Vietnam's trucking industry in the context of Asian logistics development

Traffic congestion in and out of ports is one of the causes of increased logistics costs. Photo: T.H

Improvement in customs procedures

The transportation industry in Asia, a crucial factor in the region's economy, is facing increasing operational costs. This trend and coping measures were discussed at the recent "Fleet Futures" event in Ho Chi Minh City organized by CEL.

According to CEL, in 2023, Vietnam's Logistics Performance Index (LPI) ranking dropped four places to 43rd, compared to 39th in 2018. Despite the ranking decrease, Vietnam's LPI score increased to 3.3 points from 3.27 points in 2018, indicating gradual improvement, especially in the effectiveness of customs procedures and infrastructure quality.

This ranking reflects the impact of the Covid-19 pandemic on the logistics industry, with disruptions in supply chains and transportation. In Vietnam, the trucking industry plays a crucial role in the national economy, responsible for 77% of cargo transportation, totaling over 1.5 billion tons.

However, the freight transport industry faces challenges such as high logistics costs (21% of GDP) and environmental impact due to emissions and traffic congestion caused by old and small trucks.

To address these challenges, key policy recommendations, including modernizing the vehicle fleet, improving driver training, and enhancing infrastructure for diverse transportation methods, have been shared by experts. The integration of digital technology, such as automatic toll collection, is seen as a key to improving operational efficiency and economic viability.

Development amid challenges

Despite challenges, Vietnam's transportation and logistics market is expected to reach US$45.19 billion in 2023 and grow at an annual compound growth rate of 6.34% to reach US$65.34 billion by 2029.

Vietnam's trucking industry witnessed significant growth in early 2023, with a 16% increase in cargo volume and nearly a 22% increase in revenue compared to the same period last year. However, this growth comes with high costs, partly due to rising fuel prices, as evidenced by a 1.98% increase in Brent crude oil prices in 2021.

According to Nguyen Quyen, Director of CEL, a recent survey by CEL with 143 trucking businesses in Vietnam highlighted critical operational issues such as suboptimal route optimization, high maintenance and repair costs, and a shortage of drivers coupled with increased wages. These factors underscore the urgent need for more efficient logistics management.

Looking towards the future, the industry aims to diversify transportation methods, reduce dependence on road transport, and explore alternatives such as water, air, and sea transport. This shift is reflected in the Asia-Pacific logistics market, renowned for its diverse service offerings.

Experts noted that the transportation industry would face complex prospects in 2024, with businesses preparing for potential cost increases or expecting stability. Rising fuel prices, driver shortages, along with increased wages, and suboptimal route optimization are the main challenges affecting operating costs.

Additionally, vehicle maintenance costs and legal compliance also pose financial burdens. These challenges highlight the dynamic nature of the logistics industry, influenced by economic fluctuations and market trends. Companies are focusing on innovative strategies and efficient planning to cope with these complexities and capitalize on growth opportunities in an evolving industry.

Sharing experiences from other countries, experts noted that technological advancements were at the forefront, with companies across Asia pioneering breakthrough innovations. Yamato Holdings has revolutionized its operations by integrating GPS tracking and telematics across its entire fleet, reducing fuel consumption by 10% and improving delivery efficiency.

Similarly, India's Delhivery uses data analysis to optimize routes, cutting the distance traveled by 15%. This focus on efficiency is reflected by Singapore's ComfortDelGro, whose advanced fuel management system achieved a 12% reduction in fuel costs.

Environmental impact concerns are clearly demonstrated by Alibaba's collaboration with SAIC Motor in China to deploy electric vehicles, significantly reducing fuel costs and carbon emissions. In South Korea, Hyundai Merchant Marine applies real-time management systems, reducing waiting times by 20% and improving cargo handling efficiency. Japan's Nippon Express sets high standards for safety and driver performance, reducing accidents by 25% through rigorous training programs. These innovations, along with new technologies such as DiBee's fuel management system and SimCEL DELIVER's route optimization solution increasing transport efficiency from 10% to 35%, are pivotal factors in transforming the logistics industry, emphasizing operational efficiency, economic viability, and sustainable development.