Develop logistics system to meet the requirements arising from e commerce industry in vietnam

BANKING ACADEMY INTERNATIONAL BUSINESS FACULTY BACHELOR’S THESIS - SUMMARY DEVELOP LOGISTICS SYSTEM TO MEET THE REQUIREMENTS ARISING FROM E-COMMERCE INDUSTRY IN VIETNAM Student’s name

BANKING ACADEMY

INTERNATIONAL BUSINESS FACULTY

BACHELOR’S THESIS - SUMMARY

DEVELOP LOGISTICS SYSTEM TO MEET THE REQUIREMENTS ARISING FROM E-COMMERCE INDUSTRY IN VIETNAM

Student’s name: Tran Thi Van Anh Class: K20KDQTD

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ANNOUNCEMENT

I want to declare that this thesis is my own independently researched work Statistics used for analysis purpose in this thesis have clear and well-founded origins and was published legitimately in accordance with the current applicable Vietnamese regulations Research findings in this thesis are my independent, factual and objective work that is in agreement with the situation in Vietnam These findings have not been published in any other studies before at the time of this thesis’s completion

Hanoi, May 24th, 2021 Student

Tran Thi Van Anh

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ACKNOWLEDGEMENT

Having received the honor to participate in the thesis stage at the end of the curriculum, firstly I want to express my deepest gratitude to the Banking Academy and the honorable staffs and professors who have always accommodated me with the most favorable conditions and have also offered me the best learning environment so far

I also want to send my thanks to Dr Nguyen Thi Thanh Tan who has helped

me greatly and devotedly during my researching time so that I could finish this thesis in a timely manner Concurrently, I would also like to say thanks to the professors and staffs in the International Business Faculty and friends who have supported me in the completion of this thesis

Lastly, because of my unavoidable lack in theoretical reasoning and practical experience, this thesis may not be a faultless production Therefore, I would eagerly hope to receive valuable feedbacks as well as ideas of suggestions from your honorable readers so that I could perfect my work better

Thank you for your understanding and support up until the moment I really appreciate your patience and hope that we could have a successful Thesis Presentation round

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CONTENT

ANNOUNCEMENT i

ACKNOWLEDGEMENT ii

TABLE OF ABBREVIATIONS vi

LIST OF TABLES AND FIGURES vii

INTRODUCTION 1

1 Research motivation 1

2 Literature review 2

3 Research purpose 4

4 Research object and scope 5

4.1 Research object 5

4.2 Research scope 5

5 Research methodology 5

6 Structure of the thesis 6

CHAPTER 1: THEORETICAL BASIS OF LOGISTICS AND LOGISTICS IN E-COMMERCE 7

1.1 OVERVIEW OF LOGISTICS 7

1.1.1 Definition of Logistics 7

1.1.2 Role of logistics 8

1.1.3 Characteristics of logistics 9

1.1.4 Classification of logistics 11

1.1.5 Factors affecting the development of logistics system 14

1.2 OVERVIEW OF E-COMMERCE AND LOGISTICS IN E-COMMERCE 16 1.2.1 Definition of e-commerce and logistics in e-commerce 16

1.2.2 The necessity of logistics for e-commerce 18

1.3 THE MAIN ACTIVITIES OF LOGISTICS IN E-COMMERCE 19

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1.3.1 Storage 19

1.3.2 Prepare orders 20

1.3.3 Shipping 20

1.3.4 Delivery at the seller's warehouse (buy online, pick-up in-store or purchase online) 20

1.3.5 Delivery method at the buyer's address (Buy online, ship to store) 21

1.3.6 Dropshipping 21

1.3.7 Last-mile delivery 21

SUMMARY OF CHAPTER 1 22

CHAPTER 2: THE DEVELOPMENT OF LOGISTICS SYSTEM FOR E-COMMERCE IN VIETNAM 23

2.1 CURRENT SITUATION OF LOGISTICS SYSTEM IN VIETNAM 23

2.1.1 General situation 23

2.1.2 National Logistics capacity ranking index of Vietnam 24

2.1.3 Legal policy and state management of logistics in Vietnam 26

2.1.4 Logistics infrastructure in Vietnam 26

2.1.5 Human resource in Vietnam 31

2.1.6 Logistics service enterprises 32

2.2 LOGISTICS IN E-COMMERCE IN VIETNAM 33

2.2.1 The growth rate of e-commerce in Vietnam 34

2.2.2 Current situation of logistics in e-commerce in Vietnam 35

2.3 EVALUATING THE CURRENT SITUATION OF VIETNAM’S LOGISTICS SYSTEM IN E-COMMERCE 38

2.3.1 Achievements 38

2.3.2 Drawbacks and reasons 40

SUMMARY OF CHAPTER 2 45

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CHAPTER 3: SOME SUGGESTIONS AND RECOMMENDATIONS TO DEVELOP LOGISTICS SYSTEM TO MEET THE REQUIREMENTS

ARISING FROM E-COMMERCE INDUSTRY IN VIETNAM 46

3.1 DEVELOPMENT TRENDS OF THE E-COMMERCE INDUSTRY 46

3.2 LOGISTICS AND E-COMMERCE DEVELOPMENT ORIENTATION OF THE GOVERNMENT 48

3.2.1 Logistics orientation of the government 48

3.2.2 E-commerce orientation of the government 49

3.3 SOME SUGGESTIONS AND RECOMMENDATIONS TO DEVELOP THE LOGISTICS SECTOR FOR MEETING THE REQUIREMENTS ARISING FROM THE E-COMMERCE INDUSTRY IN VIETNAM 51

3.3.1 For the Government 51

3.3.2 For Vietnam Logistics Business Association 53

3.3.3 For universities, colleges, and logistics training institutions 54

3.4 SOLUTIONS FOR BUSINESS TO DEVELOP THE LOGISTICS SECTOR FOR MEETING THE REQUIREMENTS ARISING FROM THE E-COMMERCE INDUSTRY IN VIETNAM 55

