Vietnam’s logistics sector to see rapid transformation

June 03, 2015 | 18:10
The boom in trade expected from upcoming free trade agreements, the Trans-Pacific Partnership and the ASEAN Economic Community as well the country’s rapidly growing e-commerce are going to drive a transformation in Vietnam’s logistics industry. UPS Vietnam’s general manager Jeff McLean talked to VIR’s Khanh Tran on the outlook for the market in the near future.

UPS Vietnam’s general manager Jeff McLean

With Vietnam's forecast booming exports of electronics, apparel and agricultural products, especially thanks to the country's upcoming free trade agreements, TPP and the ASEAN Economic Community. What is UPS's outlook for the logistics market in Vietnam in the near future?

Vietnam’s economy is showing a number of encouraging signs. 2014 saw GDP grow by 5.98 per cent, higher than last year’s 5.42 per cent, in part due to the country’s expanded exports, which the General Office of Statistics of Vietnam has reported grew 13.6 per cent year-on-year in 2014.

The strategic use of logistics will be increasingly important as businesses in Vietnam join ever-more complex supply chains—particularly within growing segments such as high tech, which saw export turnover of $14.1 billion in the first four months of this year alone. Such technical industries frequently source from many suppliers around the world, and likewise, often ship to customers internationally. As such, these businesses require precise logistical planning to ensure that they are fulfilling their role in the supply chain. Logistics operators in Vietnam will need to work closely with their customers to ensure that their needs are being met in this regard.

E-commerce is another one of the key factors that will drive the transformation of the Vietnam logistics industry. Online shopping is taking off in Vietnam, with the Vietnam E-commerce and Information Technology Agency reporting that consumers spent $2.97 billion making purchases online last year–equivalent to 2.12 per cent of the country’s total retail revenue.

Our recent “UPS Pulse of the Online Shopper” survey found that consumers in Asia are much less satisfied with the online buying experience than those in other markets—despite Asia also recording the fastest e-commerce growth in the world. There are several issues at play here, but one that we saw as having a marked affect on satisfaction was the quality and flexibility of delivery. Customers now want options such as the ability to reroute packages, the ability to have packages delivered to a convenient central location, and product returns that are quick and hassle free. As the e-commerce market in Vietnam matures, we expect that consumers will increasingly expect such conveniences to be a standard, and logistics providers will need to fulfil this demand with innovative, unique services that give buyers a greater degree of control over the receipt of their purchases.

What are the main factors that may make a logistics firm competitive?

Some of the fundamental attributes of good logistics firms include the ability to provide time guaranteed deliveries, visibility throughout the supply chain, maintaining shipment integrity and a good understanding of the regulatory requirements of a range of different markets.

While we pride ourselves on our extensive network, full portfolio of innovative and technology-backed solutions and customs brokerage expertise, it is UPS’s collaborative approach that we take to our customers’ business challenges that is a trait that truly sets us apart. A team of employees are equipped to work with customers to map their supply chains, target pain-points and challenges in order to offer the most suitable value proposition for their business to attain their goals.

In our experience working with customers of all sizes and across all segments, one thing we’ve learnt is that companies need to be agile, responsive and provide exemplary customer service to be successful as they engage in global trade. Some businesses are reluctant to ship internationally because of confusing and overly complicated requirements… and exporting obstacles are especially burdensome for small- and mid-sized companies, which account for more than 97 per cent of Vietnam’s businesses. To better support these companies, UPS, together with the U.S. Agency for International Development (USAID) and the U.S.-ASEAN Business Council (USABC), are spearheading a capacity-building programme across Southeast Asian markets to assist SMEs and help them get integrated into global supply chains as they take their businesses global.

A report by World Bank released last year stated that doing logistics in Vietnam is difficult for many reasons. As an industry insider, what do you think are the most difficult to deal with to make on-board players do business easier?

To accommodate the needs of hi-tech manufacturers and to become more competitive, Vietnam will need more sophisticated logistics infrastructure and services. Hi-tech manufacturers need strong global transportation networks and specialised, value-added logistics solutions to get products to market. Vietnam ranks 48th in the World Bank Logistics Performance Index, behind Malaysia, China and Thailand that compete in the manufacturing segments Vietnam wants to develop.

There have been great efforts made to improve infrastructure, and the recently inaugurated Tan Cang - Hiep Phuoc seaport is a testament to this. However, in addition to infrastructure such as roads and ports, Vietnam needs access to world-class quality, high value-added logistics services to support the development of manufacturing sector. As such, there needs policies that encourage more businesses and investment in these areas.

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