According to VIRAC’s report, Vietnam’s logistics market ranked 10th out of 50 global emerging logistics markets. Although it has increased its ranking in the group of emerging logistics markets, Vietnam logistics has decreased its ranking in the Logistics Performance Index Ranking. Is Vietnam’s logistics industry developing sustainably, and how can Vietnam’s logistics activities overcome challenges and develop sustainably in the future?
The importance of logistics activities in the Vietnamese economy
The importance of logistics activities
Logistics plays an indispensable role in the development of Vietnam’s economy. With rapid economic growth and accession to international trade agreements, the importance of logistics has been raised to a new level. High-quality logistics systems help improve the competitiveness of Vietnamese businesses in the international market, open up export opportunities, and attract foreign investment. It also helps optimize costs and time in the supply chain, helping goods move efficiently from origin to consumer. From supporting the agricultural sector to manufacturing and exporting, logistics is at the heart of Vietnam’s economic development in the era of globalization.
The value chain of logistics activities in the Vietnamese economy
The value chain of Vietnam’s logistics industry includes four main activity groups: forwarding, transportation, ports, and warehouses. In there:
- Delivery activities are the services of organizing transportation, warehousing, storage, paperwork, and other related activities to deliver goods to the recipient according to the consignment of the sender.
- Transportation activities are intermediary activities that help goods get from the production site to the distributor, including domestic transportation, seaport and airport operations, and international transportation.
- Port activities are support services for waterway transport and air transport, including seaport services and airport services. Seaport activities include services to support ships’ journeys, serving ships entering the port, loading and unloading goods, serving goods in transit, storage, and domestic transport links.
- Warehouse activities are the activities of storing raw materials, semi-finished products, and finished products throughout the process from the beginning to the end of the supply chain, while also providing information about the status, storage conditions, and location of the stored goods.
Besides these four activities, the logistics industry also includes a number of other service activities such as customs agency services, freight agency services, cargo handling services, analysis, and inspection services.
Overview of Vietnam logistics activities 2023
Overview of delivery and delivery activities
Work delivery maintains good growth in the Vietnamese market.
According to an analysis in VIRAC’s report, businesses provide delivery services and transportation and are actively working on digital transformation, applying advanced technologies to their daily work. The quality of human resources is being increased to increase service quality and lower logistics costs. By improving competitiveness and meeting the requirements of importers and exporters during and after the COVID-19 epidemic. In addition, freight forwarding businesses also aim to increase the added value of 3PL services being provided to the market.
Forwarding businesses are turning their attention to transporting agricultural products and fresh goods.
According to VIRAC’s analysis, a notable segment being delivered by businesses in the market is agricultural products and fresh goods. With the desire to ensure better quality of goods for consumers as well as convenience in transportation and storage, businesses have taken many measures to support people. Some businesses have accompanied farmers in guiding the packaging of goods according to standards to ensure product quality. At the same time, support people in applying technology to sell goods.
Express delivery and last-mile delivery activities are growing thanks to the boom of e-commerce
According to VIRAC, express delivery and last-mile delivery activities are important links in the operation of e-commerce channels. Therefore, the recent rise of e-commerce is a lever to promote the development of express delivery and last-mile delivery services. Learn more about the explosion of e-commerce.
The typical enterprise in the field of forwarding and express delivery
Source: VIRAC
Source: VIRAC
Find out more information about the size of the express delivery market.
Overview of transportation activities
The total volume of transport and rotation goods in the first six months of 2023 continued to grow over the same period.
Source: VIRAC
According to VIRAC’s logistics industry report, calculated in the first two quarters of 2023, Vietnam’s total freight transport volume reached x million tons and increased by x% over the same period. The total volume of goods turnover also reached x billion tons per km, an increase of x% over the same period.
Domestic freight transportation still accounts for a large proportion.
Source: VIRAC
In terms of both transportation and circulation of goods, goods are mainly transported domestically, with a proportion of x% and x%, respectively, in the first 2 quarters of 2023. The volume of goods transported and circulated abroad in the first 6 months of the year also continued to grow slightly at x% and x%, respectively, over the same period when cross-border transport activities were recovering to normal levels.
Structure of transport and circulation of goods by the transport industry in 6M/2023
Source: VIRAC
Calculated by the volume of goods transported, road freight transport is the most commonly used method, accounting for x% of the proportion, while calculated by the volume of goods turnover, sea freight transport accounts for the largest proportion (x%) due to the large actual transport distance. The volume of transport and movement of goods via rail and air accounts for an insignificant proportion. Freight transport by rail and air decreased compared to the same period in 2022, while other sectors increased.
Overview of port operations
The total volume of goods passing through seaports decreased in the first six months of 2023.
Source: VIRAC
According to the VIRAC report, the total volume of goods through seaports in the first two quarters of 2023 was x million tons, down x% compared to the same period in 2022.
In the first 5 months of 2023, the total number of ships passing through seaports reached more than 40 thousand, down x% compared to the same period in 2022. The number of foreign ships passing through decreased sharply. Specifically mentioned in the Logistics Industry Report for the Second Quarter of 2023 by VIRAC.
