Manufacturing and trading enterprises reduce the burden of logistics costs

The proportion of logistics costs in trading and manufacturing enterprises tends to decrease gradually, according to a survey by the Ministry of Industry and Trade .

According to the survey results in the "Vietnam Logistics Report 2023" recently released by the Ministry of Industry and Trade, about 76.9% of surveyed enterprises said that logistics costs accounted for less than 15% of total production and business costs. Only nearly 16.5% had costs of 15-20%. Meanwhile, only 6.59% spent more than 20% of production and business costs on logistics.

Logistics costs are an input cost of a business, contributing to the cost of goods and services. Therefore, high costs lead to high prices, reducing the competitiveness of the business.

According to a 2014 World Bank report, Vietnam’s logistics costs accounted for about 20.9% of GDP. By 2018, calculations by the Vietnam Logistics Business Association (VLA) showed that the average cost was 16-18%. Thus, compared to previous years, the report assessed that there was progress in minimizing waste and optimizing logistics operations of businesses this year.

However, when surveying the criteria of "price matching quality" of logistics, 63% of the surveyed enterprises rated it as average - poor. Meanwhile, the rate of comments as fair - good accounted for only 37%. In addition, many other criteria such as: professional competence of employees; ability to solve unexpected incidents, time management also had more or less 50% rated as not good.

Import and export of goods at Tan Vu port - Hai Phong on July 13. Photo: Giang Huy — Import and export of goods at Tan Vu port - Hai Phong on July 13. Photo: *Giang Huy*

At the recent Vietnam Logistics Forum 2023, Mr. Tran Tuan Anh, Head of the Central Economic Committee, said that logistics costs in Vietnam are still higher than the world average (about 10%). "Despite continuous innovation and development, for Vietnamese products to compete effectively internationally and domestically, logistics still has many obstacles," he commented.

This year, Vietnam ranked 43rd out of 139 economies in the World Bank's Logistics Performance Index (LPI), the same as the Philippines, and behind Singapore, Malaysia, and Thailand. Compared to 10 years ago, Vietnam increased by 10 places but dropped by 4 places compared to last year.

Mr. Tran Thanh Hai, Deputy Director of the Import-Export Department, Ministry of Industry and Trade, said that to develop Vietnam's logistics industry, four strategies are needed, including: improving business capacity, promoting digital transformation, developing human resources and developing green logistics.

Specific breakthrough solutions include the early establishment of a transit port and a national fleet (container ships and cargo aircraft). "This is the necessary time to form a national fleet. In addition, the form of free trade zones is also of interest to many localities but is not yet legal, and policies need to be completed soon," Mr. Hai acknowledged.

Along with that, some other necessary measures such as capital incentives, land access, investment attraction - logistics market development, and establishment of the National Council for Logistics Services Development.

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