Actual situation of Vietnam Logistics
The number of logistics enterprises in Vietnam tends to increase over the years. By the end of 2018, there were more than 36,000 enterprises operating in the Logistics industry, up 2.57% compared to 2017. In fact, the majority of Logistics enterprises in Vietnam are now domestic enterprises, accounting for 88%, 10% of enterprises are joint ventures and 2% of foreign enterprises sector. Most of them are located mainly in Hanoi and Ho Chi Minh City.
Currently, the majority of domestic logistics enterprises are small in scale, limited financial and management capacity, mainly focusing on providing freight services. In particular, about 70% of enterprises are in the 1PL and 2PL chains, which create little added value in Logistics services because of the small quantity of goods and the simple transportation process. Meanwhile, the 3PL and 4PL Logistics supply chains mostly owned by large enterprises with comprehensive Logistics systems ( namely Unilever, P&G Group,…) and others with large retail systems ( such as BigC, Metro, Aeon supermarkets…).
Challenges and risks to Logistics industry growth
The challenge of free competition
Vietnam is in the process of deeper and broader international economic integration with the conclusion of 1 m0 free trade agreements (FTAs). Vietnam logistics enterprises compete directly with foreign logistics enterprises. Currently, there are many logistics enterprises from ASEAN countries coming to Vietnam to invest in the market extension.
Challenging service quality
Vietnam logistics enterprises have not yet provided a complete logistics service. Most of them are supporting players for foreign logistics companies, perform separate operations of customs declaration, leasing domestic means of transportation, warehousing, freight trading… In addition, the high added value logistics services, especially the “door to door”, have not caught much attention.
Challenges in information technology application and e-commerce
Vietnamese enterprises are often manually managed, the level of information technology application is still low. The level of e-commerce applications (including EDI exchange and electronic B/L, electronic documents…) is inferior to foreign logistics businesses or other logistics service networks. Therefore, Vietnam logistics enterprises could mostly conduct single services for foreign logistics enterprises.
The challenge of human resources
In Vietnam, there is currently no well-designed training program and facility on logistics. In fact, human resources in logistics enterprises in Vietnam are mainly self-training based on real-life experiences, lacking the high level of professionalism. Additionally, in the event of booming market, logistics enterprises will have to face with the deficiency in good manpower due to the risk of globalization or setting up their own ventures.
Logistics development planning
The logistics industry plays an integral role in rotating and managing the storage of goods in the economy, optimizing both production and supply chain. According to Decision No.1481/QD-BGTVT on transport operation planning, the total fleet will reach from 6.8 to 7.5 million DWT by 2020, improving market share of export and import freight to 25-30%. Logistics coordination planning (Decision 175 / QD-TTg) aims to form an efficient and effective 3PL package, e-commerce and supply chain management. Logistics market growth rate will reach 20-25% per year with the rate of outsourcing logistics is 40% in 2020.
VIRAC forecasts for the period of 2019 – 2021, road will continue to be the type contributing for the largest revenue. Due to the impact of the US-China trade war, and the Covid-19 pandemic, revenue from transportation is forecasted to decline by about 20% in 2020. Logistics industry will recover strongly in 2021.
In addition, EVFTA coming into effect brings many advantages to the logistics service industry. Vietnam, the prime destination for export-orientated manufacturers, grants many valuable opportunities to leverage national economy to larger investment capital from FDI enterprises.