3.4.1 Promote links between Logistics businesses and e-commerce businesses 55

3.4.2 Promote the application of information technology and automation in logistics 55

3.4.3 Improve the quality of human resources 58

3.4.4 Enhance the development of e-logistics 59

SUMMARY OF CHAPTER 3 61

CONCLUSION 62

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TABLE OF ABBREVIATIONS

1PL First Party Logistics

2PL Second Party Logistics

3PL Third Party Logistics

4PL Fourth Party Logistics

5PL Fifth Party Logistics

AI Artificial Intelligence

APEC Asia-Pacific Economic Cooperation

ASEAN Association of Southeast Asian Nations

B2C Business To Consumer

CSCMP Council of Supply Chain Management Professionals

GDP Gross Domestic Product

LPI Logistics Performance Index

MTO Multimodal Transport Operator

OECD The Organization for Economic Co-operation and

Development OMS Order Management Systems

TMS Transportation Management Systems

UNCTAD The United Nations Conference on Trade and Development

UNESCAP United Nations Economic and Social Commission for Asia

and the Pacific VDSC Viet Dragon Securities Company

VECOM Vietnam E-Commerce Association

VIFFAS Vietnam Freight Forwarders Association

VLA Vietnam Logistics Business Association

WMS Warehouse Management Systems

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LIST OF TABLES AND FIGURES

Figure 2.1 LPI of Southeast Asian countries in 2018 24 Figure 2.2 The proportion of Logistics costs to revenue 33 Figure 2.3 Emerging Market Logistics Index 2021 34 Figure 2.4 Estimated E-Commerce and E-Logistics market size

According to experts, logistics services in Vietnam have not kept pace with the development of e-commerce Even logistics is considered a hard preventing the growth of e-commerce E-commerce wants to continue in the current development trend, it needs to go hand in hand with the development of logistics services because logistics is the last stage to create a perfect international trade cycle So how to create a close link between e-commerce and logistics to take advantage of and promote the advantages of each side to accompany development? What requirements does e-commerce impose on logistics services and the ability of Logistics services to meet those requirements? Finding the answer to the above problem requires in-depth and comprehensive studies in the development of

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logistics services to meet the requirements of e-commerce in Vietnam Besides, it is necessary to analyze and evaluate the current situation of the logistics and e-commerce market in Vietnam Since then, find solutions, and contribute to supporting logistics services to develop and catch up with the needs of e-commerce, especially in the context that Vietnam is participating in the process of international economic integration The thesis aims to study and analyze the relationship between logistics and e-commerce Also, make recommendations and suggestions for the current situation

2 Literature review

Logistics in e-commerce has been the main topic in a wide of books, studies and articles Deborah L Bayles (2000) study the best practices, it learns today's best practices for order processing and customization, payment processing, tax processing, shipping, tracking, customer inquiry, accounting, and inventory control,

as well as "reverse logistics" involves the return of products Jay Joong-Kun Cho, John Ozment, Harry Sink (2008) examines the relationship between a company's logistics capabilities, logistics outsourcing performance, and company performance Besides, the importance of logistics has been confirmed in the e-commerce supply chain Study results revealed logistics capability to be positively related to firm performance in the e-commerce market Wanwan Zhang, Shiying Fang, Bin Huang (2012) showed that e-commerce is the product of an information-based society Its development has also stimulated the logistics industry on which it depends The importance of logistics in e-commerce is already evident Also, the study fully explores the deficiencies in the management and takes actions to improve it, and then builds an e-commerce logistics management system Zhang Jin Shan (2013) gave readers general reviews of e-commerce logistics and quantitative analysis of trade cooperation activities in China - the leading market for online shopping in the world The logistics Institute-Asia Pacific (2016) presented the e-commerce landscape with challenges and the reasons that limit the development of e-commerce: underdeveloped infrastructure, ineffective door-to-door delivery After that, the author proposes a solution that applies technology, using multimodal

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transport, "deferred delivery" for as long as possible to optimize costs and payload

of the truck The report “Delivering the goods: E-commerce logistics” by the World Economic Forum (WEF) in 2018 affirms that logistics and delivery are crucial to ensure that after ordering online Not only that, but the report also focuses on research on logistics systems, on the development of the industry to meet e-commerce Recently, Shuang Yue (2019) used the existing theoretical basis analysis method and data analysis method to clarify the characteristics of logistics distribution in the e-commerce environment in China Also, the author identifies the separation between raw material flow and business flow as a core feature of e-commerce On that basis, Shuang Yue went into research and development of a suitable logistics model and explained the important effects of e-commerce on the development of logistics distribution Besides, through the research paper, the author also outlines some measures for businesses to effectively implement logistics distribution in e-commerce Chia-Nan Wang, Thanh-Tuan Dang and Ngoc-Ai-Thy Nguyen (2021) has launched a complete and objective review process for e-commerce businesses or for anyone in the supply chain in optimizing the outsourcing of third-party reverse logistics partners In addition, they also pointed out the important factors affecting the selection of partners

Overall, research on logistics in e-commerce worldwide shows an overview of the e-commerce logistics situation, the background theories, closely related factors, and impacts on logistics in e-commerce Each country has a developing economy with a different speed and scale, which leads to the difference in e-commerce and logistics in each country Therefore, researching logistics in e-commerce in each specific country will help each country find a more appropriate and correct direction

in the growth of the economy in general and e-commerce logistics in particular Not only is it a hot topic attracting foreign authors, logistics in ecommerce is also a topic that attracts the attention of Vietnamese authors Doan Thi Hong Van (2010) has provided the most complete theoretical basis on issues and aspects of logistics Thereby, the author has analyzed the current situation of the logistics industry in Vietnam and proposed solutions to support and promote the development of the logistics industry in our country Nguyen Dang Hiep (2015)

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shows e-commerce models in the world such as Walmart, Amazon (B2C) Besides, the author also analyzes logistics activities in e-commerce in Vietnam Finally, the author has come up with a solution to organizing and operating logistics in e-commerce in Vietnam Nguyen Van Thinh (2018) showed the current situation of logistics operations in some successful e-commerce models worldwide and given an overall assessment of logistics solutions in the e-commerce industry in the world However, the difference of this study is that the author analyzes the logistics process at typical e-commerce enterprises of Vietnam and proposes solutions (infrastructure, technology, policies) related to logistics to support the development

of e-commerce in Vietnam The authors’ group from Foreign Trade University (2020) affirmed that logistics is a point factor in the success of e-commerce Research shows the coordination and interaction between logistics and cost of doing business and customer service, the impact of logistics on the competitiveness of businesses Then, they determine the trend of logistics that will develop in Vietnam

in the future phases and propose solutions to organize and operate logistics in commerce in Vietnam

