Logistics market: The battle between David and Goliath

Foreign investors have geared up to prepare for the Vietnamese logistics market opening in 2014. Report by the Vietnam Net online newspaper.
Foreign investors have geared up to prepare for the Vietnamese logistics market opening in 2014. Report by the Vietnam Net online newspaper.

The Vietnamese logistics market has warmed up recently with the investment deal worth 13 million USD by DHL Supply Chain. The company has put the second distribution center, covering an area of 10,000 square meters in Bac Ninh province, into operation. This is a part of its investment expansion plan in the north of Vietnam.

With the new investment deal, DHL will be able its warehouse area from 91,000 square metres to 141,000 square metres and develop the fleet to 100 vehicles by 2015.

A senior executive of DHL Supply Chain said the company targets the retailing, consumer goods, technology and automobile sectors in Vietnam, which are forecast to develop strongly in some more years.

According to the Ministry of Industry and Trade, logistics services make up 15-20 percent of GDP, while the industry has been growing steadily by 25 percent per annum.

Vietnam is a vast logistics market with the turnover of 12 billion USD, of which the transportation, the most important link of the logistics chain, makes up 40-60 percent.

Vietnam is a newly emerging market, therefore, the demand for logistics outsourcing is believed to increase rapidly. This explains why a lot of the world’s big logistics firms such as Maersk Logistics, APL Logistics, NYK Logistics, MOL Logistics, have come to Vietnam to seek profits.

Vietnam can attract the world’s leading logistics firms because it, after the WTO admission, has been chosen by a lot of the world’s big manufacturers as the places for them to set up the production bases.

Analysts have noted that Vietnam has far lagged behind the other countries in approaching logistics technologies. While foreign logistics firms now apply the 4PL (fourth-party logistics) service already, domestic firms still can provide simple services.

They transport and forward goods by land, inform to clients about the transportation process on behalf of the shipping agents, or collect fees on behalf of shipping agents.

Since Vietnamese logistics firms can only undertake several works in the supply chain, they cannot compete with foreign firms in the home market. As a result, domestic firms have been competing with each other to scramble for clients by lowering the service fees, which has benefited foreign firms.

It is obvious that international logistics firms are superior to Vietnamese in the domestic market. However, the analysts said domestic firms still have their great advantages.

According to Do Xuan Quang, Chair of the Vietnam Logistics Association, most of the warehouses have been possessed by Vietnamese firms, which means that foreign firms have to lease the warehouses or join forces with Vietnamese firms to provide logistics services.

Quang went on to say that Vietnamese enterprises better understand the Vietnamese market, clients, geography, weather and culture than foreign firms.

Some Vietnamese logistics firms can compete well with foreign ones. Vinafco, for example, has defeated its rivals to obtain the right to provide services to Akzo Nobel, American Standard, or Vifon. ICD Tan Cang Song Than, with the 3PL distribution center, won the bids to provide package service to the US Kimberly Clark.-VNA

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