138 experiences in logistics servicer development in some ASEAN countries lessons for vietnam,khoá luận tốt nghiệp

Student : Tran Thi Kim PhuongBACHELOR’S THESIS EXPERIENCES IN LOGISTICS SERVICES DEVELOPMENT IN SOME ASEAN COUNTRIES - LESSONS FOR VIETNAM... Student : Tran Thi Kim PhuongBACHELOR’S THES

Student : Tran Thi Kim Phuong

BACHELOR’S THESIS

EXPERIENCES IN LOGISTICS SERVICES DEVELOPMENT

IN SOME ASEAN COUNTRIES - LESSONS FOR VIETNAM

Student : Tran Thi Kim Phuong

BACHELOR’S THESIS

EXPERIENCES IN LOGISTICS SERVICES DEVELOPMENT

IN SOME ASEAN COUNTRIES - LESSONS FOR VIETNAM

First and foremost, I have to thank the Banking Academy and the Faculty ofInternational Business for creating enthusiastics and dynamics academic environmentfor me to study in the past 4 years I would also like to show gratitude to all of thetalented and devoted teachers in the the Falcuty of International Business, who are mygreat source of motivation and imparted precious knowledge so that I have a solidfoundation to prepare for my future career

My sincere gratefulness also goes to M.A Ngo Duong Minh, who guided mesince the very beginning of my dissertation, and was also very patient with myknowledge gaps and faults during process Thank you for your kind support

Most importantly, none of this could have happened without my family I mustexpress my very profound gratitude to my parents for providing me with unfailingsupport and continuous encouragement throughout my years of study Thisaccomplishment would not have been possible without them

The thesis remains lots of limitations I look forward to receiving comments andsuggestions of the lecturers so that my research topic could be improved

