As an important service industry with high added value, Logistics is the foundation for goods trade, contributing to improving the competitiveness of the economy. With the explosion of digital technology and Industry 4.0, the logistics industry has many breakthrough opportunities to contribute more to the economy if it accelerates digital transformation soon. The article assesses the current situation and proposes some solutions to promote digital transformation in Vietnam’s logistics service industry effectively and quickly in the coming time.
The logistics service industry plays an essential role, is a spearhead service industry with high added value, as a foundation for trade development, contributing to improving the competitiveness of the economy.
According to the Vietnam Logistics Business Association (VLA), the growth rate of the logistics industry in Vietnam in recent years has reached about 14%-16%, with a scale of about 40-42 billion USD/year. . Especially, recently, with the explosion of information technology, e-commerce and online logistics (e-Logistics) have developed strongly.
According to the Department of E-Commerce and Digital Economy (Ministry of Industry and Trade), e-commerce grows by 35%/year; Vietnam’s e-commerce retail sales in the period 2016-2020 are estimated to increase by 20%/year and the total retail sales of e-commerce in Vietnam is expected to reach 10 billion USD in 2020. Changes in E-commerce in the world and in Vietnam has pushed Vietnam’s logistics industry to improve its service delivery method towards becoming more and more professional and efficient.
Currently, Vietnam’s logistics market has the participation of about 3,000 domestic enterprises and about 30 enterprises providing transnational logistics services, with big names such as: DHL, FedEx, Maersk Logistics, APL Logistics, CJ logistics , KMTC Logistics … Logistics enterprises have small and medium scale, of which 89% are Vietnamese enterprises, 10% are joint venture enterprises and 1% are enterprises with 100% foreign capital.
This shows that the fierce competition in the logistics service market has a lot of potential. However, the Covid-19 epidemic has caused the global supply chain to be broken and turned upside down, in which logistics activities, which are considered the “backbone” of the supply chain, are also strongly affected.
That fact poses a requirement to accelerate the digital transformation process in the field of Logistics in order to both overcome the problems arising in the recent epidemic and take advantage of the current advantages of the digital revolution. and achievements of the Industrial Revolution 4.0.
In addition, studies also show that digital transformation brings many benefits such as cutting operating costs, reaching more customers, in the longer term, quick decision-making and leadership. more precisely, through which, the operational efficiency and competitiveness of enterprises are improved…
Through digital transformation, logistics service providers will change the mindset of stagnation, create a breakthrough to improve competitiveness, reduce logistics costs, grow, gain more customers and gain profits. The maximum profit exceeds that before digital conversion.
The current situation of digital transformation in Vietnam’s logistics service industry
Over the years, identifying logistics as one of the backbone industries of the digital economy, Vietnam has paid attention to the development of logistics services. On February 14, 2017, the Prime Minister issued Decision No. 200/QD-TTg approving the action plan to improve competitiveness and develop logistics services in Vietnam until 2025.
Accordingly, the logistics service industry strives to achieve a proportion of 8%-10% of GDP, a service growth rate of 15%-20%, and the rate of outsourcing logistics services to reach 50%-60%, ranked according to the index. the number of national logistics capacity (LPI) in the world reached 50th or higher; Focusing on attracting investment in logistics infrastructure development, building regional and international logistics centers, improving the efficiency of connection between Vietnam and other countries…
According to VLA data, currently, Vietnamese logistics enterprises are providing from 2 to 17 different logistics services, of which mainly forwarding, transportation, warehousing, express delivery and customs declaration services. . 50%-60% of enterprises are applying different types of technology, depending on the size and nature of the service of each enterprise.
In the face of competition and the explosion of the digital economy, along with increasingly fast e-commerce, especially under the pressure of the Covid-19 epidemic, logistics enterprises have partly been aware of the problem of speeding up. digital transformation and application of technological achievements in business activities to enhance economic efficiency, as well as optimize in production and supply chains. This activity was promoted and developed more and more strongly when the wave of Covid-19 appeared.
The domestic logistics industry has made certain strides in the process of digital transformation when 50% – 60% of enterprises in most services are applying various types of technology, depending on the size and nature of each business. services to “merge” into the digital economy.