Overall, studies in Vietnam have shown that logistics knowledge in commerce is still very lacking The research topic of logistics development in e-commerce needs to found on a theoretical basis with analysis and assessment of the reality of logistics operations in e-commerce in Vietnam today Therefore, this thesis will analyze the latest data on the development of logistics in e-commerce to apply the success into Vietnam with a macro-level approach The study also complements the shortcomings of studies in the world Also, the study points out the problem of the specificity of logistics in e-commerce only in Vietnam Moreover, the condition of the logistics in e-commerce of Vietnam in recent years and recommendations for developing logistics in e-commerce of Vietnam are also given

e-3 Research purpose

The thesis has proceeded for the following purposes Firstly, it gives a theoretical basis related to logistics and logistics in e-commerce Secondly, this

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study analyzes and evaluates the current situation of logistics activities in

e-commerce in Vietnam Thirdly, the thesis give some suggestions to improve the

quality of logistics sector to meet the requirements of e-commerce for businesses From the research purpose stated above, the thesis needs to answer and clarify the following research questions:

Question 1: What is the theoretical basis for logistics and logistics in e-commerce?

Question 2: How does logistics affect e-commerce in Vietnam?

Question 3: What are the strengths, limitations, and specific characteristics of

logistics in e-commerce in Vietnam?

Question 4: How to improve the logistics system for meeting the requirements

arising from the e-commerce industry in Vietnam in the present period and the future?

4 Research object and scope

4.1 Research object

The research focuses on logistics activities in e-commerce

4.2 Research scope

The scope of time: period of 2015 - 2020

The scope of space: logistics activities in e-commerce in Vietnam

5 Research methodology

The thesis is proceeded by the following research methods:

Firstly, theoretical analysis and synthesis method In this method, the author

collects information from secondary information sources, documents about logistics and e-commerce Then synthesize that information and documents into a new complete and in-depth theory about the object

Secondly, the theoretical systematization and classification method In this

method, the author arranges knowledge into a logical system to understand logistics and e-commerce, especially logistics activities in e-commerce in Vietnam

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Thirdly, analyzing method, summarizing the experience In this method, the

author studies logistics activities in the e-commerce of enterprises around the world Since there, the author understands how it works, how to apply IT in the operation process as well as inherits experience in logistics operations meeting the requirements of e-commerce in Vietnam

6 Structure of the thesis

Except the introduction, conclusion and reference parts, the thesis contains three main chapters:

Chapter 1: Theoretical basis of Logistics and Logistics in e-commerce

Chapter 2: The development of Logistics system for e-commerce in Vietnam Chapter 3: Some suggestions and recommendations to develop Logistics system to meet the requirements arising from e-commerce industry in Vietnam

According to the Law on Commerce of Vietnam 2005 (Article 233):

“Logistics services are commercial activities, in which a trader organizes one or more tasks including receiving goods, transporting, storing, storing, customs clearance, other paperwork, customer consulting, packaging, marking, delivery or other services related to the goods as agreed with the customer for remuneration.” According to the Council of Supply Chain Management Professionals – CSCMP, the term "Logistics" is quite fully defined: "Logistics management is a part of supply chain management including planning, implementing, controlling transportation and effectively store goods and services as well as related information from origin to consumer to satisfy customers' requirements Basic logistics management includes managing import and export freight, fleet management, warehousing, raw materials, order fulfillment, logistics network design, inventory management, planning supply/demand, third-party provider administration To some extent, logistics functions also include sourcing, production planning, packaging, and customer service Logistics management is a function that integrates and optimizes all logistics activities as well as coordinates logistics activities with other functions such as marketing, sales, manufacturing, finance, information technology.”

According to the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP): “Logistics can be defined as the management of the flow of transshipment and storage of raw materials, production processes, finished

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products and the processing of related information from the origin to the final consumer at the request of the customer More broadly it includes waste collection and treatment ”

Overall, there is not a unified definition of logistics, but all of these definitions have a common ground that highlights the importance of efficient physical and information flow within the system The thesis use the definition of The Seven R’s:

“Logistics relates to receiving the right product or service in the right quantity, with the right quality, at the right place, at the right time, delivering to the right customer, and doing this at the right cost”

1.1.2 Role of logistics

1.1.2.1 The role of logistics for the economy

Logistics is a series of continuous activities, closely related to each other, interacting with each other So, logistics is an economic link throughout almost the entire production process, goods export, circulation and distribution, market expansion Each activity in the chain has a position and costs a certain amount Therefore, if the efficiency of logistics operations is improved, it will contribute to socio-economic efficiency

Logistics supports the flow of economic transactions A series of related economic activities take place in the logistics chain, in which resources are transformed into products Value is added to both customers and producers, helping

to satisfy demand Efficient logistics activities increase a country's competitiveness

in the international arena Moreover, the development level and logistics costs of a country are also considered a significant basis in the investment strategy of multinational corporations Besides, the development of logistics is the key factor to promote the smooth flow of export goods

1.1.2.2 The role of logistics for businesses

Logistics helps to handle both the output and the input of the business effectively Thanks to changing input resources, logistics help to reduce costs and increase competitiveness for businesses There are many big successful businesses

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thanks to the right logistics strategy and operation On the contrary, many enterprises have difficulties, failures, even bankruptcy due to wrong decisions in logistics activities Today, to find a better location, more efficient business, businesses have been making efforts to search globally for raw materials, labor, capital, technology know-how, consumer market, business environment

Logistics contributes to improving management efficiency, reducing costs to improve the competitiveness of businesses Businesses are proactive in planning production, managing inventory, and deliver on-time delivery with the lowest total expense

1.1.3 Characteristics of logistics

1.1.3.1 Logistics is the synthesis of business activities

Logistics summarizes the operations of the business on three main aspects, which are survival logistics, operational logistics, and system logistics

