Reality and solutions to develop quality service of logistics companies in vietnam

MINISTRY OF EDUCATION AND TRAINING HCMC UNIVERSITY OF FOREIGN LANGUAGES AND INFORMATION TECHNOLOGYDEPARTMENT OF INTERNATIONAL BUSINESS ADMINISTRATION GRADUATION PAPER REALITY AND SOLUTIO

MINISTRY OF EDUCATION AND TRAINING HCMC UNIVERSITY OF FOREIGN LANGUAGES AND INFORMATION TECHNOLOGY

DEPARTMENT OF INTERNATIONAL BUSINESS ADMINISTRATION

GRADUATION PAPER

REALITY AND SOLUTIONS TO DEVELOP QUALITY SERVICE OF

LOGISTICS COMPANIES IN VIETNAM

Student's name: TRA.N THJ KIM TIENClass: KQ1l02

Advisor: PH.D NHAN CAM TRI

The graduation paper is carried out by Tran Thi Kim Tien, Department ofInternational Business Administration's senior student - Ho Chi Minh CityUniversity of Foreign Languages and Information Technology (HUFLIT).

First of all, I would like to thank my family who love me by all their love.Especially, my parents who always encourage me when I feel tired or overload, is

a source of huge encouragement to me

Secondly, I would like to give all of my heartfelt to say thank to my advisor,Ph.D Nhan Cam Tri who helps me complete my graduation paper Mr Nhan gave

me lots of useful advices for my thesis as well as experience lesson in field aboutLogistics Moreover, he transmitted his enthusiasm and inspiration to me It helps

me to be more interested in Logistics

Thirdly, I would like to show my gratitude towards the InternationalBusiness Administration Department of HUFLIT and all teachers They taught mecarefully about specialized knowledge It is foundation to help me to complete thisthesis

Finally, I would like to thanks my friend who besides to me to listen andshare my emotion when I am stressful about thesis After chatting with them, I feelrelax and have more motivation for my decision when deciding to implementthesis instead of studying two subject

About the technics or research method: she has applied several researchmethods which are usually applied in social sciences research such as: statistics,analysis, comparison to make the contents more clearly The data has been searchfrom reliable sources such as: Work Bank, local economic websites, and doctoratethesis to ensure the scientific characteristics.

About the attitude: Kim Tien always tries her best to search for relevantmaterials to fulfill her thesis She contacts the advisor regularly for advice andmatches the time line She is very enthusiastic in her studies It is a must for aperson to do a scientific task

I'm appreciated her effort in fulfill this thesis and pleased to introduce it tothe Scientific Board of Faculty

Advisor's signature

("nan Can-> 7lV'

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Although logistics is still a new field on Vietnam's market, that is profitableindustry for logistics companies Moreover, with strong development ofglobalization trend, logistics become essential factor in trade operations as well asproduction process Therefore, domestic logistics companies will have lots ofopportunities to develop in the future but they also have to face with huge logisticscorporation in the world However, with lacking of quality about logistics service,they will be very difficult to compete again For this reason, the objective of thisresearch was to determine the reality and restrictions about quality of logisticsservice providing by logistics companies of Vietnam This thesis will analyzefigures by scientific methods such as integrated approach and economic analysis,SWOT analysis Through that analysis, results indicated that logistics companies

of Vietnam should improve quality of service to enhance competitive capacity andfulfill customer's need

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REALITY AND SOLUTIONS TO DEVELOP

QUALITY SERVICE OF LOGISTICS COMPANIES IN VIET NAM

1.1.3 Characteristics of Logistics service 8

1.1.3.2 Characteristics about commercial service o/Logistics service : 9

1.1.4 LPI - Measure that evaluate quality service 10

CHAPTER 2: THE REALITY OF QUALITY SERVICE PROVIDED

2.1 SWOT analysis about quality service of Logistics Company in Vietnam 19

2.1.1.1 Geographical location has advantages/or Logistics companies o/Vietnam

19

2.1.1.3 Logistics companies o/Vietnam have applied in/ormation technology in

2.1.3.3 Companies of Vietnam will have opportunities to learn more about

experience, information technology and management skills 31

2.1.4.1 Fiercer competition from international logistics corporation 32

2.1.4.2 Low in development of technology about logistics 33 2.1.4.3 Habit when using logistics service for export and import goods of

2.2 Analysis about reasons that caused restriction in developing quality

CHAPTER 3: SOME SOLUTIONS TO IMPROVE QUALITY OF

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3.1.1.3 Third party logistics (3rd PI) and Forth party logistics (4 th PI) 43

