Logistics Service Providers in Central Vietnam: Current Status and
Strategies for the Future
THE TUAN TRAN1, QUANG HUNG DO2, QUANG TOAN DINH3
1Faculty of Transport Economics, University of Transport Technology, VIETNAM
2Faculty of Information Technology, University of Transport Technology, VIETNAM
3Student Support Center Startup and Corporate Relations, University of Transport Technology,
VIETNAM
Abstract: - The trend of globalization leads to an increased need for international freight transportation and
accelerates the development of the global logistics industry. This paper aims to study logistics service providers'
current status and strategies in central Vietnam. The study data sample was collected through a questionnaire form,
responded by 488 companies outsourcing logistics services. The findings indicate a direction for the Central
Vietnam authorities to follow in implementing the ideal investment prioritization and the appropriate regulations
for improving its logistics industry. This study enriches the literature by investigating logistics study's current status
and prospects in a transitional economy. It also offers invaluable information and implications for local providers,
government authorities, and foreign logistic service providers interested in Central Vietnam's logistics industry.
Key-Words: - Logistics service provider (LSP), Central Vietnam, Current status, Strategy for development
Received: August 19, 2021. Revised: March 17, 2022. Accepted: April 20, 2022. Published: May 11, 2022.
1 Introduction
Logistics makes the business processes more
efficient and cost-effective since it plays a supportive
role in business operation's primary functions,
including marketing and manufacturing. The
objective of logistics service is to minimize the
overall costs from the inconsistency of the operation
of subsection between units produced to misbalance
in the system due to and the desire to achieve the
individual goals of individual subsystems [1].
Vietnam has experienced strong growth in trade in
recent years, which will support the ongoing
development and expansion of its logistics. The
logistics industry is one of the fastest-growing
industries in Vietnam, and it is estimated to grow at a
pace faster than the GDP growth rate. Currently, the
logistics service accounts for 15-20% of GDP in
Vietnam. Vice versa, Vietnam’s logistics industry
has also been boosted by the country’s increasing
GDP rising manufacturing and e-commerce sectors.
In addition, the adoption of e-commerce by the
country’s young demographic has created the
demand for expansion in logistic services. The
country obtained an overall score of 5.67 out of 10 in
Agility's 2021 emerging markets logistics index.
Central Vietnam is one of the three main regions
in Vietnam. Provinces in the central region cover
about 151,000 square kilometers, with a population
of about 26 million, accounting for 45.5% of the
natural area and 27.4% of the population of Vietnam,
respectively. The region is located between Hanoi
and Hochiminh city, with over 1,500 km long
coastline. In Central Vietnam, the final point of the
EWEC (East-West Economic Corridor) stretches
from Myanmar through Thailand and Laos.
Therefore, the economy of 14 provinces in Vietnam's
central region has enormous economic potential.
There are also territories and regions with great
promise to develop logistics services. For example,
Danang port functions as a gateway for the center of
Vietnam and transit to and from Lao PDR. Tien Sa
Terminal in Danang can accommodate vessels of up
30,000 DWT, with a throughput capacity of 4.5
million tons. The three other major ports serving the
central coastline include Cua Lo, Quy Nhon, and Nha
Trang can receive vessels of up to 10,000 DWT.
Fourteen groups of seaports are planned for the
Central Region, including eight Type-I ports
belonging to the national port authority, such as Nghi
Son (Thanh Hoa), Nghe An, Ha Tinh, Thua Thien-
Hue, Da Nang, Dung Quat (Quang Ngai), Quy Nhon
(Binh Dinh) and Khanh Hoa ports included in the
development plan for Vietnam's seaports from the
year 2020 with orientation until 2030. Although the
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central region has an advantage of deep-sea ports,
with a large cargo volume, container volume is
limited, and goods are not diverse, mainly petroleum,
cement, steel, textiles, leather shoes, wood, and
wooden furniture. The shipping services are still
underdeveloped and have not benefited from the
deep-sea ports to develop logistics and shipping in
the East-West economic corridor. Shipping costs are
also higher than in other regions, while management
in some ports is overlapping, resulting in the uneven
spread of investments and development capabilities.
The development of the logistics sector has
drawn much attention from all provinces in the
central region of Vietnam. It has been recognized as
one of the critical drivers for regional and provincial
economy and business development. Several central
regions, such as Da Nang, Quy Nhon, and Ha Tinh,
have identified logistics as important urban sectors.
Some have adopted preferential policies in tax and
land use to enhance the development of this sector.
This study aims to present an assessment framework
of the current logistics situation in Central Vietnam.
The study also identifies logistics providers'
challenges in Central Vietnam and suggests strategies
for LSPs and managers in an increasingly
competitive environment.
