Vietnam high logistics costs lower businesses’ competitiveness
According to the International Monetary Fund (IMF), the logistics costs make up 12 percent of the total gross domestic products GDP in the world. In the US, logistics account for 9.9 percent of GDP. As for businesses, the logistics costs gobble up 4-30 percent of their turnover.
Businesses still cannot realize the role of logistics
According to Dr Pham Dinh Phuong, a lot of Vietnamese businesses still cannot take full advantage that logistics can bring. Especially, they have not realized the important role of logistics in reducing the production costs.
Logistics is the industry that combines marketing, production, stocks, transport and distribution. Meanwhile, shipping division is a part of the administration and personnel department, while inventory management belongs to the finance and accountancy department, and collecting materials is a function of the marketing or sale department.
In Vietnam, goods have to go through too many intermediate parties which lead to the higher transaction costs and higher sale prices. In the distribution chain, the involved parties all try to make profit for themselves. Since they lack information, they only keep direct contacts with enterprises, while ignoring other members of the chain, which has resulted in the exaggeration of the logistics costs.
In Vietnam, the distribution networks are mostly set up in urban areas, while the networks have not reached out to rural areas. Distributors only undertake short-distance transport services, while sales agents have to arrange the goods transport themselves.
While the retail networks are dense in urban areas, big storehouses are mostly located very far. As a result, the transport costs could be low, but the storage fees are high, or vice versa, which has also led to the increase of the logistics costs in general.
Vietnamese businesses now do not have the habit of using outsourcing services, including customs declaration service, accountancy agents and 3PL services, while they undertake all the works themselves. Once businesses have to spend money on too many things, their works cannot be professional.
The logistics industry in Vietnam has been developing strongly, while many companies now can provide professional services. The higher professionalism would certainly lead to the logistics cost decreases. However, the problem is whether businesses can attach much importance to logistics to reduce the production costs.
Infrastructure still poor
There are 17,000 kilometers of asphalt, more than 3,200 km of railway, 42,000 km waterways, 266 airports and 20 seaports in Vietnam. However, the quality of the traffic network is not the same in different places. Though Vietnam has 266 seaports, only 20 can serve the import and export of goods. Most of the seaports are not capable to receive normal container ships because of the lack of equipment and experience.
At present, air transport is not yet popular, while road transport remains the major kind of transport. However, the road system cannot serve the heavy cargo transport because of the low transport capacity, traffic jam and low technique. Industrial zones have been completed, but there has been no road linking to the zones, or the zones are located too far from the seaport systems.
Railway mostly carries passengers, not cargo. With the current sizes of the rails, it is unsuitable to carry high-tonnage goods. Businesses do not want to use waterways transport, because it takes much time.
Meanwhile, multimodal transport which allows taking full advantage of the strong points of different means of transport has yet been popular in Vietnam. This explains why the retail prices are different in different localities of the country.
Vietnamese exporters, who try to avoid risks, usually apply the sale prices based on FOB origin, which does not include the transport costs. Meanwhile, in order to obtain single prices nationwide, they need to apply FOB destination prices.
In 2011, the logistics costs in Vietnam reached 25 billion dollars.
