Start-ups embrace logistics sector

• Ba Ria-Vung Tau to develop logistics sector
• High logistics costs hinder Vietnam’s economic growth
• E-commerce golden pass for logistics

In a report on the Vietnamese logistics market released by the business data and information provider StoxPlus, the percentage of logistics cost over the nation’s total gross domestic product (GDP) is 20.8%, much higher than the world’s average rate of 10-11%.

Also in the report, the number of vehicles in Vietnam increases by 10% each year while the development of transport infrastructure and facilities grows by just 3-4% per year. The area of land used for transportation rises only 1%, while the total area for parking lots meets just a small part of demand.

According to Chief Executive Officer of Abivin Joint Stock Company, Pham Nam Long, inappropriate urban planning and underdeveloped transportation infrastructure are among the reasons causing the logistics sector to be the bottleneck of the Vietnamese economy.

Local companies are not aware of logistics activities and they have not met the requirement of corporate governance and human resource management, Long said.

Vietnam’s trade activities have improved recently and the number of foreign partners doing business in Vietnam keeps increasing, thus raising demand for high-quality logistics, he added.

Despite the limitations, the logistics sector offers a wide range of opportunities for startup companies that can operate in different sectors of the rising industry.

Startup companies have the latest technologies and software to optimise their logistics procedures. Some of them have developed programmes that help customs agencies automate their procedures.

As a developing economy, Vietnam’s logistics sector has lured the attention of foreign companies, however, local firms have their own advantages, Pham Khanh Linh, CEO of Logivan Technologies Pte, said.

“Local logistic companies understand the market, people and local culture. Besides, the Vietnamese working style is quite different from that of foreign firms,” she said.

“The Vietnamese Government also gives more incentives to Vietnamese startups in tax, policies and other issues.”

Vietnamese startups are often small, so “our sole advantages are being able to make mistakes, quickly resolving issues and realising our new ideas,” Long said.

In logistics, operation management is key and technology helps smooth the operation procedures for many logistics firms.

Long said technology helps companies simplify repetitive tasks, and in the case of logistics firms, they are able to operate more efficiently.

Goods transportation requires the calculation of different variables such as the size, volume and weight of the package, packaging method, the type of truck and hours of service, and those variables have a big impact on the price of transport, Linh said.

“Technology helps optimise the connection between truck drivers, sellers and consumers. And global positioning system (GPS) helps us locate the trucks and drivers,” Linh said.

But technological advancements cannot remove people from the work flow as people are still needed to resolve unexpected issues on the trip, Linh added.

In the near future, Logivan will study the Internet of Things (IoT) to scan trucks and maximise the trucks’ loading capacity, and use artificial intelligence (AI) to solve customers’ problems, she said.