In the context that the epidemic is under control, the global logistics market is on the verge of recovery, port congestion is reduced after epidemic prevention measures are gradually removed. As one of the important links in the process of recovering import and export activities of Vietnam, the logsitics industry contributed significantly to this positive result: Total import and export turnover of goods in 11 months in 2022 is estimated to reach nearly 673.82 billion USD (exceeding of 668.54 billion USD in 2021).
In the first 11 months of 2022, the total volume of freight transport of Vietnam is estimated at 1.832,9 million tons, up 24,6% over the same period in 2021; in which road transport accounts for 74,0%, inland waterways accounts for 20,3%, and sea transport accounts for only 5,4% but this number is still much higher than the proportion of rail transport (0,3%) and aviation (0,01%).
According to research results of Vietnam Report, the business results of most enterprises in the industry are very positive. 68,4% of enterprises participating in a survey conducted by Vietnam Report in October-November, 2022 said that revenue in the first 9 months increased compared to the same period in 2021, of which 26,3% recorded a significant increase. According to financial reports of 34 logistics companies listed on the stock exchange, 64,7% of enterprises still maintain revenue growth compared to before the pandemic (this figure was 35,3% at the time of the pandemic from one year ago).
Figure 1: Revenue fluctuations of listed logistics companies in the period of 2019-2022.
Statistics also show that 26,5% of businesses have switched from "on recovery" in the period of 2019-2021 to "maintaining growth momentum" in the period of 2019-2022. This shows the unremitting efforts of logistics companies in the process of recovering and breaking through economic growth after COVID-19.
Figure 2: Changes in the resilience of listed logistics companies in the period of 2019-2022
According to a survey by Vietnam Report, the biggest difficulties that logistics companies are facing include: (1) Fluctuations in prices of energy and input materials; (2) Competition among enterprises in the same industry; (3) Risks from the supply chain; (4) Political instability in the world; and (5) The demand for shopping and consumption decreases. The biggest challenge – Energy price volatility – is the biggest difference in the economic landscape of the logistics industry this year, stemming from the Russia-Ukraine political conflict that started in March, leading to a huge shock to the world supply which makes the global energy market highly volatile. Fuel costs account for a large proportion in the operating cost structure, posing a big problem for logistics companies in terms of price adjustment. 63,2% of enterprises surveyed by Vietnam Report said that total costs increased in the first 9 months of this year compared to the same period last year.
Nearly one-third of businesses recorded a significant increase in fuel costs. Moreover, when fuel prices become a burden on businesses, it will cause many disadvantages in competition, typically increasing the gap in logistics costs of Vietnam compared to the world and regional averages. In ASEAN, Vietnam is now at 16,8%, higher than Singapore (8,5%), Malaysia (13,0%) and Thailand (15,5%).
Figure 3: Top 5 challenges that logistics companies are facing
In addition, the risks from supply chain disruptions, political instability in the world, reduced demand for shopping and consumption due to rising inflation in developed countries also create a compound impact to domestic logistics industry. Many experts say that the Russia-Ukraine conflict is disturbing the already fragile global supply chains after the "hit" of the COVID-19 pandemic.
One year ago, most of business leaders in the industry thought that the congestion at ports - a testament to the imbalance of supply and demand - would only last until mid-2022, however, before the complicated movements have arisen in 2022, this challenge is forecasted by nearly 80% of businesses to continue until the end of 2023 and even after that when COVID-19 prevention measures removed in most markets (including China).
52,6% of enterprises participating in the survey of Vietnam Report said that the number of orders decreased, inventory increased. Notably, at some enterprises, the decrease was up to 30-40% compared to the same period in 2021, especially for exports to the US and EU regions. Analysis of financial statements of 34 logistics companies listed on the stock exchange also showed that, in the third quarter, an additional 8,8% of enterprises were transferred from the group "on the way to recovery" in the first 6 months of 2022 to "decline" in the first 9 months of the year, reflecting the relatively large elasticity of the industry's business results to domestic and international fluctuations.
Outlook for the logistics industry in 2023 and trends shaping Vietnam market in the next 3 years
According to the IMF's October report, the US and EU will see GDP growth of 1% and 0,5% in 2023, respectively, compared with 1,6% and 3,1% this year. Besides, China with COVID-19 prevention measures and the real estate crisis that took place at the end of June, is forecast to grow 4,4% in 2023, 0,2 percentage points lower. compared with the previous forecast. Thus, with the world's three largest economies all experiencing low growth next year, the forecast for global growth in 2023 is also less favorable and is only 2,7%, followed by global trade output, which creates challenges for the global economy, trade and logistics. A survey by Vietnam Report showed that 52,6% of enterprises forecast that the growth of the logistics industry in 2023 would be low despite the commodity market at the end of the year and the Lunar New Year tending to increase sharply, creating great demand for logistics activities.
