x You are working in the Logistics industry and need to know clearly what logistics costs are?
How to calculate? x Are you wondering why logistics costs in Vietnam are higher than in many other regions?
x Do you want to know the current status of logistics costs in Vietnam and the most reputable Logistics and Import-Export Service provider?
PROSHIP.VN will answer your Business's questions raised above about logistics costs, and we will also point out the most outstanding strengths of our unit when performing transportation services, import and export of goods by air. International railway. Here, Proship also connects with many specialized units to optimize logistics costs as much as possible to benefit related parties. Thanks to that, your business's trade and import/export plans are always highly effective.
Shipping contact hotline:
Ms Tien: 0909 986 247
Ms Dung: 0939 999 247
Ms Duy: 0902 581 247
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What are Logistics costs?
What are logistics costs? Logistics costs are the use of various resources, including human resources, goods, money, and information to perform customer care services; it is calculated by the amount of money consumed. This cost is often associated with the circulation and distribution of raw materials and goods, so in documents, people often talk about distribution costs (the purpose of goods circulation) as another term for costs. circulate. Although there are some differences, we can temporarily consider them as equivalent.
Logistics Costs include: Transportation costs - accounting for one-third to two-thirds of distribution and circulation costs; Opportunity cost of capital – the minimum rate of return a company earns when capital is not invested in inventory but in another activity; and Goods preservation costs – including costs for renting warehouses, preserving goods, bringing goods in and out of the warehouse, damaged goods, and insurance for goods.
How are Logistics costs calculated? Why are logistics costs in Vietnam increasing?
How are logistics costs calculated?
For every market, the selling price of goods (G) to consumers must ensure at least compensation for costs (C). Therefore, the basic formula to calculate Log costs you need to understand:
G ≥ C1 + C2 + C3 + C4 + C5 (1)
In there:
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- C1: Cost of producing goods. This is the basis for determining the selling price of EXWORK;
- C2: Marketing activity costs;
- C3: Transportation costs;
- C4: Capital opportunity cost for inventory;
- C5: Cost of preserving goods.
So, Logistics costs will include: Clog = C3 + C4 + C5.
* Transportation costs: C3
Transportation costs account for a fairly large proportion of total Logistics costs and as mentioned above, they account for about ⅓ to ⅔ of circulation and distribution costs. Although the transportation industry always has policies and regulations to try to reduce transportation costs with technological solutions such as building new vehicles, transporting goods by containers, large-capacity equipment, organizing multimodal transport... but transport costs still cannot be reduced due to escalating fuel prices.
This forces Manufacturers to apply many measures aimed at reducing transportation costs. One of the most appropriate measures is to increase the ability to use equipment, tools and means of transport by packaging goods and designing products to increase the loading density of goods. .
* Capital opportunity cost for inventory: C4
The opportunity cost of capital for inventory is the minimum rate of return that a company receives when capital is invested in an activity other than investing in inventory. To make it easier to understand, we assume that the minimum return on capital is the interest rate paid when borrowing capital from a financial institution, so C4 is determined in the formula below:
C4 = (qikv)t [(1+r)t-1] (2)
In there:
- qi: Is the number of products per shipment;
- kv: Capital norm for one product unit. This capital level depends on production technology;
- t = 1/m: Is the number of time units subject to annual interest rate of inventory (month or year);
- r: Is the interest rate payable on loan capital.
Looking through formula (2), we can see that C4 depends on the capital market (r), production technology (kv), stored products and volume of materials. Assuming r and kv are both constant, C4 will be proportional to qi, that is, the smaller qi is, the smaller C4 will be and vice versa.
* Cost of preserving goods: C5
The cost of preserving goods will include the cost of renting a warehouse, transporting goods in and out of the warehouse, damaged goods, and insurance for goods. That cost is determined by the following formula:
C5 = qi.Tbq.glk + qi.kg + Cbh (3)
In there:
- Tbq: Is the storage time in warehouse of shipment qi;
- glk: Is the average cost for one unit of goods stored per day;
- k: Is the proportion of damaged stored goods;
- g: Is the value of the inventory unit;
- Cbh: Insurance costs for warehoused goods.
