For a while now, the transport and logistics landscape in Vietnam has been forced into an ongoing race to develop. A key reason for this is its swift economic development and rapid modernisation in the past decade.
This necessity is further compounded by the rapidly changing market conditions in Vietnam. It is playing an increasingly significant role in global trade and is expected to achieve prosperous economic growth, even amidst the rippling effects of the COVID-19 pandemic. To illustrate, the Asian Development Bank has projected that Vietnam’s economic growth is expected to rebound to 6.7% this year and rise to 7.0% in 2022.
While the transport and logistics sector remains a challenge for both private businesses and the government, I believe this very need for a stronger transport system presents great opportunities to revolutionise the landscape in Vietnam.
There is an opportunity for Vietnam to identify and learn from some of the more advanced developments we are seeing in the transport and logistics sectors of other parts of the world. By excluding impractical aspects and adapting proven formulas to suit the specifics of the country, this could offer an expedited pathway to better performance.
A brief history
Logistics in Vietnam has traditionally functioned in a unique way. Transport providers exist in a highly fragmented network consisting of a huge number of providers, each with small fleets of often less than five trucks. This mode of operation first took off when businesses, such as those in manufacturing, started outsourcing the idle hours of company-owned fleets of trucks. Although this can serve to drive costs down in the short-run, the quality and maintenance of vehicles is however, also impacted.
Roadblocks still present
It is no coincidence that transport and logistics have not traditionally been seen as an area of opportunity in Vietnam. The country operates in a heavily regulated environment – there are regular reviews and revisions to legislations to improve traffic congestions and the safety of motorists and pedestrians. Specifically for logistics, the truck bans in the mornings and evening peak periods in the cities of Ho Chi Minh and Hanoi pose an additional challenge for deliveries.
Further adding to the challenge, Vietnam features a complex city grid that is not captured accurately by the likes of Google Maps. In fact, up till today, not all Vietnamese addresses can be found on Google Maps. Road infrastructure across the country is also often low-quality despite being relatively developed, which can result in unexpected delays arising from the road conditions.
Development of the Transport 3PL marketplace
That said, these challenges do not conceal the opportunity that the transport and logistics sector in Vietnam can offer. For one, the specialised transport 3PLs in Vietnam have been growing in recent years. Existing fleets used in the onset are eventually sold off and the industry has been trending into new modernised fleets. This has fuelled the growth and rationalising of current transport providers. Such businesses are pioneering the use of cost modelling and driving improvement initiatives in the country that have the potential to disrupt Vietnam’s existing supply chains.
Additionally, the entry of global 3PLs from Japan and Australia into Vietnam bears testament to the growing opportunity. Local players are also starting to acknowledge the opportunity at hand and are increasingly willing to collaborate with businesses to grow as partners. The growing international presence of multi-national transport providers has also brought further competition to the market, driving increased performance among incumbent local providers.
The highway to progress
A key factor underpinning the success of transforming the Vietnam transport landscape is the ability to cater to the intricacies of the market. While the local transport market has gained performance enhancements from regional specific systems, there remains a gap that requires targeted specific requirements. Cookie-cutter solutions from international systems cannot be used directly as it lacks the sophistication required to manage on-the-ground operations in Vietnam.
Innovative work is being developed and completed by local Vietnamese system providers, such as ABIVIN. The local Transport management systems are allowing businesses to compile and manage orders and using transport data specific to the local geography. By leveraging open-source data for accurate and timely maintenance of server information, providers have developed accurate route optimisation tools, translating into cost savings of 5-10% for their partners. Such development of data analytics and cost-understanding means that transport providers are more willing to be creative with their fleet to align with cost drivers.
Beyond technology solutions, opportunity exists for transport 3PLs and businesses to develop strategic partnerships. Partners should work towards modelling to understand one another’s businesses. With a focus on transparency, shared benefit and collaboration, there is great potential to drive long-term mutual success.
Based on what we are seeing, we believe that Vietnam is entering a stage of transition where the transport infrastructure and businesses are starting to develop and enter into partnerships. Understanding the intricacies of the local market and the right network of partners will be key to navigating and achieving business growth.
If you are interested in growing your business in Vietnam and playing a part in transforming the local logistics sector, get in touch.