3.2 Recommendations to improve quality of Logistics service provided by

3.2.1 Improving the quality of human resource in Logistics companies 46

3.2.1.2 Cooperating internationally in training logistics 47

3.2.1.4 Organizing scientific seminars to share experience 49

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Although logistics is still a new field on Vietnam's market, that is profitableindustry for logistics companies Moreover, with strong development ofglobalization trend, logistics become essential factor in trade operations as well asproduction process Therefore, domestic logistics companies will have lots ofopportunities to develop in the future but they also have to face with huge logisticscorporation in the world However, with lacking of quality about logistics service,they will be very difficult to compete again For this reason, the objective of thisresearch was to determine the reality and restrictions about quality of logisticsservice providing by logistics companies of Vietnam This thesis will analyzefigures by scientific methods such as integrated approach and economic analysis,SWOT analysis Through that analysis, results indicated that logistics companies

of Vietnam should improve quality of service to enhance competitive capacity andfulfill customer's need

viii

: Gross Domestic Product: Electronic LogisticsUnited Nations Conference on Trade andDevelopment

: Free On Board (term in Incoterm): Cost, Insurance and Freight: World Trade Organization: Strengths - Weaknesses - Opportunities - Threats: Vietnam Automatic Cargo and Port ConsolidatedSystem

: Vietnam Customs Intelligent Information System: Third Party Logistics

: Fourth Party Logistics: First Party Logistics: Second Party Logistics

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Nowadays, in integration economy, Logistics has become more and morefamiliar and popular in export-import activities as well as in domestic trade.Logistics service is a key to help transport goods and products quickly, easily andeffectively Therefore, Logistics has important roles in producing and trading Also

it becomes a profitable field that can bring huge and great resources for a wholenational economy in general and for companies in particular In Viet Nam,Logistics service had positive contribution for the development of country, whichoccupied 15-20% GDP with revenue about over 12 billion dollars and over 1000logistics enterprises

Especially, after Viet Nam joined WTO - entered the global playground,Logistics field in Viet Nam have become more potential in attracting investmentand had big advantages to develop quickly As the result, the number of Logisticscompanies increased rapidly in the recent years However, from 14 January 2014according to commitment with WTO, Viet Nam has to open totally market inLogistics area for foreign investors Thus, competition in Logistics market isfiercer and fiercer Logistics companies of Viet Nam have to face with powerfulLogistics Corporation in the world such as: APL Corpo ation.• Mitsui OSK Line,

Maerk Logistics, NYK Logistics, etc Besides some advantages, we also have lots

of disadvantages about capital, management, human resources, experience, Despite with advantages about home market, Logistics companies of Viet Nam justoccupy 25% market share while foreign Logistics companies take 75% of totalmarket It demonstrated that our quality se ice and capacity working have reached

our domestics market.

low level because of with the number of nearly thousand Logistics companies butjust Y4 of total market share If companies of Viet Nam do not change to improvequality service, after few years we can lose opportunities to develop Logistics at

this study may provide the useful information for people who are working inLogistics area

II Scope of research

Scope of content: Analyzing about reality of quality service provided byLogistics companies of Viet Nam and finding some solutions to develop it

Scope of space: in Ho Chi Minh city, Viet Nam (where occupy 70%Logistics activities in Viet Nam) to analyze about reality of quality serviceLogistics

Scope of time: 2007~2014 (from the period after Viet Nam joined WTOuntil now)

III Research method

Integrated approach and economic analysis: Base on secondary data from

reliable sources such as the research of Ph.D Nhan Cam Tri, World bank,Logistics union of Viet Nam, General Statistics Office, author integrated,analyzed and evaluated to find issues about reality of quality service Logistics

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Analysis and comparison method, logic method: The data of Viet Nam was

compared with data of countries in ASEAN and BRICS group to determine where

is position of Logistics Viet Nam in the world

r-SWOT analysis: Analyzing about strengths, weaknesses, opportunities, and

threats of Viet Nam Logistics companies to have an overlook about reality ofLogistics development

IV Research content

Apart from the abstract, introduction, conclusion, reference, list of table andfigure, list of abbreviation, the thesis consists of 3 chapters:

Chapter 1: Several theoretical bases of Logistics service

Chapter 2: The reality of quality service provided by Logistics companies in VietNam