2 Literature Review
Although a large proportion of research has been
conducted to study logistics systems at the micro or
business level, the number of logistics studies at the
national or regional level is still minimal [2].
Approaching logistics from a macro perspective,
according to Kampan & Tanielian [3], Arvis et al.
[4], logistics plays a vital role in increasing
competitiveness, adding value to the supply chain,
and reducing costs [5], [6]. Previously, logistics has
been considered a ‘dark continent’ with many
benefits and advantages that businesses have not yet
exploited [7]. Blanco and Sheffi [8] have stressed the
role of logistics in ensuring the availability of
material requirements, i.e., raw materials, inventory,
semi-finished products, finished products in the
production cycle. Therefore logistics advances large
production capacity and commercial growth [9]. It
can be implied that logistics is the backbone
economy. Logistics has also been recognized as one
of important drivers for national and regional
economy and business development. Thus, there
exists studies on logistics that investigate the current
status of logistics providers in a country/region, then
offer some managerial implications on logistics
competitive strategy.
A study by Hong et al. [10] explored logistics
providers' current status and prospects in Tianjin
(China). The results revealed that Chinese logistics
providers depended heavily on transportation and
warehousing businesses but lacked value-added
services and logistics information management. The
findings indicated that institutional problems are the
most severe barrier preventing the development of
China's logistics industry. Dang & Yeo [11]
evaluated the main factors influencing the
improvement of Vietnam’s logistics system. The
study indicated a direction for the Vietnam
government to follow in implementing the ideal
investment prioritization and the appropriate
regulations to improve its logistics system. The
findings showed that the optimal order for improving
Vietnam’s logistics system should be logistics costs,
logistics services, logistics infrastructures,
connections between logistics components,
institutional frameworks, and technology. Minh [12]
indicated the most striking problems that
inappropriate and ineffective port investment,
highway congestion and consequent delays,
unprofessionalism of domestic logistics service
providers, cumbersome and inconsistent institutional
framework, and, finally, insufficient experienced and
qualified human resources.
The above literature review suggests that most
previous studies investigate logistics at the national
level, but largely ignore the assessment of logistics at
the regional level, especially in Vietnam. This
research attempts to analyze the current status of
logistics in Central Vietnam and provide some
managerial implications on logistics competitive
strategy.
3 Methodology
A national/regional logistics system includes (1)
transport and logistics infrastructure, (2) the
institutional and regulatory framework, (3) service
providers, and (4) logistics service users [13]. The
assessment of the logistics system in Central Vietnam
can be based on the four strategic dimensions that are
considered as being the key components. This
standardized logistics framework is essential in
understanding the logistics system and its
relationship with four logistics-related sizes.
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The semi-structured interview was utilized to
obtain in-depth data related to four logistics
dimensions. The semi-structured interviews were
primarily based on what was obtained through an
extensive literature review. The purpose of semi-
structured interviews questionnaires was to get a
clear picture of the current status of logistics-related
sectors in Central Vietnam.
The authors surveyed logistics services to
understand the current status in Central Vietnam. A
thirty-item questionnaire was designed after careful
discussion by logistics researchers and practitioners
from VLA (Vietnam Logistics Business
Association), VCCI (Vietnam Chamber of
Commerce and Industry), and UTT (University of
Transport Technology), and in consultation with
several logistics managers who are familiar with the
context of Vietnam. The questionnaire included two
major parts: (1) the basic information of enterprises
(2) the respondent's perception of the logistics service
in Central Vietnam and other regions. The first part
has consisted of questions on company information
such as type of business ownership, the number of
operation years, and the central area of operation. In
part two, close-ended questions were utilized to
investigate the current status of logistics services in
Central Vietnam and other regions in Vietnam. The
questionnaire was developed in the Vietnamese
language then distributed through an electronic
survey system (Google form). In September 2021,
the survey was delivered by email to 600 firms and
an official note from the UTT requesting
cooperation. After two weeks, a total of 488 valid
questionnaires were collected, with a response rate of
81.33%. The survey data were then analyzed to
investigate the current status of logistics services in
Central Vietnam.
4 Findings
4.1 Respondent Profile
The survey has gathered information concerning the
respondent profile, which is essential because it
provides basic information. Several firm profile
issues addressed in the questionnaire are reported and
discussed below.
Table 1. Respondent profile
Firm characteristics
Firm group
Frequency
Headquarters location
Northern Vietnam
96
Central Vietnam
371
Southern Vietnam
21
Ownership
Limited liability company
60
State - owned enterprise
18
Shareholding company
324
Private enterprise
66
Joint venture company
8
Enterprise with 100% foreign-owned capital
12
Number of employees
Less than 10
26
11-30
35
31-50
49
51-100
100
101-200
215
200 or more
63
Major logistics activities
Sea freight service
322
Airfreight service
313
Rail transport service
312
Road transport service
344
Delivery service
338
Warehouse service
334
Freight forwarding and customs declaration service
290
Loading and unloading service
312
Analysis and verification
296
Direct delivery service
299
Others
265
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Several company characteristics are as follows:
The survey results indicate that more than 66 percent
of respondents are shareholding companies, which
has caused a more significant proportion of non-
state-owned firms to exist in the logistics industry.
