High costs a drag on domestic logistics industry

High costs and delivery failure rates continue to plague local logistics companies, which are unable to compete with foreign-owned rivals.

Dao Trong Khoa, vice president of the Vietnam Logistics Business Association (VLBA), said the cost of logistics in Vietnam is equivalent to 20 percent of GDP while the global average is around 11 percent.

The delivery failure rate is around 10 percent, adding to the cost of logistics as businesses have to bear additional expenses for storage and inventory management.

The vast majority of domestic logistic companies are small ones that primarily provide low-value-added services and intensely compete among themselves.

The lack of coordination among them means they are unable to compete with multinational companies, who have grabbed an 80 percent market share.

Deputy Minister of Industry and Trade Tran Quoc Khanh said local logistics companies have to find new spaces to grow.

Tran Trung Hung, general director of Viettel Post, warned they would continue to languish if there is no technical innovation, especially in digital transformation.

Do Huy Binh, director of the digital solutions provider Smartlock, said digital transformation is key to reducing costs, and logistics companies could cut up to 30 percent of their costs. “Investment in technology is a no-brainer for logistics companies; it is a step into the future.”

According to the VLBA, there are around 30,000 logistics companies in the country, 4,000 of them foreign-owned.

The industry is growing at 12-14 percent annually and is now worth $40-42 billion.