Supply chain services booming on Vietnam’s logistics market opening

VietNamNet Bridge – DHL Supply Chain (DSC) has announced its plan to invest $13 million in Vietnam to expand its business scale here in anticipation of the Vietnam’s logistics market opening next year.

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The sum of money would be used to train the labor force, which would increase the number of workers to 2,200 by 2015, and to increase the storehouse area from 91,000 square meters now to 141,000 square meters by 2015. DSC also plans to develop its truck fleet to 100 units by that time.

A distribution center is being built in Bac Ninh province which covers an area of 10,000 square meters. The company’s office in Hanoi would be set up in the near future.

Explaining the decision to make heavy investment in the context of the gloomy economy, Jan Willem Winkerlhuizen, the group’s CEO said Vietnam is really an attractive market with the logistics growth rate of 25 percent per annum. As Vietnam is a newly emerging market, the demand for outsourcing logistics services would also be increasing.

Ngo Luc Tai, Deputy Chair of the Society for Sea Science and Economy, has warned that DSC’s plan would put a hard pressure on the domestic logistics firms.

Vietnamese logistics firms remain tiny, which can only undertake separated phrases within 2PL services. Meanwhile, foreign firms can take the works within 4PL services. That explains why domestic firms can only get small pieces of the big logistics cake, worth $12 billion.

A senior executive of Tan Cang, a port development company, also thinks foreign companies are inferior to domestic ones in the field, saying that the 25 foreign companies in Vietnam now hold 80 percent of the market share.

A report of Multrap III, a project on multi-sided trade development, showed that logistics activities in Vietnam make up 20 or 25 percent of GDP, while the transportation costs make up 60 percent.

If the Vietnamese transportation services cannot develop, this would lead to the lower national competitiveness, because the transport cost would increase by 10 percent.

Multi-national groups now tend to apply streamline distribution models, cutting the general sale agent networks in distribution regions. Instead, they would use the services from logistics firms which can provide 3PL services.

Uniliver Vietnam, for example, though having set up the biggest and most modern distribution center in Vietnam with the 100,000 square meter yard in Binh Duong province, still has to hire logistics firms. However, the services go beyond the capability of domestic firms.

According to Jan Willem Winkerlhuizen from DSC, the business fields of retailing, consumer goods, technology and automobile manufacturing in Vietnam would develop very strongly in some years. Six big retailers are preparing to join the market. Therefore, it’s now the right time for DSC to make investment in anticipation of the increasing demand from the business fields.

A report said there are some 1,000 logistics firms in Vietnam. The big names in the world such as Maersk Logistics, APL Logistics, NYK Logistics, MOL Logistics have set up 100 percent foreign invested enterprises or teamed up with domestic partners to set up joint ventures, where they hold the controlling stakes.

Domestic firms have also geared up with their plans to make heavier investments to grab the opportunities which would come when the national economy prospers. Vinafco, for example, has spent money on setting up a new storehouse system, while considering hiring foreign experts, who will help build up the operation network in accordance with “Best Practice” standards.

DNSG

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