The employment base in the survey varies
substantially among the respondents. At the same
time, 12 percent report less than 30 employees,
another 30 percent report at least 200 employees.
4.2 Current Status
The survey also addressed a series of issues
concerning the current status of logistics service
providers, such as quality of personnel, business
coverage, and services offerings.
4.2.1 Facilities and Human Resources
Figure 1 shows the self-evaluation of the quality of
personnel. The figure indicates that most employees
meet standard work requirements.
Fig. 1: Quality of personnel
Figure 2 presents which warehouse type is in the
operation of logistics companies in Central Vietnam. It should be noted that 153 out of 488 logistics
companies (31.35%) are without a warehouse.
Fig. 2: Type of warehouse
The IT adoption level in logistics companies'
operations is exhibited in Figure 3. Almost all companies are aware of the role of IT in business and
have adopted it in the process.
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Fig. 3: The level of IT adoption
4.2.2 Current Status Figure 4 shows factors and their impact on
operational practices.
Fig. 4: Factors and their impact on operational practices
Figure 5 shows the components of logistics costs.
Logistics costs comprise the charges for the
movement of goods using various transportation
methods such as railway, road, airway, and
waterways, including fuel and passage costs.
Additional logistics costs may include warehousing
space, packaging, security, tariffs and duties, and
information processing costs. According to
respondents, it is reported that logistics costs in
Central Vietnam are high.
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Fig. 5: Type of logistics costs
Figure 6 presents difficulties in logistics
management practices. As shown in the figure, the
biggest challenge logistics enterprises face in Central
Vietnam is limited human resources. The enterprises
still lack skilled and highly qualified employees,
including experienced executive-level managers and
directors who have experience in supply chain and
logistics management. The second difficulty is high
operating costs. In Vietnam, the average logistics
cost accounts for nearly 17% of the total revenue of
logistics enterprises. Recently, the price has been
decreased. However, it is still very high compared to
other countries in the region.
Fig. 6: Difficulties in logistics management practices
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On behalf of their organization, the respondents
were required to assess infrastructure on the Likert 5-
scale. Figures 7, 8, 9, 10, 11, 12, and 13 evaluate
road, railway, airway, inland waterways, seaports,
warehouse, and IT infrastructure. For example,
regarding the evaluation of road infrastructure, the
“agree” responses were always dominant with above
62%, then “strongly agree” responses came right
after, varied about 17-19%. The transport sector of
Central Vietnam consists of a wide range of transport
modes: road, railway, inland waterway, coastal and
sea shipping, and aviation. The transport sector has
grown significantly since the 1990s. This was partly
supported by the development of transport
infrastructure and the effects of partial transport
deregulation. In addition to general reforms, the
transport sector experienced extensive
commercialization. According to the respondents'
opinion, the evaluation of transportation
infrastructure is quite suitable for all the considered
aspects, even though they had difficulties assessing
the quality.
Fig. 7: The evaluation of road infrastructure
Fig. 8: The evaluation of railway infrastructure
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Fig. 9: The evaluation of airway infrastructure
Fig. 10: The evaluation of inland waterways
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Fig. 11: The evaluation of seaports
Fig. 12: The evaluation of warehouse infrastructure
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Fig. 13: The evaluation of IT infrastructure
Figures 14, 15, 16, and 17 evaluate road, seaport,
airport, railway connectivity in Central Vietnam,
respectively. As can be observed, the connectivity of
transport systems and cooperation between different
modes are rated at a reasonable level.
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Fig. 14: The evaluation of road connectivity
Fig. 15: The evaluation of seaport connectivity
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Fig. 16: The evaluation of airport connectivity
Fig. 17: The evaluation of railway connectivity
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Figure 18 exhibits the factor affecting central
Vietnam's location selection of logistics service
providers. The factors considered in the logistics
center location are grouped into natural
environmental factors, business environment factors,
infrastructure status.
Fig. 18: The factor affecting the location selection of logistics service providers in Central Vietnam
From the above survey findings, it can be
concluded that the logistics system in Central
Vietnam has several advantages as follows:
The central region in Vietnam offers various
strategically important geographical characteristics
and a well-developed transportation infrastructure
that provides significant competitive advantages to
investors over other areas of Vietnam. The long
coastline of 1,200 kilometers and 13 seaports,
including seven first-class ports, are the considerable
advantages of the central coastal provinces to
develop the economy. The central region has good
seaports, including Chan May and Da Nang, Ky Ha
and Dung Quat, Quy Nhon, and Nha Trang. These
could serve as the springboard to boost trade and
develop the logistics industry. Based on the survey, it
is generally believed that Central Vietnam is a land
of logistics opportunity. However, there are
difficulties and challenges in fully exploiting the
advantages of serving logistics development in the
area.
