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How to reduce logistic costs ?

We are facing the fact that Vietnam logistics costs account for a high proportion of GDP (about 23-25%). While this proportion is 5-7% in Europe and Thailand countries is 16%, Malaysia is 12%. The Government and many specialized associations such as VLA and VATA have organized many workshops to analyze causes and find solutions to reduce logistics costs but so far the results have not improved.

Commercial activities related to logistics supply chains from raw materials to consumer-handed products affect logistics costs. So the structure of logistics costs is associated with many components. Here we only discuss the elements of the solution to improve the capacity of transport enterprises, logistics service delivery.

First of all, please describe the basic causes that logistics professionals have drawn, including:

  • Due to lack of professionalism, fear of risking most Vietnamese import and export enterprises buy goods on CIF terms and sell on FOB terms. Under this condition, the entire charter and cargo insurance phases are handed to foreign businesses. While a handful of capable businesses empower importers and exporters to arbitrarily dispose of charterers that conflict between personal and corporate interests and rates are always high.

  • Containerized speed is still low in many bulk export products, poor packaging operations affect loading and unloading speed and cost of workers, warehousing and berths when handling goods. On the other hand, most warehouses are still exploited at a traditional level without a smart warehouse system, not using IT software in management, so the exploitation efficiency is poor and time consuming.

  • The scale of logistics enterprises includes small transport enterprises operating alone, lack of links. The management level of many enterprises is still inadequate to be able to handle large orders, thus the transport and other logistics costs are high and the management risk is high (fire and explosion, moldy goods, delivery lack of goods ...). Moreover, the sad fact is that these enterprises only undertake some services such as transport, traditional warehouse leasing, customs procedures, animal / plant quarantine with modest profits, remaining many other services in the supply chain have to yield to foreign logistics enterprises.

  • The cost of road transport accounts for a large part of logistics costs while the Vietnamese transport companies incur a lot of unofficial costs including unreasonable fees through BOT stations and infrastructure fees at the border areas when participating in cross-border freight transport (CBT), other costs payable to shipping lines such as container cleaning fees for port handling charges, and many other surcharges set by shipping lines and lubrication liner.

  • The time to complete cargo procedures is slow, including customs procedures (such as goods tax code is still inconsistent, inconsistent, inspection, animal / plant quarantine, technical expertise ... though has improved but it is still too long compared to the requirement to release goods, making it difficult and time consuming, time is an important factor in logistics quality and price.

  • Sixthly, the transport infrastructure system has not yet met the requirements of goods circulation, especially in areas where there are frequent traffic jams; The average vehicle speed on the road is only 40km / h while in Thailand or Malaysia the average speed has reached 80km / h cargo transport with its own priority lane.

  • Road transport in our country still depends on oil prices because fuel prices account for 38-45% of transport revenue.

  • Cargo hubs are spontaneous and inadequate, so it is quite common that the ratio of empty cars (without cargo) is very high as the transport price team. The East-West Economic Corridor (EWEC) as well as long-distance domestic goods are typical examples. Goods from Thailand to Vietnam are growing strongly, but the opposite amount of goods from Da Nang is not available as well as the volume of goods from Ho Chi Minh City to the North Central provinces is very big but there is no reverse.

  • Only in road transport, we still have many barriers, the direct impact of high transportation costs.

Analyzing the above reasons, please focus on some solutions to reduce logistics costs as follows:

1. Quickly set up national and local logistics committees. This idea has been discussed for a long time but has not been formed yet. This committee will consist of leading logistics professors, experts who are senior experienced in the field of transport logistics with enthusiasm and managers of State representatives. This is the Committee that creates a close connection between the public and private sectors, and is responsible for implementing national logistics development strategies in an advanced, efficient and sustainable manner.

Experience in Thailand, Malaysia and Hong Kong by using LPG gas instead of DO oil and attaching financial support for investment in infrastructure development and transportation equipment (central bank lending With encouraging interest rates, rapid improvement of logistics operations in these countries.

2. Need a specific national strategy to improve the competitiveness of domestic logistics enterprises by supporting human resource training, bank interest rate support, fleet rejuvenation, providing management software transport means, warehouse management, logistics management, support land fund in areas where logistics activities are concentrated, creating a bridge for enterprises to integrate and integrate.

The Mekong Institute has a main office in Thailand, the GIZ organization is a very recent non-governmental organization that actively plays this role. Ho needs co-operation, from the Government to cooperate in the training of civil servants in the industry and eco-driving.

3. There should be more policies to stimulate and encourage logistics activities, especially consistency among ministries and branches. (Example: At present, the means of transporting goods when carrying out customs procedures at some border gates in the Central region face difficulties in the provisions of Article 75 of Decree No. 08/2015 ND-CP dated January 21, 2015 prescribes "vehicle registration paper for Vietnamese cars temporarily exported: Presenting the original" while many transport enterprises use certificates of credit institutions where the means are mortgaged. This investment has been solved for enterprises through Official Letter No. 7000 / NHNN-PC dated August 31, 2017. In fact, there are still many shortcomings and other inconsistencies in exporting goods codes. import, tax policies ..).

4. It is necessary to have a strategy to link importers and logistics enterprises so that domestic logistics enterprises have more opportunities to acquire transport, insurance and other services in the logistics supply chain. changing the habit of buying CIF for FOB by buying FOB / FCA on CIF selling, having specific preferential policies for Vietnamese standardized enterprises in service quality as well as connecting with domestic enterprises.

5. Quickly improve the transport infrastructure system in the seaport areas, for the transportation of goods in separate and open routes to increase the average transport speed to 70- 80km / h as the Currently Malaysia and Thailand. Connection of sea ports, transport of railways, riverways and airways is considered a lifeline for goods circulation, facilitating the flow of goods in the shortest time, most convenient and economical. The most expensive.

6. Improving friendly capacities and attitudes of civil servants working in logistics related sectors including port authorities, pilots, customs officers, registry officers, border police, goods inspection officers import and export, animal / plant quarantine medical staff ... Be aware that businesses are customers to serve, say no to receiving money when on duty. Need tools to measure the satisfaction of businesses.

7. It should be resolved soon to remove the unreasonable traffic BOT fee collection (distance between 2 stations and ensure the choice of traffic participants). Publicity and transparency of investment capital, payback period for each BOT toll collection station.

8. Improving the ability of exploiting 2-way transport to minimize empty vehicles by building a strategy to create a concentrated cargo area, exploiting the strength of the online transport market.

9. Improving transport capacity by rail, river and air by equitization and privatization measures to create a fair and fair competition, to encourage creativity in transport operation.

10. There should be more policies and guidelines of the Government to create more favorable conditions for enterprises operating in logistics.

The above are some suggestions of VATA Association about solutions to reduce logistics service costs in the transportation sector.

Hopefully, through this conference, we will find a new direction and a new strategy to contribute to boosting the efficiency of Vietnam logistics operation in the new dynamic, creative and sustainable stage.

To Van Hiep - 12/2017

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