Let’s learn more:
Current status of some dry ports in Vietnam
Learn about the details of port exploitation activities.
Overview of warehouse operations
Goods inventories increased in the first six months of the year.
Difficult consumption of goods, especially exported goods, has led to high inventory in most segments. The inventory index of the entire processing and manufacturing industry is estimated to increase by x% as of June 30, 2023, compared to the same time last year (it increased by x%).
Foreign enterprises dominate the cold storage market.
Currently, about 60% of the cold storage market share belongs to foreign investors. Leading the market share in the cold storage service market are businesses such as FM Logistics, CLK Cold Storage, Emergent Cold, Swire Cold Storage Vietnam, Lotte Logistics Vietnam, Konoike Vina, etc. Learn about the leading businesses in the cold storage market.
Vietnam’s logistics activities need to overcome challenges to reach their potential.
From the above analysis, we can see that the logistics industry in general and logistics activities in particular are developing strongly in Vietnam. However, looking straight at the present, Vietnam’s logistics industry still faces many challenges when exploiting its potential. According to VIRAC, logistics activities in Vietnam are facing the following challenges:
Challenge number one: Changing technology and increasing service value
High operating costs and a lack of high-quality infrastructure will be a threat to the expansion of the delivery and express delivery markets in Vietnam. In addition, weak transportation infrastructure and ineffective information technology applications increase the cost of delivery and delivery services. Total logistics costs in Vietnam account for 25% of gross domestic product (GDP), and transportation costs account for 30 to 40% of product costs. This rate is only 15% in other countries. Therefore, the total operating costs of express delivery services in Vietnam remain high, and weak technology is also a factor hindering the growth of the logistics market.
Many logistics businesses are focusing too much on their core business and not paying much attention to added services. This reduces the competitiveness of businesses in the market. Another example in the seaport segment is that some businesses only invest in lifting and lowering equipment, but for super-sized and super-heavy shipments, these businesses have to hire outside partners, which takes a lot of time and expense. Meanwhile, the initial investment cost for these additional services is not large, and businesses can do it.
Challenge two: Creating connections between businesses and agencies
Strengthening cooperation and connection between businesses operating in the field of logistics is facing difficulties in a number of aspects. The main objects of cooperation include links between logistics businesses as well as between logistics businesses and manufacturing and export businesses. Currently, a network of large-scale logistics enterprises with market leadership has not yet been formed, which poses a challenge in promoting the development of the logistics industry.
In addition, the number of businesses in the logistics field providing integrated services such as 3PL (Third-Party Logistics) and 4PL (Fourth-Party Logistics) is still limited and not strong enough to compete with foreign businesses. foreign companies operating in the Vietnamese market. The connection and cooperation between businesses providing logistics services and businesses using logistics services, including manufacturers and owners of import-export goods, is still facing many difficulties that need to be addressed. promptly remedied.
Therefore, it is necessary to develop logistics centers, especially logistics centers, to meet the need for goods concentration and support the transportation of agricultural and aquatic products after harvest. At the same time, the import-export process also needs coordination between agencies and businesses to be carried out effectively.
Third challenge: Risk of world economic recession in 2023
The year 2023 is set in the context of the ongoing war between Russia and Ukraine, and the global inflation index is increasing. The risk of recession and slowing growth in many countries will lead to people and governments tightening spending. Consumer demand for goods is expected to continue to be low in 2023 amid high inflation. It is expected that demand for transportation activities will only recover in the fourth quarter of 2023 to prepare for the peak shopping season at the end of the year. This is an inevitable challenge; logistics businesses need to take measures to deal with risks from the macro environment.
—————————————
The above information is summarized in the “Logistics Industry Report Q2 2023”. The report not only provides complete information on macroeconomics, trade supply and demand, and the logistics industry in general, but also provides complete information on forwarding activities, transportation activities, port operations, and warehouse operations. Besides, the report also has information on forecasts and prospects for the logistics industry, including the latest updated information.
REGISTER TO RECEIVE CONSULTATION ON LOGISTICS INDUSTRY REPORT
VIRAC can conduct research and make customized reports to meet the special and in-depth needs of customers. Register for the topic HERE.
VIRAC providing more than 20 economic sectors such as: Real Estate, Pulp and Paper, Footwear, Petroleum, Textiles, Electricity, Beverages, Pharmaceuticals, Wood, Aviation, Chemicals, Macroeconomics, Components Electronics, Logistics, Accommodation, Plastic, Automobiles, Coal, Steel, Animal Feed, Food, Construction Materials, Minerals, Telecommunications, Cement,….
Contact us for the fastest advice:
Email: viracresearch@virac.com.vn
VIRAC was founded by a team of reputable personnel with expertise in information, finance, and market research in the region. VIRAC specializes in providing products and services related to:
- Industry Research
- Business research
- Market research
- Data platformVIRACE
VIRAC partners
- Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank)
- Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank)
- Vietnam Bank for Agriculture and Rural Development (Agribank)
- Military Commercial Joint Stock Bank (MB Bank)
- Unilever Vietnam International Company Limited
- Olam International
- FrieslandCampina