Currently, a number of large enterprises have successfully applied technology solutions to bring efficiency to logistics services, significantly reducing related costs. For example, electronic port (ePort) and electronic delivery order (eDO) at Saigon Newport; application of total solutions in logistics services at T&M Forwarding Company…
However, Vietnam’s logistics industry has not yet developed commensurate with its potential. Vietnamese logistics service enterprises in general, are still not properly aware of the role of digital transformation in the Industrial Revolution 4.0.
For domestic companies, only large enterprises such as Tan Cang Company, Gemadept, Vinafco, U&I, TBS, Transimex, Sotrans… have enough resources to develop warehouse management applications, reaching the same level. Data sets between shipping, inventory management, financial accounting.
From the current practice of the logistics service industry, a number of opportunities and challenges in digital transformation can be seen as follows:
Opportunities from digital transformation
– Regarding the macro environment: The Government is determined to implement the national digital transformation program with the dual goal of developing the digital government, digital economy, and digital society, and forming Vietnamese digital technology enterprises. have the capacity to go global. In particular, the Government advocates promoting the development of
the digital economy to improve the competitiveness of the economy:
Specifically, by 2025, the digital economy will account for 20% of GDP; Striving to be in the group of 50 leading countries in information technology (IDI), in the group of 50 leading countries in the competitiveness index (GCI), in the group of 35 leading countries in innovation (GII). The national digital transformation policy will be a solid foundation and foundation, creating a driving force for the development of the logistics sector. In addition, the Government has many policies to support the development of logistics enterprises. The stable macroeconomic and political environment, along with favorable policies for the logistics sector, are also attracting big men or investors with financial potential and management experience to the top. private.
Regarding cognitive transformation:
Businesses and VLAs are aware of accelerating digital transformation. Recognizing the importance of digital transformation for the logistics service industry, in May 2020, the VLA Executive Board meeting had a resolution to conduct specific projects related to digital transformation. Building a digital platform for the logistics service chain will connect stakeholders in the chain (ports, carriers, agents, forwarding companies, warehouses …) to share data, increase visibility for the chain, improving the efficiency of use, exploitation of vehicles, and operational efficiency.
Regarding the positive impact from international economic integration:
In the context of recovering and developing logistics services after the impact of the COVID-19 pandemic, Vietnam’s participation in free trade agreements will bring many opportunities for the logistics service industry in general and digital transformation. in particular. In particular, the Free Trade Agreement between Vietnam – EU (EVFTA) took effect from August 1, 2020, opening a new door and creating motivation for import and export enterprises, providing logistics services. own, thereby actively supporting the digital transformation process to meet market requirements.
In addition to the opportunities and efforts of digital transformation in the logistics field today, there are some basic difficulties and challenges as follows:
– Regarding financial potential:
Most logistics service providers are small-scale enterprises with weak financial potential. According to VLA, the digital transformation process costs between 200 million and tens of billions of dong. This cost is quite high for small and medium sized enterprises in Vietnam. Many businesses said that if investing in the direction of automation like foreign models and software, it costs a lot of initial investment; but if you do it yourself according to the internal model, it will take a lot of time, difficulty, and information technology human resource costs… Financial resources for digital transformation investment becomes one of the most difficult problems to solve today. Today, without the support of the State and financial and credit institutions…
– Regarding technology potential:
As one of the key industries in international trade, logistics needs to be carefully invested, especially in the aspect of “digitization” to be able to respond and adapt to the market context. According to VLA’s 2018 survey, the level of science and technology application in Vietnam is still not high, most of which are single solutions. About 40% of information technology applications currently used in logistics enterprises are basic applications such as international forwarding management, warehouse management, transportation management, data exchange, especially. Customs declaration is the most used 75-100%.
According to the general assessment, currently, most businesses just stop at the level of digitization, that is, converting operational data into electronic storage, but without the connection and ability to look up data as well as process it. orders on the online platform. The level of application of science and technology at enterprises providing logistics services is still not high. International standard software has not been widely applied in Vietnam.
– Regarding human resources:
Vietnam’s logistics human resources are not only lacking in quantity but also weak in quality. In particular, those who are holding key positions, even though they have been trained or re-trained, still basically lack knowledge and experience in logistics business.
