What is the real logistics cost? This cost usually includes 3 types of charges: transport costs, capital opportunity costs and storage costs. In particular, transportation costs are the largest. Managing the cost of good goods helps businesses increase their competitiveness and become one of the leading logistics companies in Vietnam.
Basically, the price of the product or service sold to the market must be greater than the sum of the cost, marketing cost and the three types of costs listed above combined.
Types of Logistics Fees
The cost of logistics in Vietnam basically consists of three types:
1. Transportation costs
All costs are for the circulation and distribution of goods from the production site to the consumer market. This is the most “expensive” cost that any item you buy must bear. Despite the transportation industry’s efforts to reduce sea freight rates or by other means, the fee has not been escalated due to the fluctuation of fuel prices.
2. Cost of capital opportunity
The minimum rate of return that the company receives when it does not invest capital in inventory but for another activity.
In the past, when the production and consumption processes were simple, small-scale, and low interest rates, businesses often ignored this cost. But now, the expansion of the scale of operations, the volume of products created and the interest rate is pushed up, this cost becomes a matter of concern.
3. Cost of preserving goods
These are expenses for renting, storing goods, importing and exporting goods, compensating for losses of damaged goods and insurance costs for special goods.
Logistics Costs in Vietnam Double the World?
The logistics cost index will reflect a country’s commercial strength. For example, logistics costs in Vietnam are based on 25-30% of gross domestic product (GDP), nearly 3 times higher than other countries like the US (9-10%), European countries. (12%) and the world average of 15%.
The time has come for us to seriously study the situation and recognize the role of commercial logistics, avoiding major economic losses. If not quickly apply these measures to reduce these costs, the logistics industry in Vietnam will be completely uncompetitive in the era of international integration today. So why is the cost of logistics in our country so high?
According to the latest statistics from Vietnam Logistics Association (VIL), our country now has more than 1,300 enterprises operating in the field of forwarding, of which only about 25 foreign-invested enterprises. But these 25 businesses are accounting for 80% of Vietnam logistics market. These are big names like Maerks Logistics, NYK Logistics, DHL, UPS, etc.
So what is the reason why Vietnam logistics companies are exhausted in the race to win this market share?
Logistics companies are not aware of the role of logistics throughout the supply chain. Logistics management departments are often integrated into other administrative departments, making logistics management cost separate and not closely linked. Besides, goods to the user must go through too many intermediaries, and the parties are trying to profit for themselves. The cost of these intermediaries makes the freight team dizzy.
Non-professional operation. Vietnamese enterprises are not in the habit of hiring outside 3PL logistics companies but often undertaking the transport themselves. When self-employed businesses mean huge capital investment to build warehouses, equipment and transport vehicles. The solution to outsource 3PLs will be efficient and reduce logistics costs greatly.
The infrastructure is still weak, the quality of the transport network is not synchronous, quickly degraded and not given adequate attention. Seaports are also not enough to accommodate large-tonnage vessels.
Uncommon multimodal transport.
Seize the opportunity
The recently concluded TPP trade agreement with many upcoming trade agreements are in talks that will increase opportunities for Vietnamese logistics companies. Therefore, in order to seize this opportunity, and improve the competitiveness of businesses, logistics companies need to aim to reduce logistics costs to a minimum.
The basic solutions to reduce logistics companies’ freight rates may be interested in:
Attract talents, and keep them: The issue of human resources is a key point in any field. A good logistics professional, having knowledge of each stage of supply chain management, good control of supply and demand for goods will make businesses very efficient.
Be aware of your strengths and weaknesses to react flexibly to every situation.
Always looking for ways to improve ourselves, improve production capacity, product / service quality, reduce costs and bring the best service to our customers.
The State supports the planning of infrastructure development and facilities and loosens public policies and creates a good legal environment to modernize the domestic transport industry and reduce logistics costs in Vietnam to a level. 15% of the national GDP.
Translation: Tiếng Việt