Advancing Logistics Digitalization Embracing Opportunities for Economic Growth

3:16:50 PM | 6/10/2024

Identified as an important sector and often referred to as the “lifeblood” of the economy, logistics necessitates robust investment, particularly in digitalization, to adapt and respond to market dynamics and to garner maximal support for propelling the growth of other sectors. The National Digital Transformation Program to 2025 with a vision to 2030, also earmarks logistics as one of the eight priority areas for digital transformation.

Obstacles in the way

At the 5th Regional Logistics Forum themed "Digital transformation - a new growth driver in the Red River Delta - Hai Phong 2024" held recently, VCCI President Pham Tan Cong said, While the advantages of digital transformation are unequivocal, the implementation of this process in Vietnam’s logistics sector continues to encounter impediments at both macro and micro scales, spanning governmental agencies, localities, and businesses.

The survey in the 2023 Logistics Report released by the Ministry of Industry and Trade showed that 90.5% of logistics service businesses participating in the survey are still digitizing, including Level 1 - computerization and Level 2 - connection. Among them, a majority of respondents (73.5%) are at Level 2.

Only 5% of logistics service firms have advanced to Level 3 - visualization, 2.2% are at Level 4 - transparency, and only 1.9% have moved to Level 5 - Forecasting capabilities and just 0.4% have reached the highest level, Level 6 - adaptability.

Mr. Nguyen Duc Hien, Vice Chairman of the Central Economic Commission, said that the logistics sector continues to grapple with a lot of deficiencies. Specifically, domestic freight transportation predominantly relies on roadways, logistics expenses persist at elevated levels, and both capacity and service quality are constrained. Collaborative efforts among logistics entities or between logistics firms and manufacturers or exporters remain underdeveloped. A network of large-scale Vietnamese logistics enterprises, possessing leading-edge and pioneering capabilities, has yet to be established for penetration into the international market.

In addition, digital transformation in the logistics industry has made certain processes but the overall outcome remains slow, failing to meet development requirements. Human resources and investment capital are inadequate. Commercial infrastructure and transportation infrastructure have not yet been invested proportionately for practical development needs. The inter-sectoral coordination mechanism in the logistics sector is not actually effective and efficient from time to time.

Currently, Vietnam's logistics market is vied by about 43,000 domestic firms, most of which are small and medium in size, and about 30 transnational logistics services providers, with such big names as DHL, FedEx, Maersk Logistics, APL Logistics, CJ Logistics and KMTC Logistics. This shows the fierce competition in the potential logistics service market.

“That reality requires accelerated digital transformation in the logistics sector to address matters arising during the recent epidemic outbreak on the one hand and take advantage of digital revolution and Industry 4.0 achievements. Enabled by digital transformation, logistics services providers will change their thinking and breakthrough development to improve competitiveness, reduce logistics costs, boost growth, gain more customers and achieve much better profit than before digital transformation," said Mr. Cong.

Exploring the logistics potential of the Red River Delta

The Red River Delta region is perceived as a promising and appealing market for the expansion of logistics, Mr. Hien said. This region is deemed the northern portal of Vietnam and ASEAN, serving as a conduit for economic growth and commerce with China - the globe’s most expansive market. It also acts as a significant nexus in the sphere of international economic and cultural interchange.

Compared to other economic regions in the country, the Red River Delta has the best and most synchronous transportation infrastructure system in the country with all five modes of transportation (road, sea, river, airway and railway) with three passing economic corridors. Therefore, the logistics industry in the Red River Delta has enormous potential and opportunities for further development, he noted.

However, developing the logistics industry in the Red River Delta is challenging and difficult, Mr. Hien added, citing limited land funds for building warehouses, yards and freight transshipment centers and logistics centers and insufficient investment capital from logistics companies. The fund for building logistics infrastructure systems is still limited

In addition, warehouses and yards in some localities are still fragmented, small in scale and unconnected and they play little role in supporting freight circulation. Inland dry ports in the north are not well-connected to seaports as those in the south. They have a small operating scale and lack specialized loading and unloading equipment. The connection and cooperation among localities in the region is lax and ineffective.