According to the results of a recent survey conducted by the Institute for Development Research in Ho Chi Minh City. In Ho Chi Minh City, up to 53.3% of enterprises lack staff with professional qualifications and logistics knowledge; 30% of enterprises have to re-train their employees and only 6.7% of enterprises are satisfied with the expertise of their employees…
– On competitive potential:
Currently, although most logistics enterprises belong to domestic enterprises, in fact, the competitiveness compared to large international enterprises shows many problems, mainly stemming from the mentioned limitations, including: Potential weak finance, outdated technology, lack of high-quality resources. In addition, there are other reasons such as: lack of management skills, cumbersome apparatus… Many Vietnamese enterprises are facing challenges and fierce competition from the market of foreign enterprises, with experienced units, the ability to provide services and better financial potential…
In the coming time, to accelerate the digital transformation process in the logistics service industry in Vietnam, it is necessary to focus on the following tasks:
On the part of the governing bodies
– Raise awareness of the need and urgency of digital transformation in society, especially in the field of logistics.
– Completing the legal framework for logistics services and digital transformation, especially security, anti-vandal cooperation, digital governance, tax on digital technology to encourage development … Research, amend and promulgate new policies and laws governing logistics services, multimodal transport, cross-border transport…
– Having policies to encourage digital transformation, support for loans and preferential interest rates for digital transformation enterprises and startups in digital technology solutions. On that basis, logistics enterprises can buy solutions or hire solutions from software providers when they do not have enough financial capacity.
– Developing digital infrastructure, ready to meet the explosive demand for connection and data processing, functions of network monitoring and network safety and security are built-in right from the design , construct. Research and application of new technologies, technical advances in management, operation, training in supply chain and logistics services. Encourage and guide enterprises in a number of industries to apply advanced supply chain management models in their production and business processes, with emphasis on implementing logistics activities on the basis of information technology application and New technologies in logistics.
– Promote the role of digital transformation linkage between state agencies and organizations and enterprises; between associations, information technology industry associations and logistics associations and associations to create the highest efficiency in digital transformation efforts.
On the side of logistics enterprises
Enterprises need to change their thinking about digital transformation, including starting to invest at the leadership level. Digital transformation is inevitable for logistics activities, if you do not want to be eliminated from the market. The purpose of digital transformation is for businesses to participate in a broader supply chain, bringing greater economic efficiency.
In fact, some business leaders still expressed concern about the safety and information security of online platforms, leading to slowness and lack of technology sensitivity. Therefore, it is necessary to change the mentality for businesses.
– The digital transformation must be done firmly, according to a roadmap suitable to the capabilities of enterprises. Enterprises must have a long-term, methodical and careful plan in every step such as choosing a process, finding a suitable supplier in terms of prestige, quality and financial ability to create a continuous number system. , share the same standards, have high connectivity and easy access to data.
The selection of a digital transformation model needs to be studied carefully and thoroughly. Close linkages with the industry as well as seeking advice from digital transformation service providers will help businesses determine the right direction. If they find a suitable model and grasp new technologies, enterprises can completely become a “shortcut to take the lead”, quickly catching up with the market trend.
When implementing digital transformation, logistics service businesses need a synchronous transformation. In order to achieve high efficiency, the digital transformation process of providing services to customers has many points that need to be kept in mind. One of them is building a digital platform for the logistics service chain, helping to connect stakeholders in the chain (ports, carriers, agents, forwarding companies, warehouses …) to share data, increase the availability for the chain, improve the efficiency of use.
In the long term, it is necessary to build a digital logistics ecosystem, exploiting existing data of enterprises into a competitive advantage for efficient goods movement; Building common data to store and centrally manage journey data of means of transport and transport in order to digitize operations, thereby providing a basis for adjustment of traffic planning, internal parking arrangement, etc. city, cargo transshipment area, priority time arrangement.
– Continuously improve financial capacity through cooperation and merger with businesses with good financial potential or looking for potential investors so that they can have financial resources to invest in the company. technology, high quality human resources…
– Concerned about typical “digitization” related disputes in Logistics activities such as the dispute about wrong return of goods
– Confirm via personal Zalo between 2 employees of the forwarding company and the goods owner (using the original bill of lading or the submitted type)… Enterprises should choose dispute resolution methods suitable to the characteristics of the industry and profession; For example, there are advantages when applying arbitration clause to settle disputes in logistics activities.