Chapter 3: Some suggestions to improve quality of Logistics service

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CHAPTER 1: SEVERAL THEORETICAL BASES OF LOGISTICS

SERVICE

1.1 What is Logistics?

1.1.1 History of Logistics

Long time ago in history, Logistics activities have appeared in development

of human "Logistics" terminology was begun from the ancient wars of EmpireGreece and Rome At that time, the Warrior had the title "Logistikas" They had toprovide and distribute weapon and necessary goods to ensure that soldiers couldmove afety from headquarter to another place In military, the effective Logisticsactivities have contributed significantly for successful wars That process became asystem and now it is called "Logistics"

In World War II, the role of Logistics has been more confirmed UnitedStates (USA) Army supplied and transported weapons, ammunitions at the rightplace, right time Thus, USA and its allies have repeated prevailed in the war

In history of Vietnam, two the first successful applications of logistics inmilitary are King Quang Trung - Nguyen Hue in the North operation to defeatQing army (1789) and then general Vo Nguyen Giap in the battle ofDien Bien Phu(1954) After war, lots of application of Logistics have been developed and useduntil now However, nowadays Logistics services had some changes to suit withmodem economy environment

Source: Nguyen Duy Chinh (2006), "King Quang Trung went to the North" (Hoang De Quang Trung ra Bac); and Vo Nguyen Giap (1979), "Dien Bien Phu",

6 th edition, Hanoi:People's Army.

1.1.2 Definition about Logistics

Logistics is a difficult word to translate into Vietnamese because it cannotcontain an exact and full meaning of Logistics Therefore, we can accept

"Logistics" as a common and popular word when speaking about it

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CHAPTER 1: SEVERAL THEORETICAL BASES OF LOGISTICS SERVICE

In the past, "Logistics" word was used in military in war time However,today, it has been mentioned more in business, so what does "Logistics" mean?These are some representative definitions:

According to definition of Military, Logistics means "The sCience ofplanning and carrying out the movement and maintenance of forces those aspects

of military of operations that deal with the design and development, acquisitionand storage, movement, distribution, maintenance, evacuation and disposition ofmaterial; movement, evacuation, and hospitalization of personnel; acquisition ofconstruction, maintenance, operation and disposition of facilities; and acquisition

of furnishing of services." George C Thorpe (1917), "Pure Logistics", JointPublication 1-02 excerpt

In business, there are lots of definitions about Logistics based on differentpurposes in research

Logistics is to transport right product and service to the right place at righttime in circumstance requirement as well as bring the biggest contribution forbusiness (Ballou, Business Logistics Management, 3rd edition, Prentice HallPublication, 1992)

"Logistics is defined as a business planning framework for the management

of material, service, information and capital flows It includes the increasinglycomplex information, communication and control systems required in today'sbusiness environment." (Logistix Partners Oy, Helsinki, FI, 1996)

Logistics is a process that makes a plan, supplies, manages about effectivemovement, storage of products, service, and relevant information from origin place

to consumption place in order to adapt customer demands (D Lambert 1998,World Maritime University)

Logistic is a process management about flow of raw materials from storagestage to production and become product which delivery to consumer according to

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customer requirement.(Material of United Nations about Multimodal Transportand Logistics Management at Foreign Trade University, 2002)

Logistics is an optimal process about place and time, transportation andstorage of material sources from the beginning point of supply chain to the finalconsumer though economic activities Logistics is an art as well as a science aboutlayout management and engineering activities related to require, design, provideand maintain sources in order to support for implement of tasks and plans ( PhD

Du Duc Thanh - Maritime University of Kaohsiung Taiwan, 2004)

However, definition of Council of Supply Chain Management Professionals(CSCMP) is the most recognized and widely using definition They said: "Supplychain management encompasses the planning and management of all activitiesinvolved in sourcing and procurement, conversion, and all logistics managementactivities Importantly, it also includes coordination and collaboration with channelpartners, which can be suppliers, intermediaries, third party service providers, andcustomers In essence, supply chain management integrates supply and demandmanagement within and across companies "

In Viet Nam, article 233 of Commercial Law 2005 defined that "Logisticsservice is commercial activities Whereby traders organize to perform one or moreworks consisted of consigning goods, delivering, storing (including storage anddemurrage), making customs procedure and other paperwork, consulting customer,packaging, marking or others service related to goods according to agreement ofcustomer to receive remuneration"

Through some above definitions, Logistics can be understood simply that

"Logistics is a flow a funds, goods and information between source andconsumer" Figure 1.1 will describe simple relationship of activities in Logistics

Logistics= Supply + Material Management + Distribution

Figure 1.1: One quite widely accepted view shows the relationship in Logistics

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CHAPTER 1: SEVERAL THEORETICAL BASES OF LOGISTICS SERVICE

Actually, it is a complex process in which include a sequence of continuousactivities can influence and support with each other The following diagram 1.2will explain clearly about activities in Logistics