"This context and situation pose a requirement for the logistics industry of Vietnam in general and the Red River Delta in particular to have solutions to maintain and ensure logistics roles in maintaining supply chains for goods and services, have visionary thinking and solutions, shape new directions to catch up with global trends and achieve development breakthroughs," Mr. Hien emphasized.

Well-timed institutionalization for logistics development

To develop the logistics industry in general and promote digital transformation of the logistics industry in particular, it is essential to have consistent, timely and effective participation from all levels of authority, sectors and the business community, Hien said, adding the need for continued innovation and improved institutional quality. Specially, it is important to have timely institutionalization of Party views and guidelines on logistics development and digital transformation in logistics.

Besides, emphasis should be placed on the construction of a harmonized and contemporary logistics infrastructure system. The role of logistics in fostering robust regional and inter-locality connectivity should be amplified. Policy impediments in infrastructure investment need to be eliminated to enhance regional connectivity, such as contemplating the establishment of infrastructure development investment funds as stipulated in Resolution 29, utilizing land funds to augment regional connectivity. The pace of urbanization should be accelerated in accordance with Transit-Oriented Development (TOD) models to construct efficient logistics infrastructure.

Furthermore, it is vital to develop smart logistics based on the foundation of scientific and technological progress and innovation, accelerate information technology application in the logistics industry, and make the most of digital transformation for logistics development, Hien added. It is also important to develop a goods distribution system capable of joining global distribution networks; develop e-commerce and all types of digitally enabled commerce; expand channels and flows of goods between urban and rural areas; form major trade routes of the region, develop modern, smart and sustainable logistics systems and wholesale markets; boost e-commerce development; and establish commodity exchanges and exhibition complexes.

Last but not least, there is a need for mobilizing socialized resources for logistics development, strengthening public-private partnership (PPP) in building and developing domestic and foreign logistics centers, especially for strategic partner markets.


Data sharing is the best way to promote benefits of digital transformation

Mr. Tran Thanh Hai

Deputy Director of the Agency of Foreign Trade (Ministry of Industry and Trade)

Digital transformation is a much-talked topic, covering technology, financial preparation, human resource, infrastructure, including infrastructure connections among governmental agencies, at central and local levels, and between governmental agencies and businesses.

E-government and online public services have interconnected governmental agencies and businesses, especially importers and exporters. However, the boost to expanding the scope of these activities is slowing down.

Data dissemination serves as the optimal method to amplify the advantages of digital transformation. Nevertheless, it has emerged as a constriction, even within governmental bodies or between these agencies and businesses. Concurrently, it is imperative to devise solutions and applications, such as intelligent port applications and human resource enhancement programs.

Simultaneously, it is crucial to stimulate logistics growth by formulating a local logistics development blueprint that aligns with the national strategy. This involves nurturing and backing the business community to establish industry-leading conglomerates, fostering local connectivity, and constructing expansive, contemporary, intelligent, and automated logistics zones/centers.


Hai Phong has all necessary factors to become a logistics hub

Mr. Nguyen Duc Tho

Vice Chairman of Hai Phong City People's Committee

Knowing that logistics is an important service sector in the overall economic structure and it helps support, connect and promote the city's socioeconomic development, Hai Phong City has carried out many programs and projects to boost logistics development and has achieved important and comprehensive results in many fields.

In particular, Dinh Vu - Cat Hai Economic Zone with a total area of 22,540 ha and 14 industrial parks are investing, constructing and operating infrastructure facilities covering over 6,000 hectares, including nine industrial parks inside Dinh Vu - Cat Hai Economic Zone and five industrial parks outside it. This has created huge potential and advantages for logistics connection from seaports, airports and extremely convenient transport systems. This has supported investors to boost manufacturing, business, importing and exporting.

The city also built five yards with 98 wharves, including 52 wharves included into the Vietnam seaport system, with a total length of more than 14 km, and eight main maritime routes. The most prominent is Lach Huyen port area, the gateway combined with international transit. Operated from May 2018, the port has been completed and operated two wharves and can receive vessels of up to 200,000 metric tons.