Survival Logistics are related to the basic needs of life Survival logistics as its

name says comes from human survival instinct, meeting the essential needs of humans: what to need, how much, when to need, and where Survival logistics is the essence and foundation of logistics in general;

Operational Logistics is a new development of survival logistics and

associated with the entire process and production system of the enterprise's products Activity logistics is related to the movement and storage of input materials inside, going through and out of the business, penetrating distribution channels before reaching the end consumer;

System Logistics help to keep the system running Elements of system logistics

include machinery, human resources, technology, factory infrastructure Survival logistics, operations, and systems are closely related, creating the establishment of a complete logistics system

1.1.3.2 Logistics supports the operations of businesses

Logistics supports the entire operation of the business, even when the product

is out of the production line of the enterprise and reaches the consumer A business

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can combine any elements of logistics or all the logistics factors depending on the requirements of their business Logistics also supports business operations through managing the movement and storing of raw materials going into the business and semi-finished products moving within the business

1.1.3.3 Logistics is the complete development of freight forwarding

Along with its development, logistics has diversified the concept of traditional freight forwarding and freight forwarding that is now attached to and in logistics such as renting ships, storing freight, preparing goods, packing, recycling, clearing customs clearance to provide full service from warehouse to warehouse (Door to Door) From acting as an agent, the trustee becomes a major entity in the freight forwarding activities with the customer, responsible for the governing law sources Today, to be able to perform their business, the forwarder has to manage the asynchronous system from forwarding to transportation, supplying raw materials for production and business, preserving goods in the warehouse, distributing goods at the right place, at the right time, using electronic information to monitor, check Thus, the freight forwarder becomes a logistics service provider

1.1.3.4 Logistics and multimodal transport logistics is the complete development

of multimodal transport services

Previously, the goods traveled in the form of odd cargoes from the exporting country to the importing country and went through many different means of transport, so the probability of loss to the goods is very high, and the shipper contracts must be signed with many different carriers whose responsibility is limited

to the route or service they undertake By the 60s and 70s of the twentieth century, the container revolution in the transport industry ensured safety and reliability in cargo transportation, was the premise and basis for the creation and development of multilateral transport When multimodal transport was born, shippers only had to sign a single contract with the multimodal transport operator (MTO) The MTO will

be responsible for organizing the entire carriage of goods from receipt to delivery with a single document of transport even if he is not the actual carrier Thus, the MTO here is the logistics service provider

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1.1.4 Classification of logistics

1.1.4.1 Classification by forms of logistics

a First Party Logistics (1PL)

Self-level Logistics is applied to businesses undertaking logistics activities themselves, generating income for that business In this type, businesses almost perform activities by themselves as well as provide means of transport, factories, and people to support the completion of the logistics cycle Usually a company or individual organizes logistics activities for their purposes These companies or individuals generally own the means of transport, tools, or equipment for loading and unloading and moving goods from one location to another, warehouse, and other resources including people to carry out and run logistics activities by themselves Thus, the role of the carrier and the supplier of the goods in the form of Self-Level logistics is often representative of both the shipper and the consignee

b Second Party Logistics (2PL)

The form of using the second party's service occurs when the enterprise cannot afford to perform one or more logistics operations by itself This company performs all of these activities on behalf of the enterprise to support the business process of the business Includes individual logistics service providers to meet the needs of customers These service providers often own and use specialized means of transport for their particular transportation That means that 2PLs only take on the transport role of a particular stage or provide single transport services in the entire logistics chain of a customer company

c Third Party Logistics (3PL)

This form of third-party logistics service or contractual logistics works as follows, a company that represents the outsourced party to undertake all logistics services of the client company based on a contract, including: carry out customs declaration and customs clearance procedures for goods, import and export documents, delivery and transport documents, loading and unloading goods, etc to deliver the goods to the specified destination 3PLs often own a variety of means of

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transport from land to air or have great connections with many other carriers to get the most out of their service functions Besides, the 3PL service providers are also responsible for arranging reasonable transit times so that the goods are delivered on time as well as ensuring the goods are intact If the goods or the packaging of the goods is not intact when delivered to the recipient, the hired logistics company must bear the full responsibility

d Fourth Party Logistics (4PL / LPL)

This form of providing logistics services or distribution chain logistics is more developed than 3PL A 4PL company usually has to be large-scale and capable of performing complete chains of operations, in particular, a consulting services firm plays the role of coordinating and overseeing all supply chain operations from The acquisition of resources, finding possibilities, and applying technology, to design, construct and operating a comprehensive logistics chain In a certain sense, 3PL can

be considered as the foundation to develop a broader, more diverse, specific, and complete 4PL, to reach a distribution chain covering the global market, creating a competitive advantage picture and build lasting relationships This type is growing and occupying an important position

4PL = 3PL + IT services + business process management

e Fifth Party Logistics (5PL)

The 5PL is the highest type of logistics service to date Includes all 4PL activities, but the new feature is the presence of e-commerce Enterprises of this type of service use automated management systems such as order management systems (OMS), transportation management systems (TMS), warehouse management systems (WMS) The combination of the aforementioned systems will create a modern and unified IT system, making it easier for businesses to control information in the process of managing and operating their businesses

1.1.4.2 Classification by field

a Procurement Logistics

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Procurement Logistics is the flow of goods when the raw materials and parts necessary for manufacturing are procured from suppliers This field did not attract much attention before, but now that small-lot production of a variety of models is the main type of production, many firms are actively pursuing production by procuring the necessary materials in only the necessary amounts at the necessary times (the shift to just-in-time production) because it is directly connected to reducing inventory costs

b Production Logistics

Production Logistics is the flow of goods that includes the management of procured parts and materials, distribution inside a factory, product management, packaging, and shipping to the warehouse Delivery management, warehouse dispatch management, and shipping management can be optimized and the state of delivery vehicles can be managed by smoothly linking procurement logistics and sales logistics described later

c Sales Logistics

Logistics typically refers to sales logistics In the past, this was mainly delivered from delivery centers and logistics warehouses to distribution points such

as wholesalers and retailers But now direct delivery also makes up a large amount

of this volume due to online shopping and e-commerce Whether delivery through delivery centers and logistics warehouses or direct delivery from production sites, higher efficiency in transportation and delivery and shrinking inventory are indispensable for delivering the necessary goods to the necessary people in the necessary quantities at the necessary time This also contributes to improving customer satisfaction

d Recovery Logistics

If the flow of goods from production to consumption by procurement logistics, production logistics, and sales logistics is described using the circulatory system of the body, it would be said to be forward logistics On the other hand, recovery logistics or reverse logistics is the flow that recovers and recycles products,

