If you are a new Vietnamese business operator in search of logistics services, a foreign company considering entering the Vietnamese market, or a multinational logistics enterprise thinking about cashing in on the country’s economic growth, it’s a good idea to know a little at least, about the current state of play in the Vietnamese logistics sector.
To help you with your research, we decided to put together this brief summary of the logistics landscape in Vietnam. The idea is to give you some basic intelligence about market conditions to use as a starting point for deeper investigation.
A Land of Logistics Opportunity
As the logistics industry in Vietnam becomes more liberalised, opportunities are opening up for new enterprises to cash in on a growing domestic and international demand for locally produced or manufactured products. At the same time, the country’s export market is growing, as is its industrial stature, especially as a centre for outsourced manufacturing.
If your company currently has any manufacturing outsourced to China and is starting to feel the impact of rising costs, you might consider Vietnam as an attractive alternative.
A growing number of companies are already shifting manufacturing from China to Vietnam, which of course, may also be good news for logistics operators, since demand for warehousing and road transportation services will increase correspondingly with the manufacturing growth. The current explosion in ecommerce in Vietnam should also present opportunities, especially for companies interested in last-mile delivery and value-added distribution services.
The Outlook for Foreign and Domestic Firms
With a very underdeveloped logistics infrastructure, and current high transportation cost-base compared with neighbouring countries, Vietnamese logistics ventures can certainly be challenging, but offer amazing potential for foreign logistics firms with the ability to invest and innovate.
Now might be a good time to enter the Vietnamese market, as foreign penetration is not yet as advanced as in other developing Asia nations like Thailand.
Domestic logistics competition is fierce though, and for local entrepreneurs or startups wishing to profit, it might be a good idea to think about collaborating with a foreign company to take advantage of established capabilities, along with advanced intellectual and physical resources.
Key Logistics Challenges in Vietnam
Success with any business venture in Vietnam will depend upon the ability to surmount logistics challenges. Some of the most important obstacles to overcome are as follows:
- Customs procedures are inefficient and still largely involve slow, manual processes;
- Inconsistent cargo inspection processes at ports and airports;
- Congested highways linking industrial centres with the country’s ports;
- Generally poor and unplanned transport infrastructure;
- Logistics costs are high, currently comprising around 20% of gross domestic product (GDP);
- Logistics facilities (warehouses and distribution centres) are often situated in remote locations, far from ports and centres of manufacture.
If your company is foreign-based, and you are thinking about setting up a goods transport operation in Vietnam, you should be aware that any driver you employ must be Vietnamese citizens.
This may present some challenges in itself, as professional driver training in Vietnam is not yet up to the standards of more developed countries. If you do not want to expose your business to unnecessary risks, you should consider setting up your own driver-training program, based on Western standards of driver education.
Logistics Expertise in Vietnam
This brief summary of the Vietnamese logistics landscape should be helpful if you are planning to start a logistics operation or a company that will rely on 3PL services in Vietnam.
However, whether you are starting a new venture or just trying to improve an existing one, it’s never a bad idea to take advantage of logistics expertise already present in the country.
Logistics Bureau operates an office in Ho Chi Minh City, and is able to help you find ways to meet logistics challenges in Vietnam, get a new operation established, or simply to improve your company’s overall supply chain performance.