Looking at formula (3), we see that the cost of preserving goods (C5) has a positive relationship with qi. If the value of qi and storage time t is small, this cost C5 is also small and vice versa.
Why are logistics costs in Vietnam high?
- Many businesses do not hire an outside 3PL logistics service provider but organize their own transportation. That means having to spend a large amount of capital on building warehouses, purchasing equipment and means of transport, but the operation process is difficult to reach a professional level, making it ineffective and difficult to recover. capital – high logistics costs. Meanwhile, outsourcing solutions help save costs;
- Many business owners do not properly appreciate the role of the logistics supply chain: Therefore, the logistics management department is often combined into other administrative departments, making the process of controlling logistics costs unsystematic and goods arriving. consumers go through many intermediaries, causing high transportation costs;
- The members in the supply chain do not have close coordination with each other: Because a close relationship between suppliers and manufacturers, between manufacturers and customers has not been formed, the parties only know what to do. direct relationship to yourself - resulting in increased transaction costs, increased selling prices...;
- The infrastructure system has not been invested synchronously, many places still do not meet traffic safety technical standards, and the roads are narrow, so traffic jams occur frequently. Although the country has 266 seaports, only 20 ports are equipped with enough equipment and experience in loading and unloading containers to participate in receiving container ships importing and exporting international goods;
- Multimodal transport combining the advantages of each type of transport is not popular in Vietnam, so transport costs still account for a large proportion.
>>See more: What is green logistics?
What is the current status of logistics costs in Vietnam?
In general, the current situation of logistics costs in Vietnam still has many shortcomings such as not paying attention to the role as well as many weak infrastructure. As follows:
Infrastructure is still weak
Our country currently has over 17,000 km of asphalt roads, more than 3,200 km of railways, 42,000 km of waterways, 266 seaports and 20 airports. However, the quality of the traffic network is not consistent, in many places technical standards do not ensure traffic safety. Although there are 266 seaports, only 20 seaports can participate in the import and export of international goods. Most of these ports cannot receive commercial container ships because they lack enough equipment and experience in loading and unloading containers...
Regarding the mode of transport, air transport is not yet popular, mainly by road. However, as mentioned, this traffic system cannot be used for heavy goods transport because the roads are narrow, the technical quality is not high, and the transport capacity is too low, traffic jams often occur. . Many industrial parks have been built, but there are no roads or the industrial parks are located too far from the seaport system, increasing the cost of transporting goods.
Rail transport currently only carries passengers mainly. With a system of two different rail gauges (1 m and 1.43 m), this means of transport cannot be used to transport high-weight goods and takes a lot of time (the North-South railway trip takes up to 32 hours). Water transport is mainly by barge, low cost, safe, with few accidents, but shipping time is long and customers are still not interested in this form of transport. In addition, the combination of different modes of transport (multimodal transport) to combine the advantages of each mode of transport is not popular in Vietnam. For those reasons, it is natural that total logistics costs (mostly transportation costs) are very high.
This situation leads to very different retail prices across the country. A common trend of Vietnamese Enterprises (and export Enterprises in particular) is that they do not want to take risks, so the selling price of goods is only based on the FOB selling price of the origin, that is, sold from home. machine without including transportation costs, meanwhile, to keep the retail price consistent across the country, it is necessary to apply the FOB destination selling price, which is the price of goods plus average transportation costs. from the point of sale to the customer's warehouse, so that landed costs are the same.
Therefore, to reduce production costs for businesses and lower product prices, it is necessary to reduce logistics costs. Our country's logistics costs in 2011 were estimated at more than 25 billion USD. Thus, if only 1% of costs can be reduced, it will benefit the Enterprise and the country a significant amount of money.
Not paying attention to the role
The current situation shows that many Vietnamese companies have not fully exploited the advantages brought by logistics, and some businesses have not even seen the important role of logistics in reducing production and business costs. Logistics has a close connection between Marketing, production, inventory, transportation and distribution. However, many businesses arrange the transportation function in the administrative department, inventory management in the accounting and finance department, and the purchasing function in the marketing or sales department, etc. Such disjointed functional departments make the Enterprise's management of these functions also disjointed. Therefore, it is necessary to form a separate department for logistics/supply chain so that managers of this department can coordinate closely with other functions.
