CHALLENGES AND INNOVATIONS IN VIETNAM’S TRUCKING SECTOR AMIDST ASIAN LOGISTICS EVOLUTION

Asia's transportation sector, a pivotal element in the region's economic framework, faces rising operational costs. This trend and its countermeasures were highlighted in the recent "Fleet Futures" event in Ho Chi Minh City, hosted by CEL.

Vietnam's Trucking Industry at a Crossroads

In 2023, Vietnam's Logistics Performance Index (LPI) ranking decreased by four places to 43rd, compared to 39th in 2018. Despite this drop in ranking, Vietnam's LPI score increased to 3.3 points from 3.27 points in 2018, indicating gradual improvements, particularly in customs efficiency and infrastructure quality. This ranking reflects the impact of the COVID-19 pandemic on the logistics sector, with disruptions in the supply chain and transportation. In Vietnam, trucking plays a vital role in the national economy, responsible for 77% of the country's freight movement amounting to a volume of over 1.5 billion metric tons. The network of roads and highways in Vietnam has a total length of 570,448 km. Vietnam has over registered 1,5 million trucks. However, it confronts challenges like high logistics costs (21% of GDP) and environmental impacts due to older, smaller trucks contributing to greenhouse gas emissions and traffic congestion.

Policy Interventions and Technological Integration

To address these challenges, policy recommendations include fleet modernization, enhanced driver training, and infrastructure improvements for diverse transport modes. The integration of digital technology, such as automated toll collection, is seen as key to enhancing operational efficiency and cost-effectiveness.

Growth Amidst Challenges

Despite the challenges, the Vietnam Freight and Logistics Market is expected to reach USD 45.19 billion in 2023 and grow at a CAGR of 6.34% to reach USD 65.34 billion by 2029. Vietnam's trucking sector experienced significant growth in early 2023, with a 16% increase in freight transport volume and a near 22% increase in turnover, year-on-year. This growth, however, coincides with rising costs, partly due to increasing fuel prices, as evidenced by the 1.98% rise in Brent crude oil prices in 2021.

Survey Insights: Operational Hurdles

A CEL survey of 143 trucking businesses in Vietnam highlights critical operational issues like route optimization inefficiencies, high vehicle maintenance costs, and driver shortages coupled with wage increases. Approximately 28% of respondents identified route optimization inefficiencies as a major concern, highlighting the pressing need for more efficient and streamlined logistics planning. Additionally, 16% of respondents cited driver shortages and wage increases as significant challenges, underscoring ongoing labor issues within the transportation industry. Rising fuel prices, along with vehicle maintenance and repair costs, continue to be pressing concerns for 12% of businesses, emphasizing the economic strain associated with these factors. These factors point towards a need for more effective logistics management.

The Road Ahead: Sustainable and Efficient Practices

Looking forward, the sector is aiming to diversify transportation methods, reducing reliance on road transport and exploring water, air, and sea alternatives. This shift is mirrored in the broader Asia-Pacific logistics market, known for its diverse range of services.?

Transportation currently contributes 10.8% of total CO2 emissions, with road transport responsible for 85% of emissions. By 2030, there's an ambitious goal for 100% of road vehicles to use E5 gasoline and eventually transition to 100% electric and green energy-powered vehicles by 2050. These initiatives aim to combat rising emissions. Moreover, traffic congestion presents substantial economic challenges, with HCMC losing billions annually, and Hanoi facing a $1.2 billion loss due to congestion. Addressing these issues is crucial for economic growth and environmental preservation, making sustainable practices and alternative transport methods essential for the future of the sector.

Innovations Leading the Way

Technological advancements are at the forefront, companies across Asia are leading the way with groundbreaking innovations. Yamato Holdings has revolutionized its operations by integrating GPS tracking and telematics across its fleet, achieving a 10% reduction in fuel consumption and boosting delivery efficiency. Similarly, Delhivery in India leverages data analytics for route optimization, effectively cutting travel distances by 15%. This focus on efficiency is mirrored by Singapore's ComfortDelGro, which, through advanced fuel management systems, has achieved a 12% decrease in fuel costs.

The move towards eco-friendliness is further exemplified by Alibaba's partnership with SAIC Motor in China for deploying electric vehicles, markedly reducing fuel expenses and carbon emissions. In South Korea, Hyundai Merchant Marine's adoption of real-time management systems has resulted in a 20% reduction in idle times, enhancing cargo handling efficiency. Nippon Express in Japan sets a high standard in driver safety and performance, decreasing accidents by 25% through intensive training programs. These innovations, along with emerging technologies like DiBee's fuel management system and SimCEL DELIVER's route optimization solutions increasing transport efficiency 10%-35%, are pivotal in transforming the logistics sector, emphasizing operational efficiency, cost-effectiveness, and sustainability.

2024 Transportation Outlook: Balancing Uncertainty and Growth

The transportation sector faces a mixed outlook for 2024, with businesses bracing for potential cost increases and others expecting stability. Around 35% of businesses expect significant cost increases, while 23% anticipate stable costs. About 15% foresee a slight increase, and a small 2% expect a decrease, with 25% uncertain. Rising fuel prices, driver shortages with associated wage hikes, and inefficiencies in route optimization are primary challenges impacting operational costs. Additionally, vehicle maintenance, and regulatory compliance costs add to the financial strain. These challenges underscore the dynamic nature of the logistics sector, influenced by economic shifts and market trends. Companies are focusing on innovative strategies and efficient planning to navigate these complexities and capitalize on growth opportunities in the evolving industry landscape.

Amidst economic uncertainties, any efforts to enhance efficiency, reduce emissions, and explore sustainable alternatives are highly valuable. The industry's ability to adapt, innovate, and implement these changes will not only lead to cost savings but also contribute to a more sustainable and resilient future, ensuring its continued growth and success.

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