local logistics service centers providing service for economic - commercial activities of a local area or some large companies, or specific businesses.
- Business logistics service centers, providing services to their own businesses when their needs arise.
Above are the typical logistics centers that any logistics country must have. The number and scale depend on the workload as well as the financial capability of the logistics industry and the country. As Vietnam is developing logistics, it is essential to establish such centers. This issue will become even more complicated and difficult if it is left unsolved.
Competition for Development
With development of the global economy in the past few decades, competition has been fierce among nations, large international economic corporations, requiring globalization from industries and businesses since the economic activity of multinational or transnational corporations is no longer confined to the administrative boundaries; as the service industries generate greater added values, global logistics chains have to reduce the cost of some of the final products that consumers receive. Processes of "from door to door" or supply chain management, from the manufacturing venue to the consumer have become evident demonstrations for trends of the era, etc. Are we living in a "flat world"? That question will be answered in the future! For now, we may say that: "Logistics centers will create compulsory competition on the national and international scale", to motivate and promote Vietnam's logistics.