In Vietnam, goods have to go through too many intermediaries, from the stage of supplying raw materials for production, to the stage of distributing goods to consumers, increasing transaction costs and increasing selling prices. In this chain, all participating parties try to profit for themselves, and because of lack of information, members of the chain only know that there is a party that has a direct relationship with their Enterprise and do not know the other members. The result is inflated logistics costs.
On the other hand, the distribution system focuses mainly on urban areas, but leaves out rural areas. Distributors are only responsible for short distance transportation and agents must take care of their own transportation issues. Furthermore, the arrangement of the retail network is relatively dense in urban centers, while large warehouses are too far away, and because most businesses are not aware of the role of Each type of warehouse, such as primary, secondary, and central, results in either low transportation costs but high inventory holding costs or vice versa, either of which also increases total logistics costs.
Another issue of concern is that businesses are not in the habit of using outsourcing services such as customs clearance agents, accounting agents and 3PL outsourcing services, but mainly do it themselves. When an enterprise provides its own services, invests in building a warehouse racking system or purchasing means of transportation, it will require a lot of investment capital and it will be difficult to reach a professional level. While exploitation capacity is low, capital recovery is slow, ineffective and logistics costs increase.
Shipping contact hotline:
Ms Tien: 0909 986 247
Ms Dung: 0939 999 247
Ms Duy: 0902 581 247
Professional, Cheap, and Prestigious import-export transportation service by rail at PROSHIP Joint Stock Company
PROSHIP is proud to be one of the pioneers in the field of E-Logistics. With the multi-modal transport model, we pay special attention to applying 4.0 technology to each stage of operational and business activities. This has helped the unit create professional, high-quality Transportation, Logistics, and import-export services of goods, best meeting all domestic and foreign customer needs.
With a team of dedicated, dynamic, creative, experienced staff and fully invested railway and road infrastructure such as container tractors; trucks of all types 2T, 5T, 8T and 15T, forklifts and cranes and warehouse systems in convenient locations for goods rotation such as Ho Chi Minh City, Binh Duong, Dong Nai, Da Nang, Hanoi. From there, we contribute to providing transportation solutions that suit all of your criteria and requirements.
In particular, logistics costs are also carefully calculated to be as optimal and economical as possible to minimize any fees that may arise during the import and export process of goods. In addition to dry goods, we also transport cold goods by rail self-propelled refrigerated containers with a cold storage system that meets the required standards (applicable to items such as meat, fish, seafood, fruits, vegetables). fruits, medicines, cosmetics, preparations, etc.). With a solution that saves up to 25-30% of refrigerated container shipping costs.
In order to improve the capacity of transporting goods by international rail transport, Proship Joint Stock Company also increased the means of transporting goods, including 170 P cars to carry gasoline and all kinds of liquid goods; 20 NR wagons carrying cars; 50 high-walled H-cars with open hooks transport all kinds of goods, containers, etc. Containers are manufactured using the latest technology, scientifically treated with insulation, and constructed with good materials to better preservation of goods.
In addition, we also support Logistics Services such as entrusted import-export services, warehousing services, logistics, etc. to meet diverse services for customers in their plans to transfer export goods to other countries. Potential markets such as Mongolia, China, Kazakhstan, Russia, Italy, Germany, Poland, Netherlands, United Arab Emirates,...
Proship specializes in importing and exporting common goods by rail
- Transporting agricultural products such as beans, cassava, rice,... all kinds of fruits and vegetables;
- Transporting fresh and frozen seafood of all kinds;
- Transporting electronic equipment and electronic components;
- Transporting high-demand goods such as chemicals, western medicine, veterinary medicine, etc.;
- Transporting industrial goods..;
- Transporting mechanical products...;
- Transporting household appliances...;
- Transporting plastic beads and plastic products...;
- Transporting letters, wedding invitations, records, papers, documents, invoices, books, and publications;
- Transporting construction materials for projects, houses, factories;
- Transporting cups, bowls, ceramics, etc.;
- Transporting personal luggage, fashion accessories, clothes, shoes, bags, hats,...;
- Transporting supplies, machinery, and construction materials for projects, houses, and factories;
- Transporting components, electronics, laptops, tablets, Ipads,...;
- Transporting machinery, components, spare parts, etc.;
- Transporting large quantities of wooden furniture, interior and exterior decorations, etc.