Figure 1.2: Activities of Logistics service in Supply cbain

Source: Australian Bureau of Transport Economics, "Logistics in Australia: A preliminary Analysis ", Working paper 49, October 2001

As can be seen from the diagram, Logistics service participates duringproduction and distribution process of product It associates with whole import rawmaterials process as input to production process, production of goods anddistribution to reach final customer Logistics and other activities are incorporate inorder to make an optimal process to satisfy customer and bring bigger added-valuethan competitor Thus, it becomes an effective tool to support for businessenterprises in enhancing production and competitiveness on marketplace

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1.1.3 Characteristics of Logistics service

1.1.3.1 Characteristics of Logistics service

Although Logistics is also service field, Logistics service has some differentcharacteristics

First, product of Logistics service is non-physical

Logistics provides services such as transportation, delivery, customsbrokerage, distribution, production support service, management consulting These services are not physical or tangible, so customers cannot touch or feelthem Therefore, when buying Logistics service, customers cannot know what theywill receive from those services until they pay money to try After using service,customer may evaluate quality of service and level of satisfy, so service Logistics

is intangible In other words, selling products Logistics are promises betweenbusiness enterprises and customer based on terms of contract

Second, Logistics service is homogeneous or inseparable

Products of Logistics are the simultaneous combination of time and space,between producing and consuming service For example 1, a customer hires aLogistics company to provide service about transporting product "X" from Ho ChiMinh City to Singapore in 5 days When delivering product "X", service is beingproduced and customer is consuming service It shows relationship of productionand consumption in service Logistics

Third, Logistics service is indeterminable (not stable)

Logistics service may not be similar in the times of different providingservice With the same service provider, staff and type of service, methods ofservice Logistics for customer "A" will be different to customer "B" because ofdifferent requirements Thus, Logistics companies have to be flexible in providingservice depending on types of customer

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CHAPTER 1: SEVERAL THEORETICAL BASES OF LOGISTICS SERVICE

As an example 2, if customer "A" wants to transporting product "X" from

Ho Chi Minh City to Singapore in 10 days, how it is different to customer "B" whowants to deliver the same product to the same destination but in 5 days Base onlength of time, Logistics Company will consider what kind of transport (includedrail way, sea way, air way, etc.) is suitable in each situation This is a simpleexample about indeterminable characteristics of Logistics In fact, requirements ofcustomer are complex, different even difficult, so service Logistics may bediversified to satisfy customer's need

Finally, there are not any inventories

Logistics service is unable storage or reserve its product for the next dealingbecause of intangible products Logistics which we cannot tough, see or touch.Producing and consuming process is expressed at the same time, so it cannot bemass produced As the result, Logistics companies will provide service whencustomer requests

1.1.3.2 Characteristics about commercial service of Logistics service

First, customers may be suppliers who participate in process of service

In Logistics, customers are people who consuming directly service becausetheir requirements are origin for all activities of Logistics They may bewholesalers, distributors, retailer or even final customer Although they are notfinal customer of product, they use Logistics service to transport product toproducing place or final customer Thus, customers of Logistics are also supplierfor other enterprises

However, nowadays, customers became more intelligent because ofthanking to information and data on internet and other channels They have lots ofopportunities to compare and choose which Logistics company is the best aboutprice, quality service Consequently, enterprises have to improve quality service

to become more perfect so that customers pay attention to service provided by thatcompany As client is also one of the inputs in process of service as a co-producer

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• Planning function: customers can determine objective, destination, time and make

a plan to implement Logistics service Also, they may make decision themselvesabout mode of transportation such as sea way, air way or rail way

• Leading function: customer may have rights to guide, check and supervise aboutcontract performance

• Control function: customer will evaluate quality product as well as service to givecomments and have appropriate adjustments

Second, customers decide place and location where provide service

Physical product has certain values for human life, but it will be nothing ifproduct is not distributed to hand's customers Hence, Logistics service will makeadd-value for product by delivering to the right place, at the right time for the rightcustomers Nevertheless, customer is person to decide where and when aboutservice Logistics Accordingly example 1, based on information provided bycustomer about departure place, destination and time, Logistics Company willarrange employees, means of transportation to implement exactly requirement ofcustomers

Third, outputs of Logistics service are difficult to measure but able topredict

As service Logistics is intangible, so we cannot measure before providingservice Depending on different kind of customer, providing service Logistics isdifferent in order to satisfy customers' need However, we can predict result ofservice through service management method