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containers, and packaging that have fulfilled their role Similar to recycling logistics described later, emphasis is being placed on this flow in recycling-oriented societies

e Recycling Logistics

Typical examples of recycling logistics are recovering and recycling empty cans, plastic bottles, and old paper Containers, packaging, old computers, and inkjet cartridges can also be recovered and recycled in the same manner The importance of recycling logistics has been increasing in recent years as measure for the environment and to effectively utilize materials such as minor metals

1.1.5 Factors affecting the development of logistics system

1.1.5.1 Transportation infrastructure

The development of transport and the improvement of logistics performance are crucial issues for countries seeking to become more competitive in the international geo-economic scene (Mediterra, 2014) Good transportation infrastructure helps to facilitate trade 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 is virtually inconceivable in today’s economy for a firm to function without the aid of transportation Transportation is an essential and major sub-function of logistics that creates time and place utility in goods In fact, the backbone of the entire supply chain is 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, at the right time, for the right customer at the right cost

1.1.5.2 Technology advancements

Technological advances to improve operations and profit margins are prominent within the logistics industry (Toliver, 2017) Logistics technology provides enormous amounts of data that can be analyzed to increase efficiencies,

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streamline processes, and offer an improved customer and provider experience Improved technology increases productivity in the supply chain, minimizing costs and errors that benefit all areas of the logistics industry such as trucking transportation, international transportation (ocean and air), supply chain management, and shipment tracking Technology helps logistics to overcome some tough challenges like cost optimization, faster service, damage management, route optimization, warehouse management, and much more This will bring much-needed efficiency and the highest level of customer satisfaction As a whole, a stronger, more efficient, and connected logistic system will be formed thanks to technological advancements

1.1.5.3 Institutional frameworks

Institutional frameworks remain indispensable to the betterment of the country’s logistics systems, as an effective institutional framework plays a role as the legal foundation for the development of logistics in a nation Here, institutional frameworks refer to regulatory environments that are reflected through the implementation of policies, directions, and customs decisions There are apparently different regulatory arrangements between high and low logistics performance countries (Watanuki, 2015) No single “good” regulation exists; however, higher performers tend to have clear and transparent institutional and implementation arrangements for a regulatory framework

1.1.5.4 Human resourse

International experience shows that highly skilled human resources contribute

to the efficiency of business operations The importance of human resources has increased significantly due to new places and the role of the human in all sectors of society (Jurčević, 2009) A supply chain consists 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 whose results depend on the knowledge, abilities, skills, motivation Although technology replaces humans in some aspects

of logistics, there still a need for a workforce in logistics with high adapting qualifications The workers of the new era must continue to learn along with the

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trend Human resources need the necessary skills and knowledge such as basic knowledge of the industry, executive skills, negotiation skills in business, and customer care Management must focus on training employees working with new technology and practices To meet the demand of the logistics industry, governments and enterprises need to have proper training programs, which top logistics countries are good at

1.1.5.5 Finance resourse

Financial resources play a crucial role by providing funds for the growth of infrastructure industries and generating more employment opportunities in the country It is here that the financial services allow the nation to purchase equipment, train labor, invest in research and development, thereby expanding and improving the service quality Financial resources are mobilized to create preconditions and help improve scientific and technological capacity and level Thus, financial resources are a major factor affecting the efficiency of service provision, and also determine the existence and future development

1.2 OVERVIEW OF E-COMMERCE AND LOGISTICS IN E-COMMERCE 1.2.1 Definition of e-commerce and logistics in e-commerce

1.2.1.1 Definition of e-commerce

According to The Organization for Economic Co-operation and Development (OECD), e-commerce includes commercial transactions involving organizations and individuals based on the processing and transmission of such data digitized through open networks such as the Internet or closed networks with ports to open networks such as AOL

The E-Commerce Committee of Asia-Pacific Economic Cooperation (APEC) defines “E-commerce refers to the electronic transactions of goods and services exchanged between groups (individuals) mainly through systems that have Internet-based platform ”

Besides, the term e-commerce will be defined in many different ways depending on the angle of view In e-commerce, the concept of commerce is

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broadened than that of traditional commerce The range of e-commerce is very wide It reflects the development trend of the digital economy in which all forms of economic activities tend to be converged on computer networks

In this thesis, e-commerce is construed as follows: “E-commerce is the conduct of part or the whole process of commercial activities by electronic means connected to the Internet, mobile telecommunications network or other Other open networks” (According to Decree No.52/2013/ND-CP on e-commerce)

1.2.1.2 Definition of logistics in E-Commerce

Up to now, before the trend of shifting from traditional commerce to commerce of the world economy, the logistics industry has also made rapid changes

e-to catch up almost immediately with that general trend That is the birth of Electronic Logistics (e-logistics/logistics in E-commerce) - Logistics activities are effectively supported by information technology applications Logistics in E-commerce is an automated logistics mechanism or an electronic logistics service - buying goods/services on websites, is a modern solution to help businesses create a strong potential for themselves compete in the marketplace

Logistics in e-commerce are all activities that support the transportation of goods from suppliers to consumers through electronic purchase and sale transactions Logistics services mainly in trading, manufacturing, and service enterprises include: receiving shipping orders, goods gathering, material handling, commodity codes, storage, inventory control, distribution management, market promotion, and information services

Logistics in e-commerce helps build the optimal collection network, minimizing cost issues such as warehouse costs, packaging costs, transportation, inventory, reducing inventory, meeting daily requirements more and more strict customers on electronic orders, improving the competitive advantage for businesses According to AMR research (Challenger, 2001), e-logistics helps to reduce costs by 10%

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1.2.2 The necessity of logistics for e-commerce

