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Logistics costs cripple Vietnam’s apparel segment

The value of Vietnam’s textile and garment exports rose 19.2 per cent in 2017 compared to 2016. However, the cost of logistics activities for textile and garment enterprises accounts for 9.1 per cent of total export turnover. Logistics costs in the country are six per cent higher than in Thailand, seven per cent more than in China, 12 per cent higher than in Malaysia and three times more than in Singapore.

Despite reasonable labor costs, Vietnam’s competitiveness has been affected by transport costs, surcharges at seaports, and limited seaport infrastructure. Regulations on fees and charges for logistics services are high, making transport costs also relatively high, accounting for between 30 and 40 per cent of the cost of products, compared to some 15 per cent in other countries.

In addition, the surcharges of shipping lines also contribute to the cost of logistics operations in the country. Expanded costs for logistics have significantly affected the garment and textile industry, which employs a large number of labourers and is hugely dependent on input importation, which results in low added value.

To address these challenges, many firms have applied technology to better manage warehousing and optimise supply chains. One of the most commonly used technologies includes backing up bills and contracts, and automatically transferring documents between firms. Logistics enterprises are working to improve their competitiveness, and consider cooperating in transport services to reduce costs for other enterprises.