1.1.4 LPI - Measure that evaluate quality service

Logistics is very important in developing of economy Therefore, LPI isused to measure about capacity Logistics of each country in the world LPI is theabbreviation of Logistics Performance Index Now this index are publishedregularly every two years starting 2007 by the World Bank conducted IndicatorLPI of World Bank appraises the competence of national Logistics by 6 criteria:

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-CHAPTER 1: SEVERAL THEORETICAL BASES OF lOGISTICS SERVICE

• Infrastructure: related to quality of trade and transportation (ports, railway, roads,infonnation technology)

• Customs clearance: efficiency of customs clearance process (such as: speed,simplicity, prediction about procedures)

• International shipment: the level of ease when arrangmg shipments withcompetitive price

• Logistics competence: capacity and quality of Logistics service (such as: transportoperators, customs brokers, etc.)

• Tracking and tracing: the ability to track and trace consignments

• Timeliness: ability to deliver on time

If these criteria stand individually, it will not guarantee for the high LPIindex It is based on the studies about theory and experience and interviews inlarge scope of Logistics experts LPI uses standard statistical techniques to collectdata Besides that, LPI index depend on result of online survey performed byWorld Bank from experts in multinational Logistics companies and primarysuppliers of courier on global scope Those surveys were conducted by over 1000experts come from international Logistics companies in 130 countries in the worldincluding large companies, small and medium enterprise in Logistics field Largecompanies occupy about 45% in which included 34% multinational Logisticscompanies, 11% global courier service companies; 55% are small and mediumcompanies The participants who answered the surveys have knowledge andexperience about Logistics, in which senior executives accounted for 35%, director

of regional or national management 25% and 24% department managers Theseprofessionals are directly involved in the daily logistics operations thus ensuringreliability survey results

Before the LPI was first published in 2007, policy makers and privateinvestors did not have enough data necessary to identify the reasons thatconstrained a national trade Thus, the advent LPI has helped solve this problem

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Furthermore, LPI has become the reliable indicators to compare and evaluate aboutcapacity Logistics between countries in the world as well as be a basis for policymakers of the country.

For above reason, I decided to use LPI (Logistics Performance Index-LPI)conducted by World Bank in my thesis so as to determine rank of Logistics VietNam on the Logistics world map Especially, through comparison about LPI indexbetween Viet Nam and other countries of ASEAN, it will help author can evaluatemore exactly about reality of Logistics Vietnam

1.1.5 SWOT analysis

SWOT is a collection of abbreviated first letters of the English words:Strengths (S), weaknesses (W), Opportunities (0) and Threats (T) This isextremely useful tool to help to understand the problem or make decision in theorganization and management as well as in business SWOT is the theoreticalframework on which we can approve the strategy, positioning and direction of anorganization, analysis of the business proposition In fact, more and moreenterprises have applied SWOT in in business plan development, strategicplanning, competitor assessment, market research, product development and in theresearch report

1.2 National Logistics system (NLS)

Logistics is a huge system including lots of activities incorporate together.After all those activities, Logistics service is produced to serve for people.Consequently, when talking about National Logistics System, we will consider 5factors which include infrastructure (such as roads, bridge, information technology,etc.), superstructure (included legal systems to adjust the logistics activities),enterprises providing Logistics service, business using Logistics service and peoplefactor In this system, people are a central factor to coordinate activities related toabove factors

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CHAPTER 1: SEVERAL THEORETICAL BASES OF LOGISTICS SERVICE

Figure 1.3 will illustrate and analyze relationship between factors with eachother in national logistics system

nterprlses providing Logistics service

Logistics infrastructure

Law and regulation

Customers using Logistics service

Figure 1.3: Factors organize National Logistics System

Source: £Jijng £Jinh £Jew (2011), "Logistics - Argument issues and practical reality in Vietnam" (Logistics nhiing win il€ If luqn va tJn.rctiin a Vi~t Nam), University of National Economy Publication, page 390

• Logistics infrastructure: include road, bridge, seaports, railway, airport, masstransit, telecommunications, electronic power generation and transmission,wastewater management

• Customer using Logistics service: may be individual customers or businesses

• Law and regulation: in Viet Nam, logistics service are regulated by numerous laws

in many specific areas such as Commercial Law 2005 from article 233 to article

240, Amend the Customs Act 2005, Maritime Code 2005 and laws about Railway,Road Traffic,

• Enterprises providing Logistics service: consist of companies providing serviceabout Multimodal transport, distribution, goods (such as customs brokers, freightforwarding, packing and delivering, etc.), specialized Logistics ( as example:providing financial solution and insurance)

