OPPORTUNITIES AND CHALLENGES
Logistics has appeared in Vietnam for the last 20 years. Although income from logistics sector is still low, around 2-4%GDP/year (around 80% possessed by foreign multinational companies), logistics has a rather rapid growth rate, around 20-25%/year. It is a must-have in manufacturing, goods circulating and distributing, and also a driving force for the stable development of sea ports, and sea-based economy. In developed countries in Europe, North America and Asia-Pacific, logistics activities accounts for 10-15%GDP/year.
Development trend of logistics in the century is the globalization on the basis of applying modern informatics technology, e-commerce, and the wide use of a pull logistics method replacing a traditional push one (according to the concept of logistics management), creating added value to reduce transport costs and encouraging outsourcing from professional logistics companies.
In the situation that there has not been a signal of bouncing back of the global economy and in the situation that the macro economy is still in difficulties due to inflation, it is important to consider between opportunities and challenges to develop a new sector of the economy.
OPPORTUNITIES
Although opportunities and challenges mingle in the course of development, basic factors of opportunities are on the Vietnam logistics’ side: with the trend of globalizing logistics, Vietnam is a fertilized soil to develop logistics in the next decades.
Vietnam has developed a deep water sea port system (the sea port group 5) and it is under operation with advantages of modern loading/unloading equipments and advanced communication technology. Therefore, it is possible to eliminate our weak point: doing transshipment at some of big ports in the South East Asia. At the current, we can have direct routes to Europe and North America, which is able to save transport time of liners and time of circulating cargo, not yet mentioning reduction in psychological and diplomatic factors.
Container development is expected to reach 17%/year and national export, to reach USD 500 billion in the coming years.
At the same time, the sea transport cost is expect to be leveled to global one (transport cost currently accounts for 40-60% of logistics cost in Vietnam). All the factors will make logistics an important sector in Vietnam, contributing 15% national GDP/ year.
CHALLENGES
There have been 1,000-1,200 businesses operating in logistics field, (more businesses in the field comparing to Singapore’s and Thailand’s) but there is only 80% of them with registered capital of 1-1.5 billion dongs – a modest number that is able to explain the fact that Vietnam is holding only 20-25% of its home market. In addition, Vietnam logistics activities are small in size, and lack professionalism ; therefore its activities has been limited in those of forwarding, storing, counting, clearance procedure handling, and short-distance transport… In the other words, we are doing outsourcing or 3PL for foreign companies only. Besides, transport infrastructure systems which have just been invested to be upgraded or to be newly built cannot meet all requirements. What’s more, mechanisms, policies and legal framework are still not very flexible, which need solutions from the authorities. These matters have been causing many obstacles while its vast potential has not been quite in good use.
The situation if being lengthened will badly affected the development of Vietnam sea ports, and the sea-based economy. Possible solutions are to keep investing in building logistics centers in chosen places to make a stable logistics for the course of integration with benefits gained for both sides: the Government and logistics businesses.
BUILDING LOGISTICS CENTERS
What is “Logistics Center”?
Logistics center is an area dedicated to activities related to logistics, transport, and domestic /international distribution. And the activities are carried out by different subjects. The logistics center is equipped with machines and devices serving activities of logistics, multi modal transportation, and is connected with regional and global sea ports by advanced communication technology, ensuring two-way information: sending and receiving data through Electronic Data Interchange (EDI).
The center can be divided in 3 parts in functions
Cargo serving part for loading/unloading, storing, preserving, labeling, packaging, classifying, cleaning and qualification inspecting
Transportation and distribution serving part for transporting, collecting, distributing by various means of transportation
Assisting part for clearance procedures, paperwork handling, consulting, insurance, preparation and maintenance work, gas supplying, and supplying partners and clients with hospitality facilities
In mechanism, there are 5 small centers (called serving parts): cargo serving part, logistics services serving part, information part and organizations, a part serving means of transportation and service supplying businesses (relevant authorities, branches of commercial banks, insurance companies and agencies, and other companies of quality estimation, commodity logistics, brokerage and consulting)
In size and role, there are five levels of logistics centers
Global logistics centers - located at global transportation hubs and near world-level commercial-economical centers, having size of 100-150ha, supplying logistics services for a continent and the world as Rotterdam, Bremen, Los Angeles, Antwerp, Singapore, Hong Kong…
Regional logistics centers – located at regional transportation hubs and near region-level commercial-economical centers, having size of 20-50ha, serving commercial-economical development for many countries in a region or serving businesses of multinational groups.
National logistics centers – located at main transportation hubs of a country and near commercial-economical centers of it, having size of 10-30ha, serving commercial-economical development of the country or businesses of big groups
Local logistics centers serving commercial-economical activities of an area or big companies, specialized businesses
Business-level logistics centers serving a business itself as required
These are typical logistics centers that any countries doing businesses must possess. And financial capacity of the logistics sector and the country will decide the amount and size of them.
Vietnam is trying to develop the logistics sector. Therefore, it is urgent to have these centers. If there are no actions carrying out, it will be more complicated with time.
Compete to grow
With the global development in the past few decades and fierce competitions among countries, economical groups, it is required that manufacturing sections and businesses go globalization for economic activities are not limited in geographical borders. And when service sector makes bigger added value, global logistics chain should cut cost of some products. ”From door to door” procedures or supply chain management procedures from manufacturers to consumers is a proof for the current trend… are we living on a “flat world”? And the answer comes from the future. Simply speaking, it is logistics centers that create compulsory competitions both in the country and in the world, which boosts Vietnam logistics.
Source: Vietnam Logistics Review