The customers Proship wants to target
- Forwarding agent;
- Importing unit;
- Product supplier.
How to transfer and deliver international intermodal containers
- Transporting full containers from Station to Station;
- Transporting goods by Container from Station to Warehouse;
- Transporting goods by Container from Warehouse to Warehouse;
- Other accompanying services if requested by the customer.
Receive goods collection/delivery in provinces and industrial parks in Vietnam
- Northern region: Hanoi, Bac Ninh, Ha Nam, Hai Duong, Hai Phong, Hung Yen, Nam Dinh, Thai Binh, Vinh Phuc, Ninh Binh, Hoa Binh, Son La, Dien Bien, Lai Chau, Lao Cai, Yen Bai , Phu Tho, Ha Giang, Tuyen Quang, Cao Bang, Bac Kan, Thai Nguyen, Lang Son, Bac Giang, Quang Ninh,...;
- Central region: Da Nang, Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Quang Tri, Thua Thien Hue, Quang Nam, Quang Ngai, Binh Dinh, Phu Yen, Khanh Hoa, Ninh Thuan, Binh Thuan,...;
- The South: Ho Chi Minh City, Ba Ria - Vung Tau, Binh Duong, Binh Phuoc, Dong Nai, Tay Ninh, An Giang, Bac Lieu, Ben Tre, Ca Mau, Dong Thap, Hau Giang, Kien Giang, Long An, Soc Trang, Tien Giang, Tra Vinh, Vinh Long, Can Tho,...;
- Central Highlands region: Kon Tum, Gia Lai, Dak Lak, Dak Nong, Lam Dong, Buon Me Thuot,...;
- Or at large industrial parks in Vietnam: Phuoc Dong, Duc Hoa III, Nhon Hoi Binh Dinh, My Phuoc 3, Tan Khai, Minh Hung, Dong Xoai, Tan Phu Trung, Ham Kiem, Binh Thuan, Bau Xeo, Loc An - Binh Son, Giang Dien, An Tay, Bim Son, Long Duc, Du Long, An Hoa; Long Huong, Tam Diep II, Song Cong 2 Industrial Park, North Dong Phu Industrial Park, Thuan Yen Industrial Park,... and potential Export Processing Zones and Industrial Clusters stretching from North to South.
Process of transporting, importing and exporting goods by Proship container
- Step 1: Receive goods information from customers via 0909 344 247 or Email;
- Step 2: Conduct a survey of customer orders;
- Step 3: Send a quick, detailed quote for customers' reference;
- Step 4: When both parties agree, sign an official contract and proceed with the shipping process;
- Step 5: Track and update customers on the order's travel route;
- Step 6: Deliver goods to customers, make payment and end the container shipping contract.
In the case of sending dry consumer goods for export to other countries, you need to pay attention
- Keep the Manufacturer's original packaging and full labels proving origin;
- Clearly state the ingredients and expiration date on the packaging;
- Consumer goods are packaged in carefully moisture-proof and vacuum-sealed boxes;
- The production facility must have a production and business license and complete warehouse import and export records;
- The product is not expired or contains banned substances.
Through the knowledge and information that PROSHIP has conveyed, individuals and businesses have grasped the current situation of logistics costs in Vietnam as well as what logistics costs are and why logistics costs in Vietnam are so high. So from there, there will be a timely and effective adjustment plan... And when your unit needs to find and rent Logistics services, import and export of goods by cheap railway containers, contact us immediately at the Hotline inside. Below, let the Sales and Customer Service departments advise on the most optimal and economical shipping solution. This will help your trading plan take place more quickly and smoothly.
Shipping contact hotline:
Ms Tien: 0909 986 247
Ms Dung: 0939 999 247
Ms Duy: 0902 581 247