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• People: be customers and human resource who work in Logistics service

According to figure 1.2, it indicates that people are the most importantfactor in 5 factors because people affect other activities and those activities areproduced for needs of people For this reason, people are the determinant innational Logistics system Besides that, factors in NLS interact with each other byparticular Logistics activities For example: when customer uses Logistics serviceabout customer brokerage, distribution, ware house All those activities areperformed based on infrastructure (road, bridge, port ), laws or regulation aboutLogistics (customs law) When Logistics service is produced, it will serve forpeople, and people are also employees who produce service Hence, people are acentral factor

Nevertheless, because of some restrictions, my thesis will focus on analyzeand explain factor about enterprises providing Logistics service According torelationship between factors in NLS, my study may find role of Logisticsenterprise in NLS as well as how NPL will change positively or negatively by theimpacts of Logistics companies

1.3 Roles of Logistics

1.3.1In macro economy - for national economy

Circulation and distribution of goods and trade exchanges between thedifferent regions in the country and foreign countries are essential activities of thenational economy If these activities are smooth and effective, it will greatlycontribute to make development of the manufacturing industry Even if theseactivities are stalled, it will adversely impact the entire production and life Forthose reasons, Logistics has important roles in national economy

First, development of Logistics service will contribute to expandinternational trade market When countries have good connection withglobalization Logistics network, its can reach more markets and consumers fromaround the world Logistics service acts as a br!dge to transfer goods on the new

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CHAPTER 1: SEVERAL THEORETICAL BASES OF LOGISTICS SERVICE

route to the new markets according to requirements of time and place Forinstance: Transnational companies have branches, production facilities, supply andservice which put in many places, in many different countries, so the company hasapplied " Global Logistics System" to ensure that production and businessactivities would be high efficiency and overcome effects of factors distance, timeand production cost

Second, Logistics service contributes to improve and enhance efficiency ofnational competitiveness In the strong globalization trend as today, thecompetition between countries of the world becomes fiercer and fiercer Therefore,Logistics becomes one of competitive advantages of countries According to thefinding of research about Logistics at production companies, production costsoften account for 48%, 27% marketing costs, logistics costs by 21 % while theprofits of 4% in cost of products It showed that cost f Logistics occupies a hugeproportion Therefore, development of Logistics service will help businesses aswell as the entire national economy to reduce production costs, make theproduction process and streamlining business more efficient, enhance thecompetitiveness of the country and enterprise on the market

Third, development of Logistics service will bring enormous resources tothe economy Logistics is an integrated chain The efficiency of this process isimportant in determining the competitiveness of industry and trade of eachcountry For developed country like the US and Japan, logistics contributes about10% of GOP For the least developed countries, this rate may be higher than 30%

In Viet Nam, Logistics service occupies about 15-20% of GOP In 2014, GOP ofViet Nam accounted for about 509 billion dollars Thus, logistics costs occupiedfrom 76.4 to 101.8 billion This is a huge sum, so Logistics has an enormousservice market

Fourth, Logistics service help industries to use maximally natural resources

in that country Each geographical area has different characteristics about terrain,mineral resources, modes of labor, habits, so it should have the distribution,

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acquisitions, production, industrial areas and economic centers to fit with theoverall and specific conditions in order to promote resources in the most effectiveway As an example, for production companies, they often put factories IIIcountryside because of cheap labor, available resource at that area, easy IIIgovernment law However, products they produced need delivering to otherregions or countries to reach large customer but with low cost, so how they can dothat? Consequently, Logistics service will be effective hands of those companies tohelp them bring their products to other areas, new market in the world.

At last, development of logistics service helps to reduce costs, improve andstandardize documents in international business In fact, a transaction ininternational trade often has to spend lots of papers and documents According toUnited Nations estimates, the cost of papers to serve all aspects of commercialtransactions around the world has exceeded 420 billion dollars in each year Based

on calculations by experts, private papers, documents cumbersome annualexpenses consume, it also accounts for over 10% of foreign trade turnover andinfluences to the trade international Logistics provides diverse services andpackages which help to reduce the cost of paper documents in international trade.Multimodal transport service provided by Logistics companies has eliminated a lot

of costs of paperwork, upgraded and standardized documents In addition, with thedevelopment of e-logistics (electronic logistics) will create a revolution intransportation and logistics Costs for papers and documents in freight traffic havebeen reduced maximally Quality logistics service also has been increased higherand higher As the result, barriers of space and time in flow of materials and goodswill been narrowed Hence, efficiency of international trade is enhanced.Simultaneously, countries will come closer in production and circulation activities

