News# 51 - Vietnam logistics industry has low digitalization rate


Vietnam logistics industry is highly regarded for its potential and growth room, yet it suffers from low efficiency and a lack of digitalization.

"Vietnam is gradually replacing China as the world's factory, with an increasingly internationalized manufacturing sector and an important link in the global retail chain. However, many stages in logistics operations are still manually executed, reducing business efficiency," Mr. Kim Dongkyun, head of the Smart Logistics Department at Samsung SDS Asia-Pacific.

Vietnam ranks fourth in Agility's 2023 Emerging Markets Index for global logistics opportunities, just behind China, India, and Mexico. This sector is also seen as rapidly growing, with an increase of over 23% from 2020-2022, according to Nextrans.

However, this investment fund also estimates Vietnam's total logistics costs to be high, accounting for about 20% of GDP. Each product has to bear transportation costs amounting to 30-40% of its price. Meanwhile, in the US, South Korea, and Japan, this rate is below 15%. This difference indicates that the logistics sector has much room for improvement.

"The logistics market in Vietnam has not been fully digitalized compared to Europe countries, US, or South Korea, and there are many areas that need improvement as it is very difficult to operate manufacturing sectors without digitalization," a representative of Samsung SDS commented on the weakness of Vietnam's logistics.

The room for improvement through digitalization makes this sector a "fertile ground" for technology companies such as Samsung, Amazon, Alibaba, and domestic ones like Viettel and FPT.

Regarding business operations in Vietnam, Amazon has mentioned that their warehouse operation solutions help retailers save costs when selling abroad. Similarly, Samsung stated that the Cello Square solution developed by Samsung SDS enhances productivity and minimizes risks in the transportation process.

These technology companies leverage their platforms to transition from being customers of the logistics industry to becoming service providers, such as Samsung SDS, Amazon Global Selling, or Viettel Logistics. Mr. Kim Dongkyun believes that digitalization can help reduce inventory age by up to 50%, one of the factors that determine capital tie-up in the system.

Digitalization solutions in logistics are not necessarily dependent on high or special technologies. However, due to the nature of large-scale production and import-export operations, the challenge of digitalization lies in the lengthy period of quality testing, ensuring reliability, and the ability to personalize depending on business needs.

"Whether it's SDS or domestic companies in Vietnam, the cost difference will not be significantly large. In fact, we do not sell Samsung's logistics solutions but share them, so customers do not incur initial system investment costs," Mr. Kim Dongkyun responded when asked about businesses' concerns regarding the cost of digitalizing logistics.


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