Challenges in Consolidating Large-Volume Orders
At the European and American logistics forum, the topic “Seizing opportunities from EVFTA and logistics changes to support exports to the EU market” was organized by the Ministry of Industry and Trade in coordination with relevant units on September 23. Ms. Dinh Thi Bao Linh, Deputy Director of the Information Center under the Ministry, shared that since the COVID-19 pandemic broke out in early 2020, the global economy has entered a phase of consecutive challenges. Despite efforts to transition to a new normal, geopolitical issues, climate change, and other unforeseen events continue to occur.
“I believe that the difficulties we face will persist until 2025 and beyond, in ways we may not yet imagine,” she frankly stated, while pointing out three main challenges currently faced by Vietnamese businesses in bringing their products to the world.
The first challenge arises from external factors beyond their control, such as increases in ocean freight and air cargo rates, which Vietnamese businesses cannot intervene with as they depend on the global market. Wars and geopolitical conflicts disrupt preferred trade routes, forcing alternative paths that are often less efficient.
The second issue pertains to the ability to comply with new standards and regulations. For instance, the EU, being a highly developed market, imposes stringent requirements not only on Vietnamese enterprises but also on companies from other markets worldwide. Small-scale businesses that are unprepared for such compliance will encounter significant obstacles.
Thirdly, while Vietnam is rapidly progressing in terms of production and export volume, it still struggles to compete with China, Thailand, and Malaysia in consolidating large orders. This ability to consolidate would provide a scale advantage and reduce logistics costs per unit of product.
In addition to these challenges, the expert also mentioned difficulties related to access to finance and technology. However, she assured that these issues are not uniform and remain within the realm of “solvable” problems.
Ms. Dinh Thi Bao Linh sharing at the workshop. Photo: Tu Kinh
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Purchasing from Vietnam: Higher Costs and Longer Delivery Times
According to Ms. Linh, setting aside the discussion of exporting to global markets, whether B2C or B2B, even in the domestic Vietnamese market, local consumers are increasingly embracing online shopping. However, most people realize that purchasing an item from within Vietnam often incurs higher costs and longer delivery times compared to buying from neighboring countries in the region.
Given the inability to influence external challenges, the expert emphasized the need to address logistics costs in the domestic market first. When venturing into international markets, these costs can be even higher due to reliance on freight rates, be it ocean or air transport. “Even the railway routes that we once hoped would carry Vietnamese goods to Europe are subject to price fluctuations in the international market and the whims of shipping companies,” she informed, adding that places with limited cargo volume must accept this risk, not just Vietnam.
In reality, buyers anywhere are primarily concerned with the final price they have to pay. For instance, the price composition for consumers in Europe includes logistics costs in Vietnam, such as the expenses involved in bringing production materials into factories, warehousing, and transporting them to seaports for shipment to that region.
Optimizing the logistics process within Vietnam will significantly contribute to reducing the overall price for consumers in Europe or any other market worldwide. If leading logistics companies and seaports globally design service routes that align with Vietnam’s cargo volume, local businesses will reap the benefits.
“Since we cannot intervene in global freight rates unless we change some transport routes, it is evident that Vietnamese cargo owners cannot single-handedly bring about this change.
It’s not enough to say that they should optimize their logistics processes independently. A collaborative effort is necessary. On the one hand, there’s a crucial role for ‘leading’ logistics enterprises in designing a suitable and sustainable supply chain for Vietnamese businesses. On the other hand, Vietnamese business owners also need to optimize their internal processes,” Ms. Linh added.
Learning from China’s Approach?
At the event, the expert from the Ministry of Industry and Trade cited the example of an upcoming event in China on November 11, which is considered a significant occasion for the logistics industry. This event showcases their strength in delivering goods with slogans like “Global delivery within 5 days.”
“During last year’s event, China demonstrated the entire process of handling an export B2C order from China to the world, showcasing their impressive speed and efficiency,” she illustrated, attributing China’s success to its advantage of having large-scale bonded warehouses in key export destinations. Additionally, their ability to sometimes forecast demand and pre-position inventory in these areas allows them to promptly fulfill online orders.
For instance, if they predict that a particular toy will be in high demand on a specific day, they will import it into the bonded warehouse beforehand. When consumers place an online order, the item can be delivered swiftly.
“If Vietnam lacks such a network of bonded warehouses, individual B2C orders will incur higher costs, take longer to deliver, and risk missing delivery deadlines during peak seasons,” warned the Deputy Director of the Information Center. She expressed her concern about enhancing economic advantages through scale. Larger order volumes would reduce costs per unit, attract shipping companies and global logistics partners to open direct routes, and ultimately lead to more efficient operations.
The Information Center, led by Ms. Linh, has been entrusted by the Ministry of Industry and Trade with the task of managing a logistics information portal with the domain logistics.gov.vn, featuring both English and Vietnamese interfaces. Every month, the center produces and publishes periodic reports on logistics market trends in various regions, along with insights for Vietnamese businesses engaging in trade with these markets regarding logistics, new regulations, and policies.
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