1.3.2 In micro economy -for business

When global market has developed faster and faster because ofadvancement of technology and the open market in developing countries as well asleast developed countries, logistics is seen as a tool, a mean to link different fields

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CHAPTER 1: SEVERAL THEORETICAL BASES OF LOGISTICS SERVICE

together in business strategy Thus, Logistics has enormous roles in operation ofenterprises

First, Logistics creates usefulness about time and place for the operation inbusiness Logistics helps to solve effectively both input and output for enterprises

as well as optimize process flows of materials, goods, services Many businesseshave great success thanks to right strategic and operational logistics Nevertheless,many businesses have to face difficulty, even failed because of the wrong decision

in logistics operations such as choosing the wrong location, improper storage,transport organizations which are not effective Logistics plays a major role indelivering products to the correct destinations at appropriate time Products andservices will only satisfy customer or have value when it reaches customers ontime and specified location Therefore, the development of logistics services meant

to ensure the operation of the production, sales and other services are guaranteedon-time and quality

Second, Logistics service contributes to reduce cost in production process and enhance the competitiveness for businesses Price of goods in the market oftenequals price of production plus circulation In cost of goods circulation, mainlyshipping free accounts for a considerable proportion of the components It is one offactors to set up commodity prices in the market Transportation is a key element

of circulation In international trade, transport costs account for a large proportion,according to UNCTAD statistics, the cost of sea transport accounts for 10-15%average FOB or CIF price of 8-9% That transport is the most important factor inthe logistics system, so logistics services should become more completed andmodem It will save money for freight and other costs incurred in the process ofcirculation so as to lead to save and reduce cost of production and price ofcommodity Thus, competitiveness of business will be improved

Third, logistics will decrease amount of inventories in business In eachenterprise, there is at least one of two decisive activities included organization ofproduction and distribution channel construction With supporting role for other

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activities in business, logistics always has close interaction with both thoseactivities It will help to handle infonnation of market so that business can identifycustomer's need in each phase before starting production process and avoid storage

as much as possible It also helps business to ensure about raw material inputs,production planning compliance in order to avoid interrupting production.Furthermore, in Logistics, the strong development of information technologyallows incorporating the supply and storage of goods, consumption andtransportation in order to make whole process faster and more efficiency

Finally, Logistics support manager to make right decision in production andbusiness activities Administrators have to solve the conundrum about supplies ofraw materials, quantity and time to supplement materials, means of transport andtravel, location, local storage of finished products semi-finished products in thebest effective way To solve this problem without role of logistics as it allowsmanagers to control and make accurately decisions about the above mentionedissues in order to reduce the maximum incurred costs and ensure efficiency inproduction and business activities

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CHAPTER 2: THE REALITY OF QUALITY SERVICE PROVIDED BY LOGISTICS COMPANY IN VIETNAM

CHAPTER 2: THE REALITY OF QUALITY SERVICE PROVIDED BY

LOGISTICS COMPANY IN VIETNAM

2.1 SWOT analysis about quality service of Logistics Company in Vietnam

After Vietnam joined WTO, the logistics services market Vietnam has thepositive changes The number of Vietnam logistics companies has increase withhigh speed growth Moreover, quality service is being improved day by day Itshowed that logistics companies of Vietnam have lots of advantages andopportunities in this field However, they also have to face some disadvantages,obstacles and difficulties in the future Therefore, in my thesis, I will analyze aboutstrengths, weaknesses, opportunities and threats (SWOT) of quality serviceprovided Logistics Companies in Vietnam

•

-Ch na

PacIfic Oceort

Figure 2.1: The countries of Southeast Asia

Source: from World atlas

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1 http://www.biendong.net/su-kien/556-b-bin-vit-nam-thc-t-dai-bao-nhieu-km.htm I

2 http://vneconomy.vn/doanh-nhan/lo-cho-nganh-logistics-viet-2013111507 5825121.htm

2.1.1.2 Labor isyoung and cheap

Logistics service will not been produced without participation of human.Hence, labor is one of factors that determine quality service and improvecompetitiveness of logistics companies If which country has large size of labor,labor price will cheap, so price of logistics service will also cheap With reasonableprice, logistics companies of Vietnam will have opportunities to compete withforeign companies

Number of human resources of each country is determined by populationsize Large and young of population size will have abundant human resources.Currently, in our country, there are quite large population size and the number ofworking age people are high and continue to rise rapidly Figure 2.1 will show theincrease in population and labor force in Vietnam from 2010 to 2014