The development and prosperity of an economy are no longer based solely on natural resources and labor, but to a large extent determined by the level of information technology and innovative knowledge Along with that trend, e-commerce appeared to change the face of the world economy because of its great influences E-commerce has broken the limits of time and space Non-stop commercial activities are a form of breaking the limits of space and time that can be done 24 hours a day, 365 days a year The second impact is that the supplier can have a direct relationship with the consumer, thus by passing the middlemen, through the Internet, they can sell directly to the user The direct relationship between the producer and the consumer helps us to know exactly what the customer wants It's the best way to keep costs down - just on-demand production that the consumer needs E-commerce has caused banks to reform the system Thanks to the internet, e-commerce has transcended national borders and moved towards the globe When the world is connected online, national boundaries are no longer commercial boundaries

If e-commerce has a significant impact on the development of logistics, logistics is also considered an important link to complete online shopping, which is

an important decisive factor in determining the success or failure of an e-commerce business So what role does logistics play in e-commerce? The characteristic of e-commerce is that all activities are done through a virtual world There is no direct meeting or exchange between buyers and sellers This is a form of buying and selling that it is difficult for businesses to understand customers' psychology and build trust and prestige with them Trust needs to be built through product and service quality, on-time delivery, and the professionalism of the shipper But e-commerce alone cannot do that, so they need the active help of logistics to achieve their primary goal of delivering the right product and quantity at the right time and place In this way, e-commerce businesses can eliminate consumers' fear of buying online, leading to an increase in the number of orders online In online goods shopping, besides quality, product prices, customer care services, delivery time is the factor that is most concerned by customers Any shopper wants to be able to

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receive the goods as soon as possible This requires e-commerce businesses to make efforts to deliver goods according to their commitments But to do this, e-commerce businesses need the support of logistics enterprises in the transport phase to improve the maximum multi-quality delivery services, increasing competitive advantages for businesses

Not only that, but logistics is also an effective tool to help e-commerce businesses calculate prices Thanks to the logistics of a forwarder, with just one click, freight rates to any geographical location will appear Based on that, businesses will calculate the selling price of goods Besides, the e-commerce logistics infrastructure system enables both customers and businesses to track and manage the status of goods, shipping costs, and expected time to receive goods Besides, in e-commerce, logistics plays a role as a bridge between businesses and customers Characteristics of the e-commerce model are high market coverage, high quantitative distribution of goods, small scale because the audience participating in e-commerce is very diverse, can be anywhere, can join this model With this feature, e-commerce businesses should have an efficient distribution system by closely linking with logistics businesses Then, thanks to the extensive distribution network, logistics businesses can easily connect sellers and buyers Thanks to logistics activities, e-commerce can easily reach all types of objects in all different geographical locations

1.3 THE MAIN ACTIVITIES OF LOGISTICS IN E-COMMERCE

Every stage of the logistics process of delivering goods is crucial from the time a parcel leaves the hands of the sender up to the moment it arrives at its destination While each step of the way should be taken seriously, there is no point more high-priority than that of the last mile delivery stage, where the goods from a transportation hub move to their final delivery destination

1.3.1 Storage

It is the maintenance of a reasonable amount of goods at the appropriate storage points in order to respond quickly to the order requirements However,

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because the needs of customers are very diverse, the complexity of inventory is also many times greater The management and maintenance of reserves should ensure accuracy, flexibility, high requirements in the application of automatic machinery and equipment In addition, the use of warehouse management software systems to maximize the support for the activities of receiving goods, checking goods, labeling/barcodes, classifying, setting up a list of goods to ensure on time and speed

1.3.2 Prepare orders

It is a system of receiving, processing and preparing goods according to orders placed from different sales channels It includes order-to-order, standard packaging for delivery The degree of application of mechanization and automation technology

in this stage is very important because it will increase supply productivity, improve accuracy, reduce customer waiting time, and improve sales efficiency

1.3.3 Shipping

This includes coordinating orders, releasing goods from warehouses to customers or couriers, and updating information to customers B2C retailers can conduct their own delivery operations if they have enough money and experience to build, train and manage a delivery team But small businesses often lack this capacity, so they will have to hire forwarding services from third-party logistics companies When delivering goods, B2C retailers often use a number of different delivery methods, which determine the amount of logistics services and how much

or less enterprises participate in electronic transactions

1.3.4 Delivery at the seller's warehouse (buy online, pick-up in-store or purchase online)

Customers come to pick up goods at the store In this way, customers go to the supplier's warehouse or store to pay and receive goods This is the most primitive method of e-commerce and is not convenient for customers However, businesses that are not able to provide logistics services can still use them

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1.3.5 Delivery method at the buyer's address (Buy online, ship to store)

This is also known as online purchase, home delivery Allowing goods to be delivered to the location requested by customers, creating convenience for customers but increasing logistics costs and resources significantly At this time, the B2C retailer will have to bear all shipping and delivery costs, in the case of limited capital and shipping capacity, it is very difficult to do

1.3.6 Dropshipping

This is a delivery method that skips shipping, which is a very optimal model, allowing businesses to buy individual products from wholesalers and ship them directly to their customers Instead of having to buy large quantities of inventory, a B2C Retailer simply partners with a supplier that can ship and catalog their merchandise for sale Then, when the order is received, it will be forwarded to the suppliers for fulfillment Suppliers will ship products directly from their warehouses

to their customers, and businesses only pay the shipping fee for the order

The advantage of this method is that it does not need a lot of capital, no inventory, fast capital turnover, and no time pressure In particular, it is suitable for B2C retail businesses that completely lack a network of warehouses, means of transport, and delivery teams because they have taken advantage of the full logistics capacity of suppliers

1.3.7 Last-mile delivery

Last mile delivery is defined as the transportation of goods from the distribution center/goods warehouse to the final delivery point, in other words, to the final consumer The goal of last-mile delivery is to transport an item to its recipient in the quickest way possible This has been driven by the continuously evolving market and demand for convenient customer experience across industries such as e-commerce Last-mile delivery has been a key factor for businesses across the globe where businesses have established a need for more effective delivery service Consumers easily look for alternatives if their logistics partners come up short in providing top-notch supply chain services including last-mile delivery