Student’s signature

Tran Thi Kim Phuong

TABLE OF CONTENT

ACKNOWLEDGMENTS i

DECLERATION ii

ABBREVIATIONS vi

LIST OF FIGURES vii

LIST OF TABLES vii

INTRODUCTION 1

The urgent of the subject 1

Literature review 2

Research objectives 6

Methodology 6

Thesis structure 6

CHAPTER 1: AN OVERVIEW OF LOGISTICS SERVICES 8

1.1 AN OVERVIEW OF LOGISTICS SERVICES 8

1.1.1 The concept of logistics services 8

1.1.2 Components of logistics services 9

1.2 THE ROLE OF LOGISTICS 12

1.2.1 In the economy 12

1.2.2 In business 13

1.3 MAIN TYPES OF LOGISTICS SERVICES 15

1.3.1 Core freight logistics services 15

1.3.2 Related logistics services 15

1.3.3 Major or supportive services 16

1.4 MEMBERS IN LOGISTICS 16

1.4.1 Logistics services providers 16

1.5.4 Human resource training 21

CHAPTER 2: EXPERIENCES IN DEVELOPING LOGISTICS SERVICES IN SOME ASEAN COUNTRIES 22

2.1 CURRENT SITUATION OF LOGISTICS SERVICES DEVELOPMENT IN ASEAN 22

2.1.1 ASEAN economic and trade development situation 22

2.1.2 Current situation of logistics services development in ASEAN 23

2.2 CURRENT STATUS OF DEVELOPMENT OF LOGISTICS SERVICES IN SINGAPORE 25

2.2.1 Economic development conditions 25

2.2.2 Current situation of logistics service industry in Singapore 26

2.2.3 Logistics development program in Singapore 31

2.3 CURRENT STATUS OF DEVELOPMENT OF LOGISTICS SERVICES IN MALAYSIA 33

2.3.1 Economic development conditions 33

2.3.2 Current situation of logistics service industry in Malaysia 34

2.3.3 Logistics development program in Malaysia 37

CHAPTER 3: DEVELOPING LOGISTICS SERVICES IN VIETNAM BASED ON THE EXPERIENCES OF SOME ASEAN COUNTRIES 40

3.1 CONDITION TO DEVELOP LOGISTICS SERVICE INDUSTRY IN VIETNAM 40

3.2 THE SITUATION OF LOGISTICS SERVICE INDUSTRY IN VIETNAM 42

3.2.1 General overview of the market 42

3.2.2 Infrastructure 46

3.2.3 Institutional framework 54

3.2.4 Vietnamese logistics enterprises 55

1PL First Party Logistics

2PL Second Party Logistics

3PL Third-party logistics

4PL Fourth-party logistics _

5PL Fifth-party logistics

ASEAN Association of Southeast Asian Nations _

AEC _ ASEAN economic community

AIDC Automatic Identification and Data Capture

AMS _ ASEAN Member States

APEC Asia Pacific Economic Conference

B2B Business to business

B2G _ Business to government _

DWT _ Deadweight tonnage

EDI Electronic Data Interchange

3.3.4 Challenge 60

CHAPTER 4: RECOMMENDATION TO IMPROVE LOGISTICS SERVICE INDUSTRY IN VIETNAM 62

4.1 THE LOGISTICS DEVELOPMENT ORIENTATION 62

4.2 SUGGESTION FOR VIETNAM LOGISTICS SERVICES PROVIDERS 63

4.2.1 Improve capability by collaboration 63

4.2.2 Pay more attention to human resources training 65

4.3 RECOMMENDATION FOR THE VIETNAMESE GOVERNMENT 65

CHAPTER 5: CONCLUSION 68

5.1 SUMMARY 68

5.2 LIMITATIONS 69

5.3 FUTURE RESEARCH 69

REFERENCES 70

ABBREVIATIONS

VLA _ Vietnam Logistics AssociationWTO _ World Trade Organization

Figure Page

Figure 3.1: Distribution of logistics enterprises by region 44

Figure 3.2: Logistics costs as a percentage of GDP, in 2016 46

Figure 3.3: Volume of goods circulated by air (million tons/km) 50

Figure 3.4: Volume of goods circulated by road (million tons/km) 51

Figure 3.5: Volume of goods circulated by rail (million tons/km) 52

Figure 3.6: Proportion of logistics enterprises by capital size 56

Table 2.1: Economic indicators of Singapore period 2014-2018 25

Table 2.2: Economic indicators of Malaysia period 2014-2018 34

Table 3.1: Economic indicators of Vietnam period 2014-2019 41

Table 3.2: Vietnam LPI index for the period 2010-2018 43

Table 3.3: The volume of goods through the seaport system, period

LIST OF FIGURES

LIST OF TABLES

1 The urgent of the subject

Logistics has become substantially more important as the result of globalization

as well as advanced technology Logistics is the backbone of global trade, so anefficient

and dynamic competitive logistics network will significantly contribute to promotinggrowth for the country in particular and the world economy in general A study by the

US National Magic University shows that logistics alone accounts for 10 to 15% of theGDP of most major countries in Europe, North America and some Asia Pacificeconomies

According to the Ministry of Agriculture and Rural Development, in the period

of 2015-2020, due to demand for production, circulation and export, Vietnam's logisticshas grown rapidly with an average speed of 16-20% per year, with the scale is 40 - 42billion USD /year Transportation and logistics activities in Vietnam are on the rise ofbrilliant development Vietnam is also ranked at 39th with LPI score, 3rd place inASEAN (after Singapore in 7th and Thailand in the 32nd position) in the logisticsactivity rankings in 2018 reported by World Bank Vietnam is assessed to have betterlogistics service performance than other markets with similar income

Vietnam gathers all the favorable factors to develop successfully in logisticsservices industry Some advantages can be mentioned as favorable geographicalconditions, improved logistics capacity, more and more businesses are engaged inlogistics while the potential of the industry has not been fully exploited However, atpresent, Vietnam's logistics enterprises have not made use of all these strengths becausethe industry still has bottlenecks such as high costs Logistics cost in Vietnam in 2016accounted for 20,9% This figure is much higher than in other developed countrieswhose

logistics costs only occupied around 8-10% Too high logistics costs have indirectlyreduced the competitiveness of Vietnamese goods on the international market Inaddition, weak infrastructure connections and inefficient institutional framework can be

listed as the main weaknesses, not mention to Vietnamese logistics enterprises are stillfragmented and workforce is facing a lack of both quantity and quality.

If these problems are not carefully examined and resolved, the logistics industry aswell as the country may lose its competitive advantages in the hypercompetitive globalmarket Hence, there is the urgent need to study experiences of logistics development insome ASEAN countries to draw lessons for Vietnam so that it can take advantage andovercome weaknesses to develop the logistics industry

2 Literature review

Logistics has attracted the attention of researchers There are a number oflogistics

studies in the world and they have been approached in variety of point of view

The authors Douglas M L et al (1988) in their book presented the theoreticalissues of logistics management in enterprises, includes the concept of logistics, thestages

of logistics activities related to customer service, procurement, processing, inventorymanagement, packaging, transportation The writers also show that logistics plays animportant in the economy and in the organization As logistics is one of the main costsfor enterprises, high logistics expenditure leads to higher prices for customers or lowerprofits for businesses Therefore, improving the effectiveness of logistics makes asignificant contribution to the economy and enhances the competitive performance offirms In addition, the authors address global logistics issues when businesses enter theforeign market, which related to transport, finance, strategy, construction, management

of information systems, and organization of the effective implementation of logisticsactivities After analyzing these issues, several guidelines in developing a globallogistics

strategy is suggested To be more detailed, the writers design a chapter to giveinformation on logistics characteristics of global market, focusing on three majorgeographic regions: North America, Western Europe and the Pacific Rim, and drawopportunities and challenges for firms to take consideration when penetrating thosemarkets Through thorough analysis, they conclude that to be successful in international

logistics market, the manager must administer the uncontrollable factors comprisingeconomic, technological, geographical, political and legal, social and cultural.

Vietnamese authors also published many books in logistics field It can be saidthat the first logistics book published in Vietnamese language is "Logistics - The basics"

by Doan Thi Hong Van (2013) The content mainly analyzed logistics in terms of basictheory After that, she released the book "Logistics Management" in 2006 This bookgave overall introduction of logistics, the role of logistics in the economy and inbusiness

activities, the most common adversities in the economy and the organizational forms oflogistics However, it is also general study on logistics and logistics management, notgoing into analyzing the current condition of logistics in Vietnam Both of the abovebooks and other textbooks are used as teaching materials in universities such as thetextbook "Business logistics management" by Nguyen Thong Thai and An Thi ThanhNhan in 2011 at the University of Commerce and “Logistics Management” by DangDinh Dao primarily focus on the theory of logistics and logistics management yet lack

of practical research of the logistics condition

There are also studies on one or several factors of logistics activities Tseng, Y

et al (2005) conducted the research about the relationship between transportation andlogistics Through gathering and analyzing various practical cases in logistics, the group

of authors infer that a good transport system in logistics activities could provide betterlogistics efficiency, reduce operation cost, and promote service quality This is becauseapproximately two thirds of the expenditure of enterprises’ logistics costs are allocated

on transportation Moreover, transportation builds a bridge between manufacturers andcustomers If transport system is well-handled, goods can be sent to the right place atthe

right time, which ultimately satisfy consumers, enhance the service quality as well ascompany competitiveness

