Tips for Running a Successful Logistics Operation in Vietnam

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Vietnam marked on map with red marker

Opening and operating any type of business can be tough, even more so if you’re trying to start one in a foreign country. The path to success isn’t always so clear, especially if you don’t speak the local language.

On the ground support is important and it’s why we at Freshport Asia have continued to be successful in Vietnam. Our associate Mathilde Tran, Retail Supply Chain Consultant, has continued to play a vital role in our organization as we have continued to expand and assist local businesses throughout Vietnam.

Mathilde has over 10 years’ experience in Vietnam; working on the field for key retail chains players. She has unique experience in retail fresh management leading design & implementation projects for fresh sourcing & distribution networks.

For a rundown of her experiences and what makes an operation successful in Vietnam, read on.

What is the current status of warehousing in Vietnam?

Warehousing facilities play a vital role in the overall supply chain process. The Vietnamese warehousing market is expected to register a positive growth of about 15% during the forecast period of 2018 – 2022. Demand for warehousing comes from Fast Moving Consumer Goods (FMCG), retail sectors and exported products such as electronic devices, textile & footwear, seafood, or wooden products. The market is further expected to be driven by a continuous flow of FDI from foreign multi-nationals and the government’s efforts towards the development of logistics infrastructure and consistent economic growth.

The rise of online shopping coupled with increasing usage of smartphones in Vietnam is expected to increase the warehousing needs for e-commerce companies in order to effectively store their products. Warehousing demand is traditionally driven by demand to store products but based on the rise of retail reach to the fast-growing middle-class urban population, the importance of hub functionality is on the rise.  Being able to consolidate, pick & pack goods for last mile delivery will be a key driver for warehousing services in Vietnam.

What are the common mistakes companies usually make in warehousing in Vietnam?

Fit to purpose warehouses are important, consider building a right fit warehouse type. Consider the investment phasing (expansion possibility) and the forecasted volumes to avoid being out of space within the first year of operations.

Proper warehouse design is even more important. We see too often warehouses that are congested because no consideration was taken for the operatorial processes (such as staging and value-added services areas). The lack of a staging area is a common mistake as well as inadequate equipment to fit the operation. An example of this is piece picking operations on pallet racking.

Designing for the best picking efficiency makes a big difference especially when it comes to ecommerce order fulfillment challenges.

Most of traditional warehouses are still relying on paper manual processes, with a lack of plans for investment into new technologies to support their processes.

Last but not least, lack of considerations on safety requirements (pedestrian walkway, resting area, forklift charging area). HSE requirements must be put back as a first critical step for any warehousing operations.

What are the common challenges in logistics operations for companies in Vietnam?

A common challenge companies will face in Vietnam is the shortage of lead operations people in the logistics field. As an example, recruiting capable warehouse manager is not an easy task, as this position requires the person to be a good leader with strong organization and management skills.

Lack of coordination between the different parties involved leads to poor planning which directly affects logistics performances. For example, misaligned planning between sales and a manufacturer makes it so they are operating in “firefighting” mode to release goods to the market on time. Logistics is often seen as only the “execution” part of the operation, with a lack of strategic direction from the company’s top management.

What is the biggest challenge in running warehouse operations in Vietnam?

Above all, I believe the biggest challenge is a lack of education and training. The need and demand for skilled and experienced logistics personnel in Vietnam is increasing at a time when the logistics sector is growing by leaps and bounds. The industry also needs advanced and affordable logistics programs to be introduced in universities, technical schools, and vocational schools. Warehousing jobs requires skills and are rapidly evolving with the introduction of new technology. Having a pool of skilled workers and managers is key to being able to run a smooth and efficient logistics operations.

What is your opinion about the technology used in logistics operations in Vietnam? 

The recent e-commerce boom has increased the focus on technology for logistics operations. Still, many logistics operations in Vietnam rely on traditional paperwork. One major bottleneck is the lack of connections between the different supply chain actors. This is highlighted with the fact that Microsoft Excel is still the most commonly used tool to transfer information from one partner to another. Furthermore, some heavily manual operations logistics process still tends to rely on low costs labor availability. This will have to evolve as minimum wage is on the rise in Vietnam.

To keep up, operations will need to increasingly adopt a warehouse management system that supports multi-location management, through effective order management, auto-refilling of inventory, auto generate purchase order to supplies and receiving automatic updates against inbound orders.

Some of the more advanced distribution centers in Vietnam are already turning to technology and robotics to help them increase efficiency, accuracy and overall productivity.

What’s different or challenging about the fresh produce supply chain?

As fresh produce is highly perishable and has a limited shelf Life, the pressure on the supply chain is high to be able to deliver fast & fresh to the market. Temperature control is crucial for fresh produce distribution to be able to preserve quality. Properly controlled cool chains are reliant on the availability & quality of cold storage and cold trucks to link the delivery steps and maintain product integrity. Food safety is also a key driver of the fresh supply chain. Preserving the integrity of food is at the heart of fresh distribution.

What are the specific challenges in fresh distribution in Vietnam?

Vietnamese cuisine is highly demanding in term of freshness. Fresh ingredients are the trademark of Vietnamese food. Fresh produce mostly comes from small farms and are produced in specific areas, so these products need to go through a complex supply chain to reach end consumers.

The fragmentation of the chain is major challenge for domestic fresh distribution in Vietnam. Linking sourcing areas to a distribution network requires effort and involvement of multiple parties. Lack of good handling practices for perishables and an absence of a proper cold chain make the fresh distribution rely heavily on a wet market style supply chain where no storage is applied and where food safety is jeopardized.

Setting up a temperature controlled fresh distribution network with investments in cold storage facilities and connection with cold trucks are crucial. Implementing a cold chain requires control over the supply chain that will inherently bring with it better food safety standards, traceability, and visibility back to the heart of perishables handling.

What are the key challenges in perishables distribution?

The main risk in fresh distribution is spoiled food which contributes to the huge issue that is food loss and waste. In fact, one-third of all food produced globally is never consumed.

Other challenges include:

  • Cross contamination
  • High delivery frequency – daily fresh access
  • Maintaining cold chain integrity – no swings to preserve the food quality (reliance on cold storage / truck availability & quality)
  • Need for transparency and visibility – temperature records and track & trace (From FIFO to FEFO)
  • Complexity & the ability to handle with care – different requirements for products. This leads to the need of high flexibility in the supply chain as mixed pallet deliveries

Interested in learning more? Contact Mathilde at mathilde.tran@freshport.asia

For more information, please contact Vietnam Trade Office in Canada at Ca@moit.gov.vn