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Digital transformation for logistics to be faster and cheaper

10:00 | 03/10/2020

VCN - Logistics is the "blood line" connecting the production chain - domestic goods circulation and trade with the global market. The application of information technology is key to linking and optimizing each stage and each specific logistics service, helping to reduce time and costs.

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The application of modern technologies has helped Cat Lai port significantly reduce loading time, increase efficiency and customer satisfaction. Photo: Thu Hoa

Indispensable requirement

A study by the Vietnam Association of Logistics Services shows that the ratio of logistics costs to the GDP of Vietnam is 18% of GDP, while the figure in developed countries is only 9-14%. Of the total logistics costs, transportation costs account for 60%, handling costs account for 21%, warehousing costs account for 12%.

HCMC is building and completing a GIS map of logistics based on the traffic data which the city is collecting and managing. Digital map data will help the exploitation of warehouses, transportation routes, bringing practical benefits to enterprises in the area.

However, most of Vietnam's logistics enterprises have not properly invested in technology, leading to tough competition with foreign firms. Typically in the port system of Vietnam, with 281 ports spread across the territory with a total capacity of over 550 million tons per year, the port system has great potential for exploitation. However, according to the assessment of Mr. Nguyen Hong Minh, Deputy General Director of Sao Bac Dau Technology Joint Stock Company, Vietnam's port system has not properly invested in the application of information technology in production exploitation.Vietnam's logistics costs are still quite high compared to other countries such as China, Thailand, Japan and the EU, due to limitations in port infrastructure associated with post-port services. Logistics infrastructure planning including seaports, inland ports, logistics centers, depots, parking lots for trucks, containers are ineffective. Therefore, the application of digitization technology is a necessary requirement to cut costs.

Specifically, Sao Bac Dau's statistics show that 75% of ports, ICDs, depots have not applied modern software to port operations, mainly using labor combined with some simple and separate software to solve problems related to port operations. This leads to not being able to optimize cargo throughput, delays and congestion.

In the field of forwarding, Vietnam Post Corporation (Vietnam Post) owns the largest network with nearly 900 delivery post offices in the center of provinces, cites, districts across the country. Up to 1,750 post offices at level 3 manage the delivery route in the ward and commune areas and nearly 24,800 delivery routes nationwide to delivery goods to customers' addresses.

However, in technology development, the large network that is the strength of Vietnam Post is gradually becoming a burden. Mr. Vu Kiem Van, Information Technology Director of Vietnam Post, said that if there was no digital transformation, the physical scale would be a big challenge when many units do not have infrastructure but have developed rapidly.

State and enterprises make a concerted effort

The effectiveness of the application of information technology to logistics has been proven in practice. Typically, the seaport systems of Singapore and Hong Kong (China), which have been dominating the list of the busiest container seaports in the world, prioritize the application of information technology in managing and exploiting seaports.

Saigon New Port Company, after successfully applying advanced production management and administration programs, the company has reduced the time of the ship at the port by 55%; goods delivery time by three quarters; reduced 60% of cases that loss working safety and traffic safety.

Thanks to that, Tan Cang - Cat Lai port is always a reliable destination, highly appreciated by shipping lines and customers.

Similarly, Mr. Vu Kiem Van said that Vietnam Post was building a Vmap mapping platform and a real-time address database for locating, addressing data, and assigning codes to the address of the household. The postal address code platform had the ability to digitize and accurately locate customers' addresses in order to provide information to enterprises in industries, fields and services that need to "find" customers. This solution contributes to optimizing the transportation and delivery of goods from sender to receiver of postal enterprises, transportation enterprises, logistics enterprises, e-commerce enterprises, thereby improving production efficiency, reducing costs and increasing competitiveness of enterprises.

However, looking at the entire logistics industry of Vietnam, the proportion of enterprises achieving a strong transformation like Saigon Newport or Vietnam Post is still very modest. Because the issue of investment funding is still a problem.

According to Mr. Bui Ta Hoang Vu, Director of the Department of Industry and Trade of Ho Chi Minh City, enterprises had to invest in hardware and software systems and also invest in people, so it took a lot of time and money.

If the investment was made towards the automation of foreign models and software, it would cost a lot in initial investment. If making the internal model by itself, it would take a lot of time, difficulties, cost of IT human resources.

Therefore, enterprises had not been bold or not been able to invest.

In addition, a number of principles that are not yet in law and state management also create barriers to digitization in logistics.

Mr. Vu pointed out that Vietnam does not have a law on logistics, the law on e-logistics, and administrative procedures were also complicated. For example, under the regulations of financial invoices (red invoice) was a required document in transporting. However, the red invoice could only be issued when the customer has received the goods at the last stage, so the application of electronic payments, electronic invoices for the logistics process could not be performed synchronously.

In order to speed up the digital transformation in the logistics field, Mr. Vu said that the Department of Industry and Trade of Ho Chi Minh City and other departments in Ho Chi Minh City were studying to establish an Information Technology Application Center to gradually establish digital transaction platforms in logistics to meet the demand of enterprises and state management.

This is a solution to gradually improve the level of application of information technology of enterprises, contributing to overcoming the current limitations in goods identification, optimizing the delivery route, lifting and loading goods and the connection among enterprises performing different stages in the logistics service chain, improving the links between enterprises and State management agencies.

By Nguyen Hien/ BInh Minh