Many solutions to reduce logistics costs

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The transport of goods at ALS Cargo Terminal. Photo: N.Linh
The transport of goods at ALS Cargo Terminal. Photo: N.Linh

Changing shipping method

According to Deputy Minister of Industry and Trade Do Thang Hai, logistics is one of the fastest growing and most stable industries with an average growth of 14-16% per year, contributing to GDP from 4 to 5%. According to the Logistics Index Report of the newly emerging market 2022 published by Agility, Vietnam ranks 11th in the ranking of the top 50 leading emerging logistics markets, and 4th in Southeast Asia.

According to a report of the Ministry of Industry and Trade, road is still the most popular mode of transport, accounting for 72.93% of the total amount of goods transported, followed by inland waterways with 21.73%.

Currently, Vietnamese enterprises, when exchanging trade with the world in general and with Europe – America region, still face many difficulties and challenges, including issues such as limited infrastructure, lack of synchronization, especially transport infrastructure and logistics infrastructure such as warehouses, logistics centers; customs procedures are still overlapping; logistics enterprises lack information; lack of links, outdated technology application. These are huge limitations that make Vietnam’s logistics costs very high, and a burden for businesses.

Mr. Truong Tan Loc, Marketing Director of Saigon Newport Corporation, said that the total length of container terminals in Cai Mep area is about 5,470 m, was divided into eight ports. The ports are scattered and most of them have limited berth lengths (average 600m berth/port) while the size of ships arriving at Cai Mep is increasing, the length of ships is up to 400m. So each time, each port can only receive one mother ship. Therefore, in order for the supply chain not to be broken right at the seaport, it is necessary to have a mechanism to link exploitation and shift goods between ports in Cai Mep – Thi Vai area (the “open port” mechanism), in order to optimize exploitation capacity and make the most of each other’s berths, solve the current limitations on berths, reduce logistics costs for import and export goods through this area.

Along with that, businesses need to strengthen the change of inland transport modes from road to inland waterway. To do this, it is necessary to invest in the construction of barge berths in Dong Nai and Binh Duong.

Sharing common challenges in the field of customs clearance, Dr. KC Chang, a specialist in customs procedures and trade legislation in the Asia-Pacific region of GEODIS Logistics, said that when importing goods to the United States, importing businesses all need the Importer Enterprise Number when clearing customs; they must use the IRS business registration code when importing for companies.

Simultaneously, complying with any special laws in the United States that may apply to your goods, such as those relating to drugs, food, cosmetics, alcoholic beverages, and radioactive materials; studying carefully about packaging and labeling regulations in the United States before exporting. Importing enterprises must apply for an import permit in order to import controlled items.

“Especially, US Customs pays great attention to the issue of “Forced Labor”. Any supplier that is blacklisted by this regulation will have to declare the goods in detail. Always use a licensed and qualified customs service provider to transport goods, in order to reduce costs,” emphasized Dr. KC Chang

Link to reduce costs

According to a representative of the Ministry of Industry and Trade, the weakness of Vietnamese enterprises is that the cost of services is still high, and the quality of some services is not high, in the context that the Vietnamese service supply market currently has stiff competition.

The main reason is the limitation of business size and capital, experience and management qualifications, the ability to apply information technology as well as the level of human resources that have not yet met the requirements of international operations. Another important factor is that there is no source of goods because Vietnam mainly exports FOB and imports CIF. In addition, there are limitations on logistics infrastructure and transportation costs on land, and seaport surcharges imposed by foreign ship owners.

Sharing experience on freight rates for exporting goods to European and American countries, Ms. Vo Thi Phuong Lan, Vice President of Ho Chi Minh City Logistics Association, said that from July 2022, international freight rates have decreased compared to 2021 and by the fourth quarter of 2022, international freight rates are tending to return to the normal state as in the period of 2019-2020. Besides, port congestion has been greatly improved at ports around the world, and the shortage of empty containers has been resolved. The scarcity of seats is now gone, and clients can choose from many suitable carriers.

The average sea freight rate at the end of 2022 to the main North American ports is about 1,500 USD/40′ container (to the West coast), 3,000 USD/40′ Container (to the East coast). The main European ports such as Rotterdam, Hamburg, Antwerp cost about 1,100 USD. Ports going inland (Chicago, IL, Dallas, TX) have freight about 4,200-5,000 USD / 40′ container.

According to experts, in order to reduce logistics costs, import-export businesses should change their sales and purchase conditions to CIF instead of FOB for the purpose of being more proactive in using appropriate shipping schedules, looking for reputable competitive suppliers to save freight costs and risks during transportation.

Importers and exporters should negotiate with carriers to allow the application of a policy of swapping export and import containers in order to minimize transportation costs when oil prices are constantly fluctuating due to the impact of the Russia-Ukraine war. Controlling import/export surcharges according to standard norms to avoid rampant fee collection.

Along with that, businesses should optimize logistics costs by integrating the chain of customs declaration services with domestic transportation. If import-export businesses use integrated services, they will save logistics costs from 500,000 VND/container compared to using single services.

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