At the workshop “Promoting Digital Transformation in the Logistics Industry” held by the Ministry of Industry and Trade in collaboration with the Digital Trade Project in Vietnam (VDT), and the United States Agency for International Development (USAID), Mr. Tran Thanh Hai, Deputy Director of the Import-Export Department (Ministry of Industry and Trade), shared that according to the National Digital Transformation Program by 2025, with orientation towards 2030, which has been approved by the Prime Minister, logistics is one of the eight sectors that need to be prioritized for digital transformation.
The application of digital technology in logistics will bring numerous benefits, optimize efficiency, and contribute to reducing logistics costs, as these costs still account for a significant proportion in Vietnam.
DIGITAL TRANSFORMATION IN ITS EARLY STAGES
The draft report “Digital Transformation in the Logistics Sector in Vietnam – Current Status and Recommendations” by the expert group from the USAID’s Digital Trade Project in Vietnam, presented at the workshop, revealed a relatively high awareness of the importance of digital transformation among logistics businesses. They acknowledged that digital transformation is inevitable to enhance competitiveness and improve business efficiency. However, most logistics enterprises in Vietnam are still in the initial stages of this process.
According to Dr. Nguyen Thi Xuan Hoa, an expert from the Digital Trade Project in Vietnam of USAID, limited investment in resources and budgets for digital transformation activities, a lack of personnel with specialized capabilities, weak risk management and cybersecurity practices, and the absence of implementation procedures and roadmaps for digital transformation, are the main obstacles for logistics enterprises, especially small and medium-sized enterprises.
The motivation and pressure for logistics businesses to undergo digital transformation are not yet clearly defined. A survey of four groups of enterprises in the logistics sector, including port enterprises, warehouse enterprises, transport enterprises, and e-commerce enterprises, revealed differences in their digital transformation progress.
For port enterprises, the level of digital transformation is relatively high: 67% of surveyed businesses apply holistic digital transformation, 50% connect with customers and suppliers, use smart port software (ePort), and functional software; 67% of enterprises allocate a budget of 1-5 billion VND/year for digital transformation. However, there are still some challenges in risk management and information security, a lack of synchronized procedures, and an inconvenient legal framework.
Regarding warehouse services, the survey showed that 63% of businesses have a warehouse connection system, 58% connect with customers through a platform, 79% use warehouse management software (WMS) and other supporting software such as accounting and human resources software, and 82% have a budget for digital transformation. Advanced technologies such as robotics, automated shelf systems (AS/RS), and pick-to-light systems have been applied but remain limited. 79% of enterprises reported improved governance, 47% increased customer satisfaction, and 58% reduced costs.
Additionally, 84% of businesses agreed that leadership influences digital transformation efforts. 47% of companies face a lack of internal experts for implementation, and 32% lack digital talent. Looking ahead to the next five years, 89% of businesses believe that digital transformation is inevitable, and 47% plan to use software to optimize their operations.
Similarly, the digital transformation in the transport enterprise group is low, with only 20% able to interact with customers and suppliers, and 96% applying transport management technology. The most commonly used information technology application is transport management software. Challenges for this group include a lack of dedicated IT personnel, absence of procedures and roadmaps for digital transformation, limited capital for digital transformation, and insufficient IT infrastructure.
Notably, the last-mile delivery service has the highest level of digital transformation among the logistics sectors due to customer pressure. Specifically, 86% of businesses have digitized, allowing connections with customers and suppliers. The most commonly used specialized technology applications in this group are transport management software directly connected to the order processing systems of e-commerce platforms. Moreover, this service has seen significant resource investment in digital transformation, with the highest budget allocation for digital transformation activities among the logistics sub-sectors.
The risks related to security and cybersecurity are the most significant challenges for last-mile delivery services, and 71% face difficulties in capital allocation for comprehensive solutions. 29% of enterprises allocate a budget of 10.4 billion VND/year for digital transformation.
Given these challenges, to promote digital transformation in Vietnam’s logistics industry, Ms. Pham Thi Lan Huong, an expert from the Digital Trade Project in Vietnam of USAID, recommended that enterprises should develop digital transformation strategies and plans that involve all departments, ensure effective communication, and establish KPIs for digital transformation tasks.
As the financial resources of most logistics enterprises are limited, and the costs of investing in IT personnel, equipment, and software are relatively high, Ms. Huong suggested that enterprises should set smaller digital transformation goals and start with simpler applications. Instead of developing customized solutions, she advised exploring “on-cloud” solutions, which are more cost-effective.
ENCOURAGING LARGE ENTERPRISES TO PIONEER DIGITAL TRANSFORMATION
From a macro perspective, the research group proposed that the government should issue a national strategy for the development of the logistics service industry, integrating digital transformation goals and plans for logistics. They also suggested establishing a National Logistics Committee to implement this strategy. At the same time, relevant ministries and sectors need to improve the legal framework related to e-commerce, cybersecurity, cooperation in countering sabotage, and digital governance, as well as integrating functions for network monitoring and ensuring cybersecurity.
Additionally, they recommended establishing a Green Logistics Startup Fund supported by the state, focusing on bringing new ideas and innovative solutions for green logistics to the market. This would provide a diverse range of cost-effective digital transformation solutions, giving businesses more optimal choices. They also proposed implementing non-profit projects to provide consulting and support for digital transformation to small and medium-sized logistics enterprises.
Furthermore, they advised introducing a mechanism to support preferential loans for digital transformation projects of logistics enterprises. Encouraging large enterprises to pioneer digital transformation and connect with other enterprises in the value chain is also essential.
According to Mr. Trevor O’Regan, an expert from the Digital Trade Project in Vietnam of USAID, the need for investment in digital skills is more critical than ever, regardless of the country. Therefore, it is crucial to raise awareness about trade facilitation in the Vietnamese economy. Vietnam should consider establishing a university specialized in logistics near a free trade zone or port.
“In the current context, Vietnam should evaluate what the government needs to do and what barriers need to be removed to meet the digital transformation needs of enterprises,” he emphasized. “When FDI enterprises choose an investment location, they consider research results and administrative procedures in different countries. If we have significant administrative barriers, it will deter investment in Vietnam. Moreover, Vietnam needs to conduct trade activities faster and more efficiently. With support from government agencies and reduced red tape, this will be a step towards better trade facilitation.”
The full content of the article was published in the Vietnam Economic Magazine, Issue 3-20245, released on January 20, 2025. Please find the article here: https://postenp.phaha.vn/chi-tiet-toa-soan/tap-chi-kinh-te-viet-nam
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