Engblom, J et al (2012) examine the interdependencies in the logistics costcomponents and in the total logistics expenses They collect data of 241 manufacturingand trading firms and analyze by various methods including generalized linear mixedmodels, descriptive analysis and principal component analysis According to the paper,

diseconomies of scale may prevail in optimizing the total logistics expenses Moreover,the total logistics costs are significantly higher for trading than for manufacturingenterprises The research also covered changes in expenses over the period of 3 years,starting from 2005 and they infer that the only administration costs witnessed adramatical change, others changes were insignificant They also give caution to futureresearches that when reporting annual changes in costs, it is vital to consider the otherbackground variables like size and level of internationalization.

The relation between logistics and financial performance is the subject ofresearch

of Toyli, J et al (2008) After analyzing the data of 424 logistics SMEs in Finland, theyimply that there is little linkage between performance of logistics and finance, butservice

level and logistics expense efficiency are positively related Enterprises have service level tend to have low-logistics expenditures

high-In addition to general logistics studies, there are in-depth logistics studies in acountry-specific context The Singapore Economic Research Council (2020) carried out

a comprehensive study entitled "Developing Singapore into a Global IntegratedLogistics Hub" on the basis of SWOT analysis of Singapore logistics situation and casestudy analysis in London It provided basic strategies and recommendations to enhanceSingapore's competitiveness as a global logistics center In the work "Logistics andSupply Chain in Malaysia: Issues and Challenges" by three researchers Rosena M A.,

et al (2008) also pointed out that logistics field in Malaysia still has many problemssuch

as: not keep up with national trade growth, logistics costs are still high due tounderdeveloped infrastructure, inefficient logistics, and transport services, andadministrative procedures related to import and export are still slow and expensive Inaddition, there are some studies on ASEAN logistics Tomczyk, J and Le Trieu (2011)

in the project "Research report on Trade Logistics in Vietnam and ASEAN" (MUTRAP)analyzed the issues of international trade logistics in Vietnam and ASEAN related tomanaging international goods flows and payment documents and procedures with theaim of cutting expenses directly or indirectly related to logistics through simplifyingand

harmonizing procedures and documents Regarding to logistics of Vietnam, some

outstanding research works can be mentioned Banomyong, R et al (2015) conducted aresearch on national logistics system of Vietnam based on the four main categories ofinfrastructure, service providers, shipper/consignees, and institutional frameworkthrough thorough review of related literature, secondary data in international andnational reports as well as interview with key players in dimensions of this country’slogistics industry Their findings show that the logistics system capability is constrained

in all of key dimensions Although overall situation has improved, it is hard for thelogistics infrastructure and environment to develop fast enough to meet the increasingdemand The Logistics monograph book - Applicability and development in the business

of forwarding services in Vietnam is written by Nguyen Nhu Tien (2006), which presentthe research results of the Ministry of Trade's scientific research project on thepossibility

of logistics application on the narrow aspect of transportation and forwarding services inVietnam The report of Research and Consultancy Department - SCM Company (2008)assess the efficiency of using logistics services and future trends in Vietnam shows theoverview of the main issues, the difficulties and opportunities in the field of logistics inVietnam Thanh Thuy Nguyen (2016) examines the Vietnam shipping industry andconsider possible changes in policy led to operate the country’s full membership in theASEAN integration

Up to now, there has been very little in-depth research on the current situation ofVietnam’s logistics over the last 5 years Although the number of logistics articles andjournals in Vietnam is relatively large, these studies are mainly done at the level ofgeneral theory of logistics and logistics management or often refer to only one or a fewaspects related to Vietnam's logistics development If the study is about the currentsituation of logistics, it is already conducted 5 years ago Most of the research was done

at the time logistics started to emerge in this country, so the accuracy of the data has notbeen updated to the present, especially in the last 5 years when Vietnam's logistics haswitnessed many changes In addition, there have been almost no studies on the lessons

of logistics development of ASEAN countries to apply to Vietnam Therefore, it is

necessary to have the paper which analyze the latest data to answer these belowquestions:

- What could be learned from partners in ASEAN?

- What are the advantages and disadvantages of applying ASEAN countries’practical experiences in logistics services to Vietnam?

- What needs to be done to take advantage of and limit these difficulties?

The thesis will accomplish the following objectives:

- Providing overview knowledge of logistics services

- Analyzing logistics services development of some ASEAN members countries

Analysis of current status of logistics service industry in Vietnam recommendations for enterprises and government are also given

-4 Methodology

To carry out the theory research, I have used desk - study methods, statisticsanalysis, qualitative analysis method by SWOT model combined with reference andcomparison aiming to highlight the research concerns

logistics services industry in Vietnam are given in the fourth chapter while the lastsection draw conclusion for the thesis.

CHAPTER 1: AN OVERVIEW OF LOGISTICS SERVICES

1.1 AN OVERVIEW OF LOGISTICS SERVICES

1.1.1 The concept of logistics services

Martin Christopher (2007) defined ‘‘logistics is the process of strategicallymanaging the procurement, movement and storage of materials, parts and finishedinventory (and the related information flows) through the organization and itsmarketing

channels in such a way that current and future profitability are maximized through thecost-effective fulfilment of orders.’’

