Overcoming obstacles to reduce logistics costs

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Traffic in and out of ports is one of the reasons for increasing logistics costs. Photo: T.H

Movement of goods

According to the leaders of Ho Chi Minh City Customs Department, the total exploitation output of Ho Chi Minh City's seaports reached more than 7 million TEUs and more than 120 million tons of goods, ranking 25th in the 100 largest seaports in the world, with average growth of 8%/year. However, the market share of seaport exploitation of the city tends to decrease compared to the provinces in the Southeast region.

In 2010, the city's market share in container exploitation in the South accounted for 90%, but by 2020 it will only be 58%.

Ba Ria - Vung Tau has increased its market share in port operations from 7% in 2010 to 36% in 2020. Dong Nai and Binh Duong have not increased significantly. In addition, the exploitation of goods at ports in Ho Chi Minh City is experiencing an asymmetric phenomenon, specifically, the output of cargo exploitation at Saigon Newport has increased sharply, at an average of 16% per year, while the other port systems have shown signs of decreasing since 2015.

Regarding this issue, Chairman of Ho Chi Minh City People's Committee Phan Van Mai asked where is Ho Chi Minh City in this shift. The city needs to pay attention to this issue, because the city's socio-economic development cannot lack the role of the logistics industry. The contribution of logistics enterprises plays a very important role.

The lack of technical infrastructure to connect and operate alone is a bottleneck that prevents the city's seaport system from maximizing its advantages in terms of geographical location and exploitation capacity. The proportion of cargo handling at ports is disproportionate, mainly concentrated in Cat Lai and Phu Huu port clusters (82%), the remaining ports account for a low proportion, not reaching the designed capacity, for example, the port Hiep Phuoc, SP-ITC, VICT only reaches about 20-30% of designed capacity, wasting investment resources.

Therefore, the Ho Chi Minh City Customs Department suggested the city develop Hiep Phuoc port cluster, link the region, take advantage of FTAs, maintain an effective legal and fiscal system, and have policies for logistics enterprises to invest in, train and develop human resources.

Weak infrastructure

According to experts, currently logistics costs are still high. The cost of road transport accounts for the majority of logistics costs, while the road routes leading to the ports do not meet standards, leading to overloading and traffic jams.

According to survey results and statistics from Ho Chi Minh City Customs Department and USAID, an average of 16,400 to 22,000 cars/day flows through Cat Lai port area, even up to 26,000 vehicles/day.

16,400 trucks lined up, equivalent to 327km of road length, in addition, vehicles entering the port have to queue for 2-3 hours before arriving at the port, causing traffic jams. According to calculations, traffic jams waste about 160 million hours/year, economic losses are over US$1 billion/year.

In terms of warehouse, yard and port infrastructure, most of the large service warehouse clusters of the 3rd logistics enterprises are concentrated in Dong Nai and Binh Duong. In Ho Chi Minh City, there are about 1,500 warehouses, mainly warehouses with a small area, without a large-scale storage system, cold storage and logistics center commensurate with the needs of production, business and e-commerce. Bui Ta Hoang Vu, Director of the Ho Chi Minh City Department of Industry and Trade, said that the problem of warehousing, especially cold storage, is currently lacking and not meeting the requirements of businesses.

Currently, the country has about 4,000 professional logistics enterprises, of which about 54% operate in Ho Chi Minh City. In general, the city's logistics service enterprises are small, medium-sized, fragmented, facing difficulties in capital, human resources and information technology application.

About 80% of logistics enterprises in Ho Chi Minh City have a charter capital of less than VND10 billion. The capacity of logistics service enterprises in Ho Chi Minh City is still weak, mainly operating domestically, providing simple logistics services, serving as satellites for foreign 3PL and 4PL integrated logistics providers, and are weak in the field of air transport, international sea transport.

Logistics costs of Ho Chi Minh City are still high, domestic transportation costs account for the majority. The main export product is seafood with logistics costs accounting for 25 - 30% of the total cost. Other industries recorded less than 10% of total costs. In the structure of logistics costs, road costs account for a very large proportion, from 30-50% for agricultural and aquatic products; 60% for garments, wood; and 70-75% for electronic components, machinery and equipment.

According to Nguyen Anh Duc, General Director of Saigon Co.op, retail logistics in Vietnam is actually low, automation has not been applied; lack of specialization; there is no high degree of centralization; not yet combining supply chains and technology. Therefore, in order to reduce costs, not only to develop logistics individually, but also put logistics in the added value of the supply chain to reduce costs.