Ph D Nhan Cam Trf 20

As the map shown, Vietnam locates in the central of Asia - Pacific and oninternational maritime routes, so it is a strategic area in ASEAN region.Furthermore, with approximately 11409 I kilometers long of coastline stretchedfrom North to South, Vietnam has potentials to become a center of cargotransportation on sea route with many ways from Middle East, Europe, andAmericas to Japan, Russia Besides that, in current years, Vietnam government hasconsidered to build national infrastructure For example: building deep water ports

as Cai Mep - Thi Vai international port in 2009, over 17 300 kilometers ofhighway, about 3200 kilometers railway, 49 harbors with 217 berths, 26 airportsand hundreds of international borders2 Thus Vietnam has enough natural conditionand geographical location to pick up goods from neighboring countries includedLaos, Cambodia and China and transport internationally in the shortest time.Logistics companies of Vietnam also will have opportunities to develop logisticsservice and take more competitive edges than other foreign Logistics companies

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CHAPTER 2: THE REALITY OF QUALITY SERVICE PROVIDED BY LOGISTICS COMPANY IN VIETNAM

(thousand people)

2 Population from 65711 67 165 68 195 68687 6931315+ years old (thousand

Figure 2.1: Population and labor of Vietnam in period from 2010 to 2014

Source:frorn General Staff Officer (GSO) - Statistical Office o/Hanoi.

According to data of figure 2.1, population and labor force has increasedfrom 2010 to 2014 With a population of over 90 million in 2014, Vietnam is the14th most populous country in the world, 8th of Asia and 3Tdof ASEAN Now, thereare over 63 million people in working age represented about 76.6% of population

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Every year, there are about I million entered the labor force That is a pretty bignumber With that scale of workforce, Vietnam has entered the peak period in thenumber of population, which is the period of "golden population structure" todevelop economy Therefore, logistics companies can use cheap labor to reduceproduction cost in logistics service.

Besides that, labor of Vietnam is hard working, careful, flexible and willing

to learn Those are necessary personalities of employees in Logistics field As allabove reasons, price of logistics service also will cheap, so companies of Vietnamwill have more competitive edge and reach more customers

2.1.1.3 Logistics companies of Vietnam have applied information

technology in working.

The explosion of information technology has contributed to improve thequality of logistics services Logistics companies of Vietnam invested to upgradeinformation technology for their company Most of companies have usedcomputers, e-mail, fax, copiers and established website for their company.Moreover, a few of companies has been using dedicated management software,technology code (bar code), electronic information exchange in business betweeninside and outside of company By these means, companies improve the qualityand efficiency of logistics operations and become an important factor of logistics

in company Figure 2.3 will describe about number of electronic devices that most

of companies applied in logistics operation

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CHAPTER 2: THE REALITY OF QUALITY SERVICE PROVIDED BY LOGISTICS COMPANY IN VIETNAM

MS about business process

MS about customer

MS about distribution channel and supplier

MS about warehouse and material

Management software (MS) about accouting

Company site Global network

89.81%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

Figure 2.3: Communication eqnipment used in operations of business

Source: Ph.D Nhan Cam Tri, "Development of Vietnam logistics service after joining WTO and prospects in the future ", economic doctoral thesis, 2015.

Based on information of figure 2.3, it indicates that level of usinginformation and technology in logistics operation increase higher and higher Most

of companies (89.81%) have company website and 72.22% companies in the sum

of companies which are investigated, used accounting management software Itshowed that computerized trends for operation about data management becamepopular To carry out the process of logistics, there are a lot of work, many officialdocuments and paper With the help of computer, the huge number of files arerecorded and processed, so logistics staffs are freed from the task of documentationservices Thus, logistics managers can make decisions promptly and properlybecause of the fast in processing data

Besides that, application about global network connection with customersand suppliers has contributed to improve the speed and efficiency of transactionsinput and output The power of the Internet in information transmission helpslogistics companies can satisfY expectation of customer Furthermore, network is

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Ph D Nhan Cam Tri

also a modern business facility because it can adapt to customer requirements bythe most accurate and fastest way.

2.1.2 Weaknesses

2.1.2.1 Less capital

Vietnam has about 800 active companies in logistics field However, thesecompanies can only meet 25% of demand about logistics service because mostenterprises are small size and have less capital - according to a report which wasannounced by Ministry of transportation in 2014 It was one of the main reasonswhy logistics companies of Vietnam lost opportunities at home market

;

II

i

VNPost Express, Saigon 80% international

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Ph D Nhan CamTri