In the beginning, logistics has merely considered a new business method,bringing

high efficiency for businesses Along with the development process, logistics has beenspecialized and developed into the service industry and played an important role ininternational trade Different from the term "Logistics", the term service is mentioned inmany documents around the world In contrast, in Vietnam, the concept of "Logistics"

is not discussed much The Commercial Law 2005 (article 233) only defines thedefinition of logistics services: "Logistics services are commercial activities wherebytraders organize one or more jobs, including taking delivery of goods in warehousingand storage yards, customs clearance, other paperwork, customer advice, packaging,marking, delivery or other services related to the goods as agreed with the customer toreceive remuneration."

The Commercial Law 2005 of Vietnam considers logistics to be almost similarto

freight forwarding Businesses who provide one of the services such as receipt ofgoods,

transportation and customs clearance are all considered logistics service providers.Logistics, by this definition, is essentially an activity that brings together the factorsthat

support the process of transporting products from production sites to consumptionplaces Accordingly, logistics services carry many transport factors, logistics serviceproviders according to this concept are not much different from providers ofmultimodal

transport services (MTO)

If it assumes that one of many of the above businesses is considered to be alogistics service provider, it will result in the fact that enterprise only need to provideany of services such as transportation, warehouse, customs procedures, etc They arealso considered to provide logistics services (in case they must meet the businessconditions and laws set out for the logistics service business: authorized capital is VND

10 billion for traders providing logistic services)

Logistic services must be understood as a continuous service of many services.These services range from pre-production until the goods reach the end consumer.Accordingly, logistics services are associated with the whole stage of importing rawmaterials as input for the production process to produce goods and put them intodistribution channels

By distinguishing logistics services from freight forwarding services, we canalso

clearly distinguish between the individual service providers such as freight forwardingwith a professional logistics service provider who will undertake all stages of theprocess

of forming and delivering goods to final consumers

1.1.2 Components of logistics services

Logistics is the connecting phase between the source of supply and the source ofdemand It fulfills the gap between input suppliers and end users To complete this, allthe components of logistics services have to coordinate with each other smoothly to getthe efficiency of the seven R’s

1.1.2.1 Order processing

Order processing is a sequential process of picking, packing and delivering thepacked items to a shipping carrier involving picking, sorting, pre-consolidation andconsolidation (Sople, 2011) Picking consists of taking and collecting articles in aspecified quantity before shipment to satisfy customers' orders Sorting is a process thatseparates items according to destination Pre-consolidation or package formationincludes weighting, labeling and packing Consolidation is gathering packages intoloading units for transportation, control and bill of lading The order processing timewill

have a direct effect on the cost of transportation The higher transportation cost fordelivering materials faster will be compensated by the shorter time lapsed at the orderprocessing stage This process is vital to the overall success of the logistics because ofits direct impact on both the cost and quality of the final product.

1.1.2.2 Inventory

Control inventory management is about balancing the cost of storing additionalgoods on hand and the cost of lost sales when there are not enough products forcustomers (Sople, 2011) The inventory carrying cost consists of the cost of financingthe inventory, insurance, storage, losses, damages and pilferages The cost depends onthe commodity’s feature and the goal of the inventory which is satisfying customers orreducing costs Companies try to balance between the two by adopting differentstrategies such as operating on a zero inventory level by adopting JIT technique since ithas been proved to be efficient and help reduce inventory costs However, applying JITstrategy is not always suitable for every company

1.1.2.3 Warehousing

Warehousing, the act of storing goods that will be sold or distributed later, isrequired because the demand and supply are not always in the same position.Warehousing plays an important role in logistics operations of the organization and can

be used as a tool for competitive advantage Warehousing is not only storage but also aplace for stabilizing the price and time utility (Sople, 2011) The delays in delivery are aresult of inefficient warehousing management Therefore, the correct decision inwarehousing is important in logistics which relates to warehouse location,infrastructural

facilities, operational mechanism, space determination, goods placement, up-to-daterecording of goods’ stock position, protecting and preserving the physical attributes ofgoods, proper loading and unloading system and warehousing cost

1.1.2.5 Packaging

Packaging is a coordinated system of preparing goods for safety, transport,distribution, storage, retailing, consumption and recovery, reuse or disposal combinedwith maximizing consumer value, sales and hence profit (Saghir, 2002) In logisticalpackaging, load unitization has a major role to play to economize the packaging cost.Packaging plays an important role in damage protection, ease in material handling andsaves storage space Packaging relates to protection from loss and damage, design ofpackage required for handling and storage, market value of the package, reuse ofpackages, scrap value of the package and packaging cost

1.1.2.6 Information system

Logistics is an information-based activity (Sople, 2011) Information systemplays an important role in delivering the right products or services to customers in theright quantity and quality, at the correct time and place, delivering to the right customer,and doing this at the right cost The use of IT tools for information flow supportlogistics

and also enhances its competitiveness Information system linking all components oflogistics system can help the logistics process quicker, cheaper and more precise.