In a broader context - the world is entering a new economic cycle, Vietnam Report's research shows the trends that shape the operation of the logistics industry in particular and the supply chain in general. While technology helps companies improve the efficiency, flexibility, and speed of their supply chains, economic shocks, political tensions, or the recent COVID-19 pandemic have continuously tested these characteristics, thereby forcing businesses to adapt continuously and quickly.
Figure 4: Trends shaping the logistics market in the next 1-3 years and their influence on a 5 . scale
In the short term, the market determinants are mainly related to socio-economic issues such as: Logistics Marketplaces; Future of Work; Omnichannel Logistics; Sustainable Logistics; Fresh Chain; and Rethinking Packaging. These factors are considered by more than 50% of enterprises in the industry to create a great influence on the development of the industry in the next normal period with an impact level of 3,45 on a 5-point scale. In which, Sustainable logistics is rated as having the most impact (4,15/5).
The ecological imbalance and the growing demand for sustainable solutions have created an urgent need for environmentally friendly activities in the supply chain: from raw material extraction to finished poroduct management at the end of its life cycle. The World Economic Forum predicts that by 2030, the growth of e-commerce alone will lead to 36% increase in the number of delivery vehicles, creating an additional 32% in carbon emissions. Sustainable logistics, also known as "green" logistics, is an enterprise's effort to reduce the harm to the environment caused by logistics activities.
According to the latest research by Facts and Factors, the demand for size and market share of the global green logistics market is valued at about US$1.038,5 billion in 2021, expected to reach over US$1.481,5 billion by 2028 at a CAGR of 6,1%. Accordingly, investing in green logistics helps businesses gain a competitive advantage over their competitors. A survey by Vietnam Report shows that nearly 90% of businesses believe that the implementation of a sustainable development strategy can enhance the brand value of the business; 84.2% of businesses can identify risks and opportunities by implementing a sustainable development strategy; 52,6% said that customers value sustainable development actions that businesses can achieve.
In contrast, technology trends play a role in the long term as technology is reshaping the way we consume physical goods and digital services. Some trends that are assessed by most businesses in the industry with great influence include: Big Data Analytics; Internet of Things and Artificial Intelligence.
In the context of adapting to new trends, Vietnam Report's survey shows the priority strategies that logistics companies have implemented in the past year and 1-2 years ahead, including: (1) Expanding the supply chain & search for new markets; (2) Increasing capital sources for technology equipment for digital transformation; (3) Strengthen staff training to serve the digital transformation process. These are also 3 strategies throughout the past 2 years.
Figure 5: Priority strategies of logistics companies in the past year and the next 1-2 years
The demand to expand the supply chain continues to be a strategy focused by most businesses in the context of a new type of globalization after COVID-19. Before that, globalization was an overarching theme in the 21st century with supply chains and distribution networks spanning the world. Today globalization is entering a new phase as emerging economies consume more than they produce and countries in developing markets are finding new ways to improve the security of important supply chain and stability of their economics.
By 2025, it is expected that the global economy will be dominated by three main focus region: North America, the European Economic Area, and China. As global trade growth slows, rising regional trade will provide a new impetus for globalization. In the field of e-commerce, cross-border transactions are growing at twice the rate of domestic transactions. With recent geopolitical uncertainty, businesses are constantly reviewing and adjusting their supply chains as they seek to balance cost, speed, and risk.
Efficiency has long been top supply chain priority for most businesses. The effort to reduce overall costs has spurred the development of low-cost sourcing and just-in-time strategies. This approach proved to be quite successful until the trade war and the COVID-19 pandemic, exposing the weakness of the supply chain when it depends too much on one point. This forces businesses to focus on strategies for sourcing diversity, flexibility, and increased resilience by sourcing critical materials, semi-finished products, and services from multiple suppliers. China + 1 is one such strategy that is currently being considered by many large enterprises. This is also a great opportunity for Vietnam thanks to its inherent competitive advantages: geopolitical position, young population size, etc. According to the ranking of Agility 2022, the Vietnamese logistics market is ranked 11th in the group of 50 emerging logistics markets globally for to the strong "transformation" of enterprises providing and using logistics services.
The enterprise's ultimate goal is a supply chain that is both automated and agile, able to sense, adapt, and learn as supply and demand conditions change. However, as digital approaches increasingly become the focus of supply chains and logistics processes, businesses are realizing that they need to pay more attention to the human aspect of their operations. Digital systems need humans to build, maintain and improve them, supply chain operations require close and continuous cooperation between humans and machines.
Businesses that fail to recognize the central role people play in their supply chain success are facing problems ranging from a shortage of skilled personnel to a complete rejection of promising technologies. In the coming years, businesses will need to address this by adopting a people-centered innovation approach. Leaders have been working hard to promote digital thinking: setting positive cultural norms, standardizing processes, and continuously training the workforce.
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