6 Discussions and Implications
According to the Prime Minister’s Decision No
221/QD-TTg, the action plan for improving the
competitiveness of Vietnam’s logistics industry to
2025 has been improved. Vietnam is planning to
raise the contribution of logistics services to its GDP
to about 6% by 2025. Several critical managerial
implications could be drawn for logistics service
providers and managers in Central Vietnam.
6.1 Resolutions on Several Specific
Mechanisms and Policies
Several logistics policies should be taken into
account as follows:
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Logistics zones should be provided to create
logistics activities and added value clusters. Still,
these zones may not fit well the needs of logistics
service providers, particularly with the ongoing
change in manufacturing around automation and
robotization.
The findings also indicate that the institutional
problem is one of the most serious barriers that
prevent the development of the logistics industry. It
is necessary to strengthen the coordination between
logistics-related authorities, prevent regional
protectionism, take policies to encourage the state-
owned logistics users to detach in-house logistics
departments.
The government should promote transparency in
custom clearance in particular or in other rules and
regulations in general. The goal is to establish a solid
base ground for consistent implementation,
interpretation, and enforcement. The draft of any new
law should be widely publicized to survey and collect
comments and suggestions. For instance, before
coming into effect, new regulations regarding custom
clearance should be made public so that practitioners,
including freight forwarders, shipping agents,
shippers, and customs officers, could contribute their
idea.
Local government agencies should facilitate
international trade through their efficient customs
administration, security, good sanitation, and
business environment, and give foreign logistics
companies easy access to funds.
6.2 Resolutions on Infrastructure
Development
The government should liberalization and privatize
the transport sector and break public monopolies,
particularly in the road, port, and airport sectors.
These measures may enable the logistics industry in
Central Vietnam to improve its performance and
competitiveness.
A significant transshipment hub and its logistics
zones should be developed. This will be expected to
build new linkages with global supply chains, mainly
through its expanded connectivity as a transshipment
hub.
It is necessary to strengthen and diversify
investment capital sources for developing transport
infrastructures for developing logistics infrastructure.
Also, government bodies must encourage and create
conditions for all economic sectors, including
foreign-invested enterprises, to participate in
infrastructure development, concentrating resources
to prioritize renovation, upgrading, and constructing
new transportation systems.
6.3 Resolutions on Human Resources
Development
Human capital availability is an essential factor in
making a logistics hub successful. Workers must
have language skills such as English, be open-
minded, and accept changes, such as changes brought
about by globalization. Workers must also be well
equipped with the knowledge to work in the logistics
sector, i.e., the availability of logistics professionals.
Several measures are as follows:
The provincial government should develop
human resources in logistics by expanding labor and
logistical services skills.
Short-term courses in logistics, including
theoretical knowledge and practical experience
taught by leading experts, should be organized. It is
necessary to seek more domestic and international
funding for short-term training programs and
coordinate and take advantage of cooperation with
the International Federation of Freight Forwarders
Associations (FIATA), The International Air
Transport Association (IATA), and other non-
governmental organizations to receive more regular
training funding.
7 Conclusions
The outsourcing of logistics activities to logistics
service providers has now become widespread.
Therefore, as an integral part of the business
environment, the logistics industry has attracted
much attention from academia and practitioners. This
study has attempted to study the current status and
prospects of the logistics industry in Central
Vietnam. Various important characteristics and
managerial implications have been derived.
Future studies with larger samples and more
comprehensive survey questions will provide more
invaluable information for local providers and
government authorities. It could also be helpful for
foreign logistic service providers to understand the
logistics industry in Central Vietnam better and take
an appropriate strategy when they enter it. At the
same time, the study provides a valuable reference
for future studies in studying the logistics industry in
other regions.
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Contribution of Individual Authors to the
Creation of a Scientific Article (Ghostwriting
Policy)
Quang Hung Do carried out the research design. The
Tuan Tran has designed the questionnaire. Quang
Toan Dinh has collected the data. All authors were
responsible for the manuscript writing.
Sources of Funding for Research Presented in a
Scientific Article or Scientific Article Itself
This research is funded by University or Transport
Technology and Ministry or Transport Technology
under the project with grant number DT214030.
Creative Commons Attribution License 4.0
(Attribution 4.0 International, CC BY 4.0)
This article is published under the terms of the
Creative Commons Attribution License 4.0
https://creativecommons.org/licenses/by/4.0/deed.en_
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