1.1.2.7 Procurement

Procurement is a process of finding and acquiring goods or services from anexternal source (Sople, 2011) The goal is to obtain materials, services or products at thebest possible cost meeting the needs and time schedule of the organization According

to DHL, a division of the German logistics company Deutsche Post DHL, procurementlogistics includes obtaining the following necessities like raw materials, auxiliarysupplies, operating supplies, replacement parts, purchased parts and similar items If theflow of procurement logistics becomes inhibited, it could undermine production inmanufacturing centers and subsequent storage warehousing, creating a strain on thedistributor and customers

1.2 THE ROLE OF LOGISTICS

Better performing logistics can play a significant role in increasing productivity,

as well as provide international and domestic investors with a favorable exportenvironment which results in lower total export costs than what they incur in othercountries National logistics systems focus on developing and providing infrastructureswhereas business logistics systems focus on optimizing supply chain decisions based onthe infrastructures provided by national logistics systems (Banomyong, Thai, & Yuen,2015)

1.2.1 In the economy

Firstly, logistics help to improve socio-economic efficiency Logistics is a series

of continuous activities that are closely interrelated with each other Logistics is aneconomic link throughout almost the entire process of production, circulation anddistribution of goods Each activity in the chain has a position and accounts for a certaincost A study by the US National Magic University shows that logistics alone accountsfor 10 to 15% of the GDP of most major countries in Europe, North America and some

Asia Pacific economies Therefore, improving logistics performance will contributesignificantly to improving socio-economic efficiency.

Secondly, logistics affect the integration ability of the economy The

Lastly, effective logistic activities that increase a nation's competitiveness in the

international arena Study shows that differences in infrastructure especiallytransportation sector account for 40% of the expenditure gap fee for countries adjacent

to the sea and 60% for countries not adjacent to the sea Moreover, the developmentlevel

and logistics cost of a country are considered as an important element in the investmentstrategy of multinational corporations Countries with good infrastructure systems toensure good port systems will attract investment from major corporations in the world.The rapid development of Singapore Hong Kong and more recently China is a livingexample of attracting foreign investment to increase export growth and GDP in thedevelopment of logistics infrastructure and logistics services

1.2.2 In business

First, logistics help minimize costs, improve efficiency and enhance

competitiveness Logistics is one of the major expenditures for business (Duong, 2016).Hence, efficient logistics solves both input and output for enterprises effectively,optimizing the process of transferring materials, goods and services Lower logistics

costs and services affect positively in the production, distribution and retail activities ofthe firms Reducing logistics costs enables a production or distribution facility to serve

a wider market area, with potential gains from economies of scale It also means that afirm can draw supplies from a wider area with potential gains in terms of the cost andquality of materials The role of logistics here is to use market research information tohelp businesses identify needs in each stage before embarking on production, avoidingmuch storage and reducing operation costs Therefore, the formation and development

of logistics services will help businesses as well as the entire national economy reducecosts in the logistics chain, make the business process more streamlined and effectivewhich contributes to enhancing the competitiveness of businesses in the market

In addition, the sales of goods and services can be facilitated thanks to effective

logistics Logistics is an important aspect of facilitating the sale of all goods andservices

(Grant et al, 2006) Logistics helps businesses to ensure that input materials complywith

production plans and specifically avoid interrupted production With the support ofinformation technology system combined with an effective logistics strategy,manufacturers can make highly effective decisions to facilitate sales and satisfyconsumers Products and services can truly satisfy customers when it maximizescustomer satisfaction and makes them want to use the products and services afterward.Logistics assists managers in making accurate decisions in production and businessactivities on supply sources, means of transport, warehousing, marketing mix, etc Ithelps business not only reduce costs, increase competitiveness but also gain credibilityand sell more goods and services

Last but not least, logistics plays an important role in expanding markets for

businesses The production aims to serve consumption, so in production and business,market problems are always an important issue and are always concerned bymanufacturers and businesses Businesses who want to dominate and expand theirproducts market need the support of logistics services Logistics service acts as a bridge

in the movement of goods on new routes to new markets as required by time and place.Development logistics services have a great effect on exploiting and expanding business

markets for businesses It also helps business have the chance to integrate in theefficient

global value chain of supply, production and distribution, to expand the market and gainmore profit (Rodrigue & Hesse, 2006)

1.3 MAIN TYPES OF LOGISTICS SERVICES

According to the General Agreement on Trade in Services (GATS) of the WorldTrade Organization (WTO), the logistic service is divided into three groups as follows:

1.3.1 Core freight logistics services

Core freight logistics services account for the majority of total logistics costs andare decisive for other services Logistics services mainly include:

- Cargo handling services, including container handling

- Warehousing and storage services, including container warehousing andmaterial handling warehouse

- Transport agency services, including customs agency operations and cargohandling planning

- Other supporting services, including receiving, storing and managinginformation related to transport and storage of goods throughout the logistics chain;activities of re-handling goods returned by customers, inventory, overdue goods, out-of-date goods and re-distribution of such goods; container leasing and purchasingactivities

1.3.2 Related logistics services

Related logistics services include:

- Maritime transport services

- Inland waterway transport services

- Air transport services

- Railway transport services

- Road transport services

- Pipeline transport services

1.3.3 Major or supportive services

Major or supportive logistics services include:

- Technical testing and analysis of postal services

- Wholesale trade services

- Retail trade services, including collection and storage management services,goods redistribution and delivery

- Other transport support services

1.4 MEMBERS IN LOGISTICS

1.4.1 Logistics services providers

1.4.1.1 Concept of the logistics services providers

Currently, there are many concepts about logistics service providers in the world,but in general, logistics service providers are independent companies that design,implement and manage logistics needs in the supply chain of customer

Through the above analysis, logistics services and freight forwarding serviceshave been distinguished Thereby, logistics companies should be seen as the enterprisesmaking a profit from providing their own information and professional skills rather than

a mere freight forwarding provider

However, in fact, most of the large carriers are expanding their businessactivities

to logistics services This is an inevitable trend for the strong development of the globaleconomy and technology Logistics service providers can now be firms involved intransport activities, shipping companies, railway transport companies, warehouseowners, freight forwarders, third-party logistics providers

