The Quiet Backbone of Economic Growth: Supply Chains in Vietnam
In the vibrant city of Ho Chi Minh, a recent seminar highlighted a critical aspect of Vietnam’s economic landscape: supply chains. Organized by Central Retail Vietnam and FM Logistic, the event drew over 100 business participants to discuss the seamless connective tissue that holds the economy together. Mike Reid, Chief Supply Chain and Logistics Officer at Central Retail Vietnam, aptly described supply chains as the “silent enabler” of business strategies. When functioning optimally, they propel prosperity; conversely, when limited, they can act as a brake on economic advancement.
Fragmented Foundations
At the seminar, Oliver Langlet, Group CEO of Central Retail Vietnam, pointed out a significant challenge: Vietnam’s supply chain remains fragmented and lacks a robust foundation. This fragmentation hampers the efficiency and fluidity of logistics and distribution. In recent years, the government has taken strides toward modernizing the logistics sector, but much work remains. Following the merger of administrative units, Ho Chi Minh City is poised to emerge as a critical regional logistics hub, thanks to extensive infrastructure improvements, including new ring roads and upgraded seaports.
The Role of Modernization
The government’s vision for the logistics sector emphasizes modernization, digitalization, and green growth. Central Retail Vietnam is aligning with this vision by pursuing centralization in production, digitizing processes, and investing in environmentally friendly logistics solutions. Reid noted that in the food sector, where modern trade represents less than 15% of the market, there exists an enormous potential for transformative growth.
Interestingly, even with 1.5 million trucks—double that of Thailand—Vietnam transports only half the volume of goods. Much of this inefficiency stems from businesses’ focus on short-term costs, causing an over-reliance on short contracts and neglecting long-term investments.
Benefits of Centralized Distribution
One important strategy discussed is centralized distribution. Instead of making numerous smaller, inefficient deliveries, businesses can leverage a centralized approach to reduce costs. By utilizing full truckloads directed to single points, companies can diminish traffic congestion and improve end-to-end efficiency. This method not only conserves resources but also streamlines operations, allowing for real-time visibility into product availability—essential for maximizing stock and driving sales.
Moreover, reduced fuel consumption and emissions follow from consolidating deliveries, making the logistics process more sustainable. Collaborative models will also enhance business reach across provinces, ensuring a wider array of products and services are accessible to consumers.
Embracing Digital Transformation
Hamza Harti, Managing Director of FM Logistic Vietnam, emphasized the crucial role of digitalization in modernizing logistics. Advanced technologies can transform how supply chains operate, fostering transparency and flexibility. This technological transformation is essential for advancing modern retail in Vietnam. Harti acknowledged the importance of the country’s youthful logistics workforce, reiterating the commitment to collaborate with local universities to nurture future talent.
National Competitiveness and Challenges Ahead
Nguyễn Thành Nam, Deputy Director at the Ministry of Industry and Trade, reiterated the significant role of supply chains in bolstering national competitiveness. With Vietnam increasingly becoming a preferred destination for multinational companies, the need for a more cohesive logistics system is pressing. However, the nation faces challenges: logistics costs as a percentage of GDP remain higher than the regional average, and connections between domestic and foreign-invested enterprises remain limited.
The uneven application of digital innovations—like big data and artificial intelligence—further complicates matters. Forecasting, risk management, and sustainability within supply chains are areas that still require enhancement. To combat these challenges, key strategies have emerged.
Future Directions
Proposed directions for improvement include developing synchronized infrastructure alongside a digital platform that integrates advanced technologies such as blockchain, the Internet of Things (IoT), and AI. The aim is to heighten transparency, refine forecasting capabilities, and optimize operations across the supply chain.
Additionally, fostering strategic partnerships among businesses in the logistics and supply chain sphere is paramount. Collaborative efforts can pave the way for shared resources, knowledge transfer, and ultimately, enhanced competitiveness both domestically and globally.
In conclusion, as Vietnam steers its focus toward a modern, centralized, and sustainable supply chain, the collaborations formed in settings like the recent Ho Chi Minh seminar will be essential in shaping a prosperous economic future.