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software This is crucial in building brand loyalty that could help companies take a huge slice of the market share There are important elements involved in the last mile delivery process that customers are looking for namely the speed, timeliness, accuracy, and precision of the product deliveries after reaching their endpoint

So, what happens in the last-mile delivery? When customer makes requests or places orders on e-commerce website, all requests and orders are entered into a centralized system This is the most effective way to keep track of all items Then, goods from manufacturing line or suppliers arrive at the transportation hub or warehouse for delivery to their end users This is where the first stage of the last-mile delivery process begins Task assignments are optimized base on routes and designated to delivery personnel This is essential for a more cost-effective logistics solutions All items are scanned prior to loading onto delivery vehicles Tracking items reduces the risk of getting lost along the way Finally, records should be verifiable for deliveries that have been made Proof of delivery is obtained upon reaching end users

SUMMARY OF CHAPTER 1

Chapter 1 has briefly introduced the concept, classification, role, and some basic contents of logistics, and logistics in e-commerce At the same time, chapter 1 also clarifies the two-way relationship between logistics services and e-commerce This is an important theoretical basis as a foundation for analyzing the current situation of logistics operations in the context of the e-commerce boom and proposing solutions to develop logistics activities to meet the requirements of e-commerce in Vietnam in the next chapters

According to Vietnam Logistics Business Association (VLA), the growth rate

of the logistics industry in Vietnam in recent years has reached about 14% - 16%, with a scale of about 40 - 42 billion USD per year Vietnam's logistics costs compared to GDP in 2020 are also high compared to the world, accounting for nearly 20.9% of the country's GDP, much higher than countries in the region such

as China, Thailand, and the Philippines Moreover, it is nearly twice as high as developed countries, 14% higher than the global average Participating in the logistics market of about 4,000 enterprises concentrated mainly in two big cities, Hanoi and Ho Chi Minh City Up to now, the market share of logistics services in Vietnam is still mainly dominated by foreign enterprises, and domestic enterprises only account for 25% of the market share Many transnational logistics service providers are operating in Vietnam with big names such as DHL, FedEx, Maersk Logistics, APL Logistics, CJ Logistics, KMTC Logistics

According to VLA, under the influence of Covid-19, up to 15% of businesses have a 50% decrease in revenue, more than 50% of businesses have a decrease in the number of domestic Logistics services, and a 10% - 30% reduction in the number of international logistics services to the same period in 2019

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2.1.2 National Logistics capacity ranking index of Vietnam

In July 2018, the World Bank released its Logistics Performance Index Accordingly, Vietnam scored 3.27, ranked 39 out of 160 countries, up 25 places in rank and 0.29 points in points compared to 2016 (In 2016, Vietnam reached 2.98 points, ranking ranked 64/160) and rose to third among ASEAN countries, only behind Singapore, Malaysia, and Thailand Vietnam is a country with good logistics performance in the survey in 2018

Source: World Bank

The score reflects the current situation of improving the capacity of businesses through the application of information technology in the logistics sector According

to VLA, improving the capacity of logistics businesses through the use of information technology has achieved good results Vietnam ranks first in emerging markets and highest among low-middle-income countries All 6 criteria for evaluating LPI 2018 increased dramatically, of which the highest increase was service quality capacity (ranked 33, increased 29 ranks) and ability to track and trace goods (ranked 34, increased 41 ranks) The evaluation criteria for a very good

4 3.41 3.15 3.22 2.9 3.27

3.89 3.14 2.67 2.9 2.53 2.95

4.06 3.14 2.89 3.15 2.73 3.01

3.58 3.46 3.23 3.35 3.29 3.16

4.1 3.41 3.1 3.3 2.78 3.4

4.08 3.47

3.3 3.15 3.06 3.45

4.32 3.81

3.67 3.46 2.98 3.67

Singapore Thailand Indonesia Malaysia Phillippines

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increase are customs clearance (ranked 41, increased 23 ranks), logistics infrastructure (ranked 47, increased 23 ranks) The delivery time criteria (ranked 40th, increased 16 ranks) and the criteria for international shipments ranked 49th, increased 1 level compared to 2016) This reflects the reality of improving the capacity of enterprises through the application of information technology in the logistics sector The capacity of businesses increased to 40-50% (between 2017 and 2018) compared to the rate of 15-20% (between 2015 and 2016) Vietnam has achieved the above results thanks to the efforts of ministries, sectors, localities and manufacturing, import-export enterprises and especially logistics service providers, VLA members and VLA Association in the implementation of Decision 200/QD-TTg, find all ways to reduce logistics costs, improve service quality, improve competitiveness to strongly develop Vietnam's logistics service industry in the context of our country's deeper and deeper international economic integration

It is the result of the Government's reform efforts in creating a business environment and enhancing the competitiveness of businesses in the economy in general and in the logistics service sector in particular The Government, ministries, sectors and localities have promptly issued many policies related to logistics, on the one hand, still ensuring the role of logistics in maintaining the supply chain of goods and services; on the other hand, shaping new and even breakthrough directions for Vietnam's logistics industry, contributing to the country's sustainable development Typically, the policies of the Government and related ministries to create conditions for the logistics sector to overcome difficulties caused by the Covid-19 pandemic, contributing to maintaining supply chains, stabilizing production activities, business, specifically as follows: The Prime Minister directed: Ministries, branches and People's Committees of provinces and munnicipal cities continue to deeply grasp the spirit of "fighting against epidemics like fighting against the enemy", raising vigilance, not being negligent subjectively, strictly implement solutions to prevent and control the epidemic in accordance with Directive 05/CT-TTg issued on January 28th, 2020 and Directive 06/CT-TTg issued

on January 31st, 2020 of the Prime Minister Besides, the Ministry of Industry and Trade has Document No.709/BCT-XNK requesting the Vietnam Association of

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logistics Service Enterprises to recommend members and logistics enterprises to join hands to contribute and take supportive measures such as reducing warehousing costs, reducing transportation and loading and unloading fees so that distribution businesses, trade centers, and supermarkets can increase the purchase of agricultural products for farmers In addition, there are many policies of the government and related ministries to facilitate the logistics sector Along with that is an effort to improve from within the business itself