1.4.1.2 Some types of logistics services providers

a 1PL (First Party Logistics or Self-Logistics)

They are usually a company or an individual who organizes logistics activities tomeet their cargo transportation purpose These companies or individuals often own themeans of transport, tools or equipment for the loading and unloading of goods from one

location to another, warehouses and other resources including people to carry out andrun logistics activities by themselves Therefore, the role of the carrier and supplier ofgoods in the form of Self-Logistics Logistics generally represents both shipper andconsignee Self-Logistics Operator can be a manufacturer, trader, import-exportcompany, wholesaler-retailer, or distributor in the field of international trade On theother hand, it can be understood simply that any individual who organizes and uses theirvehicles to transport their goods from one place to another is also considered to be self-logistics.

b 2PL (Second Party Logistics)

Second Party Logistics (2PL) is a service provider for a single operation or a fewoperations of logistics activities to meet the needs of goods owners 2PL only takes onestage in the logistics chain such as transportation, warehousing, customs procedures andpayment Its main focus is on transportation and warehousing which means examples of2PL is carriers such as shipping lines and airlines Therefore, 2PL service companiesoften own and use specialized transport vehicles to serve their particular transport work,taking on the transport role of a particular stage or providing single transportationservice

in the entire logistics chain of a customer company that requires 2PL

c 3PL (Third-party logistics)

Third-party logistics refers as a “third party” between producer and finalcustomer This is a form on behalf of import-export enterprises to implement logisticsservices in stages in the logistics chain such as on behalf of the consignor to carry outimport and export procedures, freight forwarding, transportation, warehousing loadingand even forms of light manufacturing such as packaging and labeling Using 3PLmeans

hiring external companies to carry out some logistics activities Companies using 3PLhave a close relationship with that 3PL logistics service providers to share information,risks, and benefits under a long-term contract The 3PL service provider has a highlyspecialized human resource, advanced technology and an extensive and flexiblewarehouse as well as distribution center helping to transport quickly, save costs andtime

for customers

d 4PL (Fourth-party logistics)

Fourth-party logistics is another level developed from 3PL 3PL is included inthe

4PL to design strategies, build and implement distribution chains flexibly for customers

In 4PL, the company or representative organization will be authorized by the customerwith the role of managing and concentrating on improving the process efficiency andimplementing the whole supply chain and logistics This often involves agreements with3PLs and 2PLs because 4PL is usually a non-asset based company Therefore, 4PL isincreasingly becoming one of the key positions in business operations of enterprises

e 5PL (Fifth-party logistics)

Outsourcing model 5PL (fifth-party logistics) includes all features of 4PLprovider and provides integrated information systems to ensure full monitoring andcontrol of the supply chain in real time It collaborates and obtains a higher degree ofresource utilization in order to achieve savings and secure the best possible solution forthe entire supply chain at minimum cost, no matter how many outsourced suppliers areinvolved 5PLs are often used in E-business

1.4.2 Consumers of logistics services

To meet the needs of raw materials supply, product distribution, one must alwaysconsider whether to make or buy services and whose to buy The deeper theglobalization

of the economy, the more fierce the competition is in all areas of life Before, the formerlarge business owners of goods often organize and carry out logistics activitiesthemselves to meet their needs, now, in order to optimize the competitiveness ofbusinesses, they are used to outsourcing logistics services In addition to reputablemanufacturers who have gone ahead and achieved great results in business operations ofthanks to the good exploitation their own logistics systems, there are many businessesthat are successfully taking advantage of the benefits that external logistics servicebrings

In principle, all shippers who have demand for one or more logistics services fortheir goods can become customers of logistics service providers Goods owners here are

understood in a broad sense rather than in the sense of ownership, including thefollowing subjects: manufactures, suppliers, wholesalers, retailers, consignors,consignees.

If divided into groups of logistics services mainly consumed, there will be threemain customers using logistics services That is, manufacturers buy input logisticsservices, distributors buy output logistics services, and other logistics service providersthemselves A logistic service business may also be a customer of other serviceproviders

once it is unable to provide services to the main customer, the owner of the real goods

In the trend of globalization and international division of labor, the maincustomers of logistics services are often multinational companies These corporationshave branches, production, supply and service facilities located in many different placesand countries Therefore, they have to use the global logistics system to ensure efficientproduction and business activities to overcome the effects of distance, time and costfactors

Multinational companies tend to hand over logistics companies to design andsupply the entire supply chain of raw materials and deliver goods to their companies.These companies sometimes do not care about the price of each service individually, ifthe logistics chain can reduce costs, they are willing to accept These companies canoften spend a lot on logistics package service as long as it has good quality Thisrequires

forwarding companies to have reputation and competence in the field of logistics

1.5 INFLUENTIAL FACTORS TO THE DEVELOPMENT OF LOGISTICS SERVICES

1.5.1 Transportation infrastructure

The development of transport and the improvement of logistics performance arecrucial issues for countries seeking to become more competitive in the internationalgeo-

economic scene (Mediterra, 2014) Good transportation infrastructure helps to facilitatetrade flows and is, therefore, an additional guarantee of success in international trade,while at the same time providing local solutions to improve access to certain

marginalized regions and allow them to play their part in the national economy.Facilitating trade and transport is thus of growing importance for many countries It isvirtually inconceivable in today’s economy for a firm to function without the aid oftransportation Transportation is an essential and major sub-function of logistics thatcreates time and place utility in goods In fact, the backbone of the entire supply chainis

the transportation management that makes it possible to achieve the well-known seven

