Solutions on logistics costs reduction

According to Deputy Minister of Industry and Trade Do Thang Hai, logistics is one of the fastest growing and most stable industries with an average growth rate of 14 – 16% per year, contributing to GDP from 4 – 5%. Logistics Index Report of 2022 Emerging Market released by Agility said Vietnam ranks 11th of the top 50 leading emerging logistics markets, and 4th in Southeast Asia.

A report of Ministry of Industry and Trade (MoIT) stated, roadway is still most used, accounting for 72.93% of the total amount of goods transported, followed by inland waterway, at 21.73%. Currently, Vietnam enterprises in trading with the world in general and the Europe – America region, still face difficulties and challenges, including: limited infrastructure without synchronization, especially infrastructure of transport and logistics such as warehouses and logistics centers; overlapping customs procedures; missing information and outdated technology application by logistics enterprises, etc. These limitations make Vietnam’s logistics costs high and burdened for enterprises.

Mr. Truong Tan Loc, Marketing Director of Saigon Newport Corporation, said that the total length of container terminals in Cai Mep area is about 5,470m which is divided into 8 ports, decentralized and limited in berth length (average 600m berth/port) while ships arriving at Cai Mep is getting bigger, up to 400m so only one mother ship can reach.

Therefore, in order for the supply chain not to be broken right at the seaport, it is necessary to have a mechanism to link exploitation and transport between ports in Cai Mep – Thi Vai area (the “open port” mechanism) with a view to optimize exploitation capacity and use mutual berths, solve the current limitations on berths and reduce logistics costs for import and export goods through the area.

Along with that, domestic transport should be changed from roadway to inland waterway. To do this, it is necessary to invest in the construction of barge berths in Dong Nai and Binh Duong areas. Sharing about common challenges in the field of customs clearance, Dr. KC Chang, a specialist in customs procedures and trade legislation in the Asia-Pacific region of GEODIS Logistics, said that to bring goods to the United States, importing enterprises need the Importer Number at customs clearance and the IRS business registration code.

Also, enterprises must comply with laws in the United States applied to the imported goods, such as those relating to drugs, food, cosmetics, alcoholic beverages and radioactive materials, etc., regulations on packaging and labeling in the United States before exporting. Importing enterprises must apply for an import permit to the controlled categories.

“Especially, US Customs pays great attention to the issue of “forced labor”. Any blacklisted suppliers by the regulation will have to declare in detail their goods. To reduce costs, the licensed and qualified customs service provider are frequently used to transport goods”, emphasized Dr. KC Chang.

Linkage for cost reduction

According to a MoIT’s representative, the weakness of Vietnam enterprises is that the services cost stays high while the services is not qualified in the context of fierce competitiveness. The main reason comes from limited size and capital, experience and management qualifications, the information technology application as well as human resources level of local enterprises that have not yet met the requirements of international operations.

Another important factor is that the contact for commodities is not available due to the modes applied in Vietnam in FOB for exported and CIF for imported goods. Logistics infrastructure, costs arising during the roadway transportation and seaport surcharges imposed by foreign ship owners are also barriers for local enterprises.

Sharing experience on freight rates for exporting goods to European and American countries, Ms. Vo Thi Phuong Lan, Vice President of Ho Chi Minh City Logistics Association, said that since July 2022, international freight rates have sharply decreased compared to 2021 and by the fourth quarter, it is returning to the normal of 2019 – 2020 period. Besides, port congestion has been greatly improved at ports around the world, and the shortage of empty containers has been resolved. Passengers are no longer waiting for the available seats but can choose the suitable carrier.

Average sea freight in late 2022 to the main ports of North America is about 1,500 USD per 40′ container (to the West coast), 3,000 per 40′ Container (to the East coast). The main European ports such as: Rotterdam, Hamburg and Antwerp cost about US$ 1,100 while ports going inland (Chicago, IL, Dallas, TX) apply the rate of about 4,200 or 5,000 per 40′ container.

According to experts, in order to reduce logistics costs, import-export enterprises should change their sales conditions to CIF instead of FOB for the purpose of being more proactive in appropriate shipping schedules, finding sound sources for freight costs saving and risks management during transportation.

Importers and exporters should negotiate with shipping companies to allow swap container application to minimize transportation costs in the petrol constantly fluctuation due to the Russia-Ukraine war and control import and export surcharges according to standard norms to avoid rampant fee collection.

Along with that, logistics costs must be optimized by integrating the chain of customs declaration services and domestic transportation. The integrated services will save logistics costs from 500,000 VND per container compared to the single services.


More from this stream