2.1.3 Legal policy and state management of logistics in Vietnam

Although logistics plays an extremely important role in the process of expanding production and business activities, creating conditions for other service industries to develop, but until now logistics has not been managed in a unified focal point In addition, the current legal mechanisms and policies on logistics-related activities have not yet created a link between ministries and sectors Strategies to promote the development of logistics activities of the State are only in the long-term vision and general planning, but there are no specific detailed steps for the development of the industry This creates a huge challenge for the development of logistics activities in general and logistics in e-commerce in particular in Vietnam

Overall, the legal framework regulating logistics activities in Vietnam is not really complete In the current period of economic integration, a number of legal regulations on logistics have revealed limitations, lack of updating new regulatory documents, and are no longer suitable for international logistics activities This leads to a lack of transparency in the logistics service market, unfair competition, and no conditions for sustainable development

2.1.4 Logistics infrastructure in Vietnam

2.1.4.1 Traffic infrastructure

In the supply chain, logistics is a mandatory activity at every stage, from importing raw materials, transporting materials for production, transporting products and storing warehouses (Vietnam Logistics Research and Development Institute, 2011) Logistics is responsible for ensuring the availability and

Regarding railway transport infrastructure, Vietnam's national railway network has been built and exploited for more than a century The whole national railway network consists of 7 main lines and 12 branch lines with a total length of 3,143 km (of which the mainline of the line is 2,703 km and 612 km of the railway station and branch line), stretching over the area of 34 provinces city (Ministry of Transport, 2020) The national railway system has 277 stations; including 03 types of gauge: 1,000 mm (85%), 1,435 mm (6%), 1,000 mm and 1,435 (9%) Railway density is about 7.9 km / 1000 km2 Currently, there are 02 routes connecting with the Chinese railway: at Dong Dang (Hanoi - Dong Dang line) and in Lao Cai (Hanoi - Lao Cai route) Basically, the railway industry is oriented to focus on exploiting short segments from 800 - 1200 km and places with advantages overseas

Regarding sea transport infrastructure, after nearly 20 years of implementing seaport development plans, Vietnam has formed a complete seaport system from North to South with 45 seaports, divided into six groups of the port The length of the bridge and port is about 82.6 km, the total throughput capacity is about 600 -

650 million tons, fully meeting the requirements of domestic and international sea transport (Vietnam Maritime Administration, 2020)

The Vietnamese national flag fleet is still responsible for nearly 100% of domestic cargo by sea, except for several specialized ships such as liquefied fuel and bulk cement According to statistics of The United Nations Conference on Trade and Development (UNCTAD), the Vietnamese fleet ranks 4th in the ASEAN region (after Singapore, Indonesia, Malaysia) and 30th in the world In which, the number of bulk and general cargo ships is 757 ships, accounting for more than

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72.9%; oil and chemical tankers have 159 ships, accounting for 15%; 19 ships specialized in liquefied gas, ships accounted for 1.8%; Container ship fleet has 38 ships, accounting for 3.66%; Passenger ships have 65 ships, accounting for 6.2% of the transport fleet

In terms of inland waterway infrastructure, according to the General Statistics Office of Vietnam, in the first 9 months of 2020, inland waterway transport of goods reached 238.1 million tons, down 7.6% over the same period of 2019; rotation reached 48.2 billion tons km, down 5.7% After four years of opening the coastal route, by 2020, there are a total of 1,786 vehicles carrying VR-SB class in operation, of which 839 vehicles with a tonnage of 1,742,834 tons and accounting for 0.5% of the total with inland waterway vessels

Based on the development strategy of transportation to 2020, Vietnam's inland waterways must reach a market share of 20%, equivalent to 400 million tons of cargo output, 32% of intercity freight, at present only reached 26% In 2020, capital for inland waterways will need 30,000 billion VND, of which 40% of capital will be mobilized from socialization to invest in the harbor system, the rest of the fairways will use the state budget At present, the investment in inland waterways is not much

In terms of air traffic infrastructure, by 2020, in Vietnam, there are a total of

22 airports with civil aviation operations, including 11 international and 11 domestic airports Vietnam currently has domestic airlines exploiting commercially such as Vietnam Airlines, Vietjet Air, Jetstar Pacific, Bamboo Airways, and about

70 international airlines operating commercially to and from Vietnam However, from December 2019, the Covid-19 pandemic broke out in China and quickly spread to other countries worldwide Many industries are seriously affected, especially the air transport industry due to limited travel and interrupted production and business activities Many plans to invest in new aircraft by airlines have been stopped Vietnamese airlines are also very affected because, in the Covid-19 translation, only 1-2% of the fleet is exploited During the epidemic, after having to cut or reduce passenger transportation routes, Vietnam Airlines has changed its

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direction to boost freight transportation Accordingly, the airline has increased exploitation of domestic and international freight flights to reduce losses in passenger transportation

2.1.4.2 Logistics center

Logistics hub or Logistics Center is a specific center or region that connects activities related to the transportation, organization, separation, coordination and distribution of goods for national and international transportation, on a commercial basis of different operators Logistics centers not only provide traditional operations such as storage, but also value-added logistics services such as labeling, assembly, semi-manufacturing and customization These hubs effectively combine industrial and logistics activities within the main port areas to create country- and/or-customer-specific variations

The activities of logistics centers in Vietnam are now quite diverse, which can include cargo services such as loading and unloading, warehousing, preservation, packaging, classification of goods; transportation activities such as transporting, collecting and distributing goods by means of transport or supporting activities such

as customs clearance, finance, insurance, vehicle repair and even accommodation services for partners and customers In Vietnam, along with the development momentum of the logistics industry, in recent years, the number of logistics centers has grown quite rapidly, concentrated in key economic regions associated with groups of deep-water seaports such as: Hai Phong, Ho Chi Minh City, Dong Nai, Binh Duong, Ba Ria - Vung Tau However, the reality is that most of these centers are often small-scale, with fragmented investment, local characteristics, manual and rudimentary operations, have not been synchronously planned On the other hand, the continuity between the centers is not high, the material potential as well as the management and operation skills of the entire service chain are weak In addition, the land fund for logistics centers is gradually shrinking, especially the land funds adjacent to urban areas, ports and airports; therefore, there is little opportunity to develop new logistics centers

2.1.4.3 Technology application