Rs - the right product in the right quantity and the right condition, at the right place, atthe right time, for the right customer at the right cost

1.5.2 Institutional frameworks

Institutional frameworks remain indispensable to the betterment of the country’slogistics systems, as an effective institutional framework plays a role as the legalfoundation for the development of logistics in a nation Here, institutional frameworksrefer to regulatory environments that are reflected through the implementation ofpolicies, directions, and customs decisions There are apparently different regulatoryarrangements between high and low logistics performance countries (Watanuki, 2015)

No single “good” regulation exists; however, higher performers tend to have clear andtransparent institutional and implementation arrangements for a regulatory framework

1.5.3 Technology advancements

Technological advances to improve operations and profit margins are prominentwithin the logistics industry (Toliver, 2017) Logistics technology provides enormousamounts of data that can be analyzed to increase efficiencies, streamline processes, andoffer an improved customer and provider experience Improved technology increasesproductivity in the supply chain, minimizing costs and errors that benefit all areas of thelogistics industry such as trucking transportation, international transportation (oceanand

air), supply chain management, and shipment tracking Technology helps logistics toovercome some tough challenges like cost optimization, faster service, damagemanagement, route optimization, warehouse management and much more This willbring much-needed efficiency and the highest level of customer satisfaction As awhole,

a stronger, more efficient and connected logistic system will be formed thanks totechnology advancements.

1.5.4 Human resource training

The importance of human resources has increased significantly due to newplaces

and the role of the human in all sectors of society (Jurcevic, 2009) A supply chainconsists of all parties involved, directly or indirectly, in fulfilling a customer request It

is a rational, human being, which runs key activities that machines cannot, and whoseresults depend on the knowledge, abilities, skills, motivation Although technologyreplaces human in some aspects of logistics, there still a need for a workforce inlogistics

with high adapting qualification The workers of the new era must continue to learnalong

with the trend Management must focus on training employees working with newtechnology and practices To meet the demand of the logistics industry, governmentsand

enterprises need to have proper training programs, which top logistics countries aregood

at

CHAPTER 2: EXPERIENCES IN DEVELOPING LOGISTICS

SERVICES IN SOME ASEAN COUNTRIES 2.1 CURRENT SITUATION OF LOGISTICS SERVICES DEVELOPMENT IN ASEAN

2.1.1 ASEAN economic and trade development situation

The Association of Southeast Asian Nations (ASEAN) was established in 1967.Nowadays, it consists of 10 members: Indonesia, Malaysia, Philippine, Thailand,Singapore, Brunei, Vietnam, Laos, Myanmar and Cambodia ASEAN’s operationalgoals from the outset is to promote intergovernmental cooperation and facilitateseconomic, political, security, military, educational, and sociocultural integration amongits members and other countries in Asia

ASEAN is a region of the largest and fastest-growing economy in the world with

an average GDP growth in ASEAN nations is 5.5% a year between 2010 and 2018 In

2019, the combined GDP of ASEAN Member States (AMS) reached USD 3.1 billion,making it the fifth largest economy in the world and the third largest in Asia(International Monetary Fung) ASEAN is forecast to overtake the EU and Japan tobecome the 4th largest economy in the world by 2050, behind China, India, and theUnited States There is little doubt that the ASEAN market presents huge potentials.The

region is home to more than 660 million people by 2020, and is currently enjoying ademographic dividend, in which 67.6 percent of its population in 2013 was categorized

in the working age, whilst another 55 million of its population will be put into the samecategory in the following decade (2012-2023) Moreover, the region’s market potentialsare also strengthened by the rise of its middle-class

Four major economies Indonesia, Thailand, Malaysia, Singapore are the mainmarket, although smaller economies, the Philippines and Vietnam have higher growthrates Currently, ASEAN countries are actively promoting intra-regional cooperation Inaddition, ASEAN also cooperates with many countries and regions in the world.ASEAN's main trading partners are China, Japan, Korea and the European Union (EU)

With these achievements, ASEAN strives to build a strong and unitedcommunity

based on three pillars of economic security and social culture ASEAN economiccommunity (AEC) is the main pillar, creating a solid position for ASEAN in an area thatalways intertwined with interests and complex developments ASEAN is entering a newintegration period with the introduction of the first economic union in Asia

2.1.2 Current situation of logistics services development in ASEAN

as Singapore ports to small and medium-sized ports mainly for domestic transport.However, this system still has several shortcomings Most of the ports are not deep-water

ports, lack of modern equipment and capacity to serve container ships with tonnage of10,000 DWT or 700 TEU vessels

With regard to development of railway network, Myanmar, Malaysia andIndonesia are the leading countries in ASEAN in terms of total railway length, followed

by Thailand, Viet Nam, and others The design standards sometimes fail to reflect theactual state of the railway system, most of which are in a state of deterioration thatneeds

to repair

Road development in ASEAN, particularly paved road network has improvedsignificantly, from around 628,000 km in 2004 to 967,000 km in 2014, or increase ofabout 54% Most highways have two parallel lanes to facilitate the transportation ofgoods However, the number of highways is limited and concentrated mainly inMalaysia

and Thailand Interruptions in road transport through the territory of some countries are

Air transport system in ASEAN region includes 51 main airports In addition toairports serving domestic transportation needs, each country has an airport ofinternational standard that participates in the regional air transport network Theaviation

service network in the region operates continuously and is relatively dense The currentair transport service network includes 31 direct routes connecting locations betweendifferent countries within ASEAN and linking with 45 countries outside the region