The warehouse and yard system for logistics services covers more than 700 ha with about over 60 major warehouses, including warehouses and yards at seaports, bonded warehouses, centralized inspection points and other common and cold storage warehouse systems.

According to the plan, the logistics network of Hai Phong City is expected to reach 1,700 - 2,000 ha by 2030 and 2,200 - 2,500 ha by 2040, including international and regional logistics centers in Dinh Vu - Cat Hai; municipal logistics centers, specialized logistics centers and supporting logistics centers associated with major trading hubs.

With its advantages, potential and geographical location plus a strong resolve of the city and outstanding efforts of the business community and local people, Hai Phong City has all necessary factors to become one of important logistics hubs, a multimodal distribution and transit center linked to the Northern Key Economic Zone, to the whole country, to the region and to the world.


AI and driverless vehicles will play a major role in future logistics operations

Mr. Thomas Sim

Senior Vice President of the International Federation of Freight Forwarders Associations (FIATA)

Artificial Intelligence (AI) and driverless vehicle technologies will play a major role in the future of logistics operations. Some logistics providers are already using AI to better track orders and predict transportation-related issues in the supply chain. Autonomous vehicles, such as driverless forklifts, delivery trucks and drones, are likely to become more common in warehouses, highways and more.

Currently, the demand for AI technology in modern logistics operations is increasing globally. More and more logistics companies are leveraging AI-enabled tools and systems to optimize various aspects of their operations more efficiently and better meet the ever-changing needs of customers.

Digital transformation in the logistics sector is key to economic growth and global trade integration. In Vietnam, key economic regions, including the Red River Delta, the Southeast and the Mekong Delta, can become leading logistics hubs in the region through strategic investments in digital transformation and smart port infrastructure. Stakeholders, including the government, the private sector and organizations, must work together to accelerate digital transformation to ensure sustainable and inclusive growth for Vietnam’s logistics industry.


National digital transformation strategy for logistics industry needed

Mr. Dao Trong Khoa

Permanent Vice President of the Vietnam Logistics Business Association (VLA)

To accelerate digital transformation in the logistics industry, the government needs to play a very important supporting role. Therefore, VLA proposes having a national digital transformation strategy for the logistics industry. This strategy needs to be linked to the digital transformation strategy for the logistics industry that is being built by the Ministry of Industry and Trade. It is imperative to promulgate business support policies encompassing taxation, finance, and training to incentivize businesses to invest in digital transformation applications. Specifically, it is crucial to refine the legal framework, alleviate apprehensions about digital transformation for businesses, and persist in enhancing the legal framework on logistics to regulate transportation modalities. The development of digital infrastructure and telecommunications infrastructure is essential, as they form the bedrock for propelling digital transformation development. It is also important to elevate awareness of digital transformation and fortify collaboration among logistics firms, technology firms, and cross-sector authorities.

In addition, there is a need for support capital for digitally transformed companies because not many businesses currently have enough resources and budget for digital transformation.


Clearly define each platform and data link

Mr. Nguyen Huu Hanh

Deputy Director of the National Digital Transformation Department

Digital transformation in the logistics industry has not come as expected and it is necessary to build a digital transformation strategy for the logistics industry. Digital transformation brings benefits to authorities (with data to make forecasts and create new values); reduces costs for businesses and creates new experiences for users. In addition, telecom firms are directed to invest in infrastructure in the coming time.

When building a digital transformation strategy for the logistics industry, it is essential to clearly define each platform and each data link between platforms and specifically identify inputs and outputs. In addition to building a digital transformation strategy, since the logistics industry is correlated with many different sectors and fields, it is important to build a sectoral data architecture to know about information fields the data carries, taken from available and unavailable sources. For example, business data needs to be taken from the national business database and personal data needs to be taken from the national population database.

Based on the existing database, it is necessary to interconnect data, in which the master data and dependent data and personal data warehouse are identified to enable businesses to reuse existing data.

Regarding infrastructure, the Ministry of Information and Communications already has a national data sharing integration system. According to the government electronic data architecture, all data runs through it and the national data sharing integration system ensures capacity.

Anh Mai (Vietnam Business Forum)