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Vietnam’s Logistics Future

Optimising Freight and Logistics in Vietnam

Organisations in Vietnam face increased challenges across freight and logistics operations. With GDP growing at greater than 6% annually, the global trend of moving manufacturing and operations to Vietnam (as organisations look to diversify production and mitigate risks etc.) and the rise of localised consumption there is an increasing level of freight and logistics activity into, within and from Vietnam.

Whist Vietnam is investing and fast-tracking infrastructure development, current infrastructure struggles to cope with growing private/ public use and freight volumes as around 75% of domestic freight is by road. City and street level curfews coupled with the dispersion of farming, manufacturing, distribution centres, international gateways and consumption points add to the challenge. For most organisations operating in Vietnam, freight and logistics activities are a major cost component and barrier to overall supply chain effectiveness. However leading organisations are successfully navigating the complexities of Vietnam’s freight network through combination of global best practices and local understanding and expertise.

Opportunity exists for the various levels of government (National, Provincial and District) and landlords to design infrastructure projects catering to the needs of global industries to attract more organisations and investment to Vietnam. Viewed as a critical growth lever post COVID-19 pandemic, a national taskforce has been established in June 2020 targeting further foreign direct investment with the aim to increase Vietnam’s overall value-chain contribution and socio-economic development.

 

Strategic Issues

Many leading Vietnamese organisations are facing similar freight and logistics strategic issues, such as low levels of transport and logistics service, a lack of modernised Logistics Service Provider networks and their capacity for development, as well as increased logistics scaling costs. Vietnam has been improving significantly across many international competitiveness logistics measures in recent years, boosting attractiveness for foreign direct investment and international trade.

Key challenges remaining are immature infrastructure and poor connectivity across intermodal logistics, representing a significant opportunity to develop, modernise and take advantage of Vietnam’s geographic position to promote intermodal and international transport. From assessing the local market in Vietnam compared to key infrastructure developments across the Asia Pacific region, government bodies can better understand the freight and logistics task requirements and support the infrastructure and sustainability needs of Vietnam both now and well into the future.

It is important that organisations operating in Vietnam have tailored transport and last mile strategies, complemented with best in class technologies, people capabilities and processes that create a competitive advantage within the Vietnamese market.

 

Design Challenges

At a design level, many Vietnamese organisations have opportunities to optimise fleet and improve utilisation through fit-for-purpose equipment, processes, and systems – even simple planning processes can return up to ~10% utilisation improvement.

With fragmented network coverage, low levels of technology application and potential gaps in skills and capability, many businesses in Vietnam must address these challenges. Notable improvement can be made through increasing visibility and transparency, and process efficiency across supply chains. Logistics diagnostics, benchmarking, operating model design and route to market optimisation are additional drivers that deliver significant organisational benefits.

 

Procurement Complexities

Once an organisation is clear on its Vietnam freight and logistics strategic framework, procurement becomes a significant step in striking the balance between service delivery and maintaining cost requirements. With the vast majority of Logistics Service Providers in Vietnam operating with five vehicles or less, being able to achieve this balance and procuring the right services can be a complex path to navigate.

Organisations can achieve significant savings and service quality improvements through operating competitive freight and logistics procurement processes across domestic and international services, equipment and systems.

 

Implementation Difficulties

To achieve and maintain optimised freight and logistics operations, organisations must follow through with a disciplined implementation approach, as well as ongoing measuring and monitoring of the improvement areas.

Organisations in Vietnam that have succeeded with delivering ongoing improvement initiatives have focused on addressing gaps in organisational capability and working with a maintained learning and knowledge improvement focus.

 

Optimising Freight and Logistics in Vietnam

Vietnam is well placed in a global setting post COVID-19 with respect to the current geopolitical environment, and international confidence following a strong COVID-19 response.

XAct Solutions has substantial experience in Vietnam working collaboratively with leading national organisations to help optimise and improve their logistics and freight operations, whilst delivering significant savings, service quality and sustainability benefits.

Through a combination of international best practices and local market knowledge, XAct are responding to the unique challenges of Vietnam and have made significant EBIT shifts for organisations through supporting business strategy objectives, designing optimal network configurations and systems, competitive procurement processes, and implementing key strategic, technology and business improvement projects.

For more information or to get in contact with XAct Solutions Vietnam, please reach out to:

Jamie Dixon

Director
Freight and Logistics
+61 400 140 249
jamie@xactsolutions.com

Oscar Perez

Managing Director
Vietnam
+65 9720 2410
oscar@xactsolutions.com

Tim Charlton

Senior Manager
Strategy, Freight and Logistics
+61 459 990 029
timc@xactsolutions.com

XAct Solutions is a management consultancy established with a focus on supply chain and related industrial property solutions with professionals located in Sydney, Melbourne, Singapore, Ho Chi Minh City, Hanoi, Tokyo and Bangkok. Our people are very experienced in supply chain and property matters with deep expertise in areas such as supply chain opportunity assessment (including network planning), transport procurement and management, DC operations improvement, industrial property design and procurement, supply chain systems implementations and a number of other areas.

For more information visit www.xactsolutions.com/contact-us