The application of information technology in logistics is mainly in B2G and B2Btransactions related to customs procedures Currently, only Singapore and Malaysiahave

completely cut paperwork in customs clearance, while other countries have been in atesting phase using the EDI system - Electronic Data Interchange Transactions arebased

on the platform in which businesses are willing to exchange information with commonapplied technologies such as GPS technology to monitor the domestic transportationsystem, has only been applied in Malaysia, Thailand, Philippines and Indonesia; RFIDtechnology is not yet widely used except in a few special applications at the enterpriselevel; trade and transportation data systems are not available, although the Internet isused in all countries in the region Information is only exchanged via email, phone orfax

2.1.2.2 Legal framework and regulations on services

a Regional multilateral agreements

Up to now, countries in ASEAN countries have signed the main multilateral

For foreign service providers, countries generally recognize this type of service

in their service sector, although there are many limitations such as holding a percentage

of capital contribution to establish a business compared to domestic companies Exceptfor Singapore with an open investment environment, these restrictions have beencompletely removed Currently cooperation in some areas of transport is only achieved

at the level of multilateral agreements between Malaysia and Brunei Malaysia andIndonesia

2.2 CURRENT STATUS OF DEVELOPMENT OF LOGISTICS SERVICES IN

SINGAPORE

2.2.1 Economic development conditions

Singapore's economy has developed in a capitalist manner, the government'sintervention in the economy is minimized Singapore has an open businessenvironment,

low corruption, high financial transparency and stable prices, relying entirely on theopen

Table 2.1: Economic indicators of Singapore period 2014-2018

Singapore with world markets and investment opportunities The Singaporeangovernment further promotes the development of businesses and aims for a knowledge-driven economy driven by innovation Today, Singapore is also known as a leadingrefinery and transit center in Asia and around the world, an economy primarily based ontrade and services, a leading country in transition to the knowledge economy

2.2.2 Current situation of logistics service industry in Singapore

2.2.2.1 General overview

Knowing to take advantage of the development of multinational companies(MNCs) to attract investment in building a logistics center, Singapore has emerged as aleading country in this service industry in Asia According to the Ministry of Trade andIndustry of Singapore, the Logistics (Transportation & Storage) sector contributed to7.4% of Singapore’s GDP and employed 8.7% of country’s workforce in 2015.Currently, services in Singapore are considered to be the most developed region withhigh and modern technology applied in almost all stages of the logistics system

In the 80s of the last century, the manufacturing process began to shift fromhigh-

cost countries like Japan to lower-cost countries like ASEAN countries At that time, theSingaporean government started to build and develop the country to become a hub fortransiting goods originating from Singapore to some neighboring countries such asMalaysia, Indonesia and Thailand and vice versa Singapore proactively encouragesmultinational companies and service providers to set up their headquarters and establish

a global distribution network in Singapore through a series of preferential policies, such

trading center, serving as the operating platform for a large number of multinationalcompanies and regional companies More than 5000 multinational companies havechosen Singapore as their distribution center and logistics center in Southeast Asia,while

7,000 logistics companies operating in Singapore provide transportation, forwarding,warehousing, and distribution for these multinational companies, employing over180.000 people including those in the sub-segment of transportation, postal and courier,contributing to 12,3% of total employment in the country Most of the world's leadinglogistics companies have offices in Singapore as Schenker, Keppel Logistics, APLLogistics, Maersk Logistics, Excel Logistics, UPS Logistics, etc

However, there are still disadvantages in the logistics service industry Singaporehas narrow natural area and domestic market, which leads to high price of servicescompared to the world standard and also somewhat limits the size of domestic logisticsservice providers Moreover, logistics services in Singapore are still quite expensive, inwhich customer service is not efficient compared to other developed countries in theworld such as the Netherlands, Hong Kong, and the United States

In the current integration trend, Singapore is facing fierce competition fromneighboring countries and the region Hong Kong, which is Asia's traditional cargo hub,

is also investing in the development of logistics services and has formed a logisticsdevelopment committee specializing in this area Taiwan is drafting a plan to develop akey logistics center of the world through a series of solutions to promote e-commerce,customs reform and improve social infrastructure Malaysia Thailand and thePhilippines

a Shipping hub

Singapore's port system is considered to attract the most boats and ship passingthrough in Asia, which is a transshipment place for more than 400 major shipping lines

in the world and links more than 700 ports in 130 countries In addition, Singapore has

a very modern and well-equipped warehouse system The loading and unloadingequipment and bridge equipment are both modern and operate very effectively thanks tothe control of the electronic data transmission system EDI Singapore port has also set

up a cargo handling system with fast processing speed in association with logisticscenters and connected with six main distribution stations located at Tanjong Pagar,Keppel, Brani, Pasir Panjang, Sembawang, and Jurong These distribution stations canserve all types of marine transport from small cargo ships, container ships to largevessels Major services provided at the Singapore port include cargo handling,warehousing, distribution and supply of cargo ships

The Port of Singapore and Jurong Port, are the world's busiest in terms ofshipping

tonnage handled in 2004 and in 2019, it handled a total of 626 million tons of cargo In

2018, Singapore was ranked second globally in terms of containerized traffic, with 36.6million TEUs handled, and is also the world's busiest hub for transshipment traffic.Additionally, Singapore is the world's largest bunkering hub, with 49.8 million tons sold

in 2018

b Aviation Hub

In terms of its Air Logistics Sector, both of its “Quality of Air Transportation”