In 4.0 era, reform is a must for logistics industry

Giao Hang Nhanh, a delivery firm, estimates that the number of orders in Vietnam will increase by 45 percent in 2015-2020 and may reach 530 million by 2020, equal to $472 million worth of delivery services.

Experts have begun talking about a ‘next-generation logistics’. 

“The shopping context has changed, which means that the firms in logistics industry also have to change or they will be eliminated,” said Bui Anh Tuan, CEO of the Singapore-based ManpleTree.

Tran Duc Nghia, CEO of Delta International, also said that the traditional logistics industry needs to reform to satisfy the requirements of the digital economy.

However, it is not easy to shift from traditional logistics to e-commerce logistics because of legal, technological and administrative problems.

There are still no detailed regulations for e-commerce logistics. In principle, financial invoices, or ‘red invoices’, are a mandatory document when transporting goods. However, in Vietnam, red invoices cannot be issued even when goods are transported because the transaction is not complete.

Transactions are considered complete when payments are made. In Vietnam, cash is paid on delivery.

The delivery people bear risks as they have to bring high amounts of cash. Besides, the proportion of unsuccessful transactions is high as buyers cancel orders or refuse products.

The logistics infrastructure problems are also an obstacle. According to MOIT, air and land transportation grows by 20-25 percent per annum, which is lower than the growth rate of e-commerce. The services related to storage and service centers are still fledgling. 

The complicated connection system and the manual goods service have both led to the slow goods treatment process. This explains why expenses on logistics account for a large proportion in enterprises’ revenue.

A service provider in Vietnam estimates that logistics fees in the e-commerce sector account for 30 percent of revenue, a very high proportion compared with traditional trade. 

The expenses on e-commerce logistics in Vietnam are also higher than in many other countries, including India, with 15 percent (2017), the US 11.7 percent (2015) and China 12 percent (2015).

In HCMC and the southern key economic zone, there are only two air cargo stations and none of them is designed for e-commerce services. E-commerce logistics firms have to rent areas around Tan Son Nhat Airport which are located among military camps and residential quarters.

According to Tuan of ManpleTree, the static infrastructure area related to freight and forwarding is 3.5 million square meters, half of Singapore’s.