Đề tài Real situation and Logistics applicability in freight forwarding of Haiphong Port – Recommendations to improve performance

prices for food, while producers in the surplus region face a market glut. Regional variations in agricultural prices are especially pronounced within country like Vietnam, in which interior regions are poorly connected or inaccessible. Good internal logistics facilitates surplus commodity shipments from surplus to shortfall regions, smoothing prices variations between them and providing a kind of insurance against shortage and glut. Better market access appears to dampen price volatility for a broad range of products. Validity in goods prices between city pairs riser with the distance between the cities, and is especially large for city pairs across national borders. Essentially, arbitrage is necessary to narrow price differentials across locations, and this is much harder to achieve when logistics are poor. 1.2.4.3. Reduced inventory costs. Better transport and logistics system not only lower the costs of delivery, but also make the timing of delivery more reliable. Producers cannot manufacture goods without the inputs they need, and retailers cannot sell goods they do not have in stock, so if delivery times are uncertain, firms must hold large inventories of goods. The first reason for long and uncertain delivery times is poor infrastructure – roads may be impassable, and railways nonexistent, or roads may cause damage to trucks that involve high costs and long delays. Another reason is peak load congestion – a severe problem in areas where population and manufacturing intensity have grown faster than infrastructure capacity. In Ho Chi Minh City, for example, the government bans trucks heavier than 2 tons in the inner city between 6 a.m. and 6 p.m. to combat growing traffic congestion, and thus manufacturers must hold large inventories all day rather than delivery midday shipments, and trucks sit idle during the day. This contrasts with modern just- in - time techniques, in which deliveries are continuous, and the transport capital stock is in constant use. Leaner production techniques require a substantial flow of information. Manufacturing firms can only run with small inventories of inputs if they are certain where and when the next shipment will arrive. In turn, this requires sophisticated electronic data interchange. 1.2.4.4. More developed markets. Well-developed logistics increase consumers’ choice and producers’ sources of supply, and bring more markets within producers’ reach. According to the statistics of International Exhibition Logistics Associates, 40% of trade growth in East Asia arises from offering new product lines and extending exports of existing product lines to new trading partners. Products diversification benefits both agricultural- and industrial- based economies, since for both specialization in narrow range of products can be dangerous because of prices volatility. According to the Global Competitiveness Report 2005-2006 (World Economic Forum), most of the differences in trade levels between small and large economies can be attributed to differences in the range of goods that are traded, and that much of the growth in imports that results from lowering trade costs come through expansions in the set of products available. The welfare benefits from expended product variety can dwarf those from standard calculations of the gains from trade. Better logistics allow variety expansion in several ways. First, they may directly lower the fixed cost of expansion. There are significant scale advantages to providing transport hubs, warehousing, and logistics services that many firms can share. Second, by lowering the marginal costs of serving markets, it is possible to increase sales and spread entry costs over more units. The diversification argument also applies across markets, as reliance on single export destinations leaves firms subject to significant business cycle risks. CHAPTER 2: HAIPHONG PORT AND LOGISTICS SERVICES 2.1. Overview of Haiphong port 2.1.1. Establishment and development Haiphong ports was founded in 1876, with original name is Ben Sau Kho. Over 121 years of existence and development, port of Haiphong has always played the most important role of the “Border gate” interface in the North of Vietnam. Import and export cargoes to and from North of Laos and South of China, have been transferred via Haiphong Port to the markets of many countries and vice versa. Haiphong port has the biggest cargoes throughput among the ports in the North of Vietnam. The port is equipped with modern facilities and equipments and has safe, sufficient infrastructure which meets all international modes of transport and trade. The estimated cargo throughput of Haiphong Port in the 2005- 2010 period is from 12.000.000 tons to 18.000.000 ton per year. The Head Quater is at number 8A Tran Phu Street, Ngo Quyen district, Haiphong city. 2.1.2. Scope of business activities In Haiphong port, handling operation areas are located based on the infrastructure advantages such as railway, high way, and inland waterway. These areas are installed and equipped with modern and advanced handling equipments which are suitable to every kind of cargoes, meeting the demand for different models of transport. Main services of Haiphong port: Cargo handling, forwarding and logistics. Ship towage and assistance International container transshipment Forwarding and transporting agent Transporting containers from Haiphong to Laocai and vice versa by railway Bagging, packing, and transporting cargoes by sea, highway, and inland waterways. Ship agent and marine brokerage 2.1.3. Organizational structure Haiphong port is operated like a big state-owned company. The leader of Haiphong port is General Director who is responsible for all activities in the Haiphong port. There are four Deputy General Directors who support General Director in four sectors: business, operation, engineering, and port rehabilitation project. Separating to the General Director and Deputy General Directors are functional departments. For example, Business department, Accounting department, Technical department, Agent shipping and brokerage department, Human resources department, etc. Besides these functional departments, Haiphong port has five enterprises which mostly responsible for cargo handling services. They are: Hoang Dieu, Le Thanh Tong, Chua Ve and Bach Dang Stevedoring Enterprise. Each functional department is controlled by a manager. 2.1.4. Situation of business activities Haiphong port continuously improves its methods of providing services to customers, increases handling productivity, cuts short procedures of cargo delivery and receipt as well as applies advanced methods of management in order to enhance the quality of services, minimize cost and time for customers. Therefore, Haiphong port’s throughput has increased through years. Table 2.1 Haiphong port throughput from 2001-2006 2001 2002 2003 2004 2005 2006 Export throughput 1,336,393 1,365,476 1,757,845 1,792,446 2,349,119 2,925,092 Import throughput 4,357,606 5,266,554 5,401,516 5,365,624 5,196,931 5,198,669 Domestic thoughput 2,881,513 3,669,293 3,358,601 3,325,623 2,965,007 3,127,601 (Source:Annual report of Haiphong port’s business department -unit:billion tons) Haiphong port throughput from 2001- 1006 From 2004, Haiphong port faced some difficulties and more fierce competition due to the appearance of several ports in the North of Vietnam, such as Transivina, Greenport, Quangninh port. Although these ports are smaller than Haiphong port, market share of Haiphong port has reduced. Haiphong port also suffers several damaged due to natural calamities through the year of 2007. Table 2.2 Market share of Haiphong port from 2001- 2006 (turnover 1000 tons) Year 2001 2002 2003 2004 2005 2006 Turnover 8575 10314 10518 10486 10512 11000 Market share 79.3% 75.35% 68.84% 58.87% 54.29% 53.11% (Source: Annual report of Haiphong port’s business department-2007 ) Haiphong port ensures to provide all clients with services of high quality through the effective application, maintenance and operation of the Quality Management system acclaimed the standards of ISO 9001- 2000. At the same time, the port continuously improves and upgrades the infrastructure and invests in modern facilities to enhance the quality of services to meet all requirements of clients with the motto: “Productivity- Quality- Safety- Effectiveness” Fully exploiting the advanced equipment, Haiphong port try to offer a wider range of services to its customers. Besides the every effort of Haiphong port, the development of Vietnam in the stage 2001- 2006 brings Haiphong port more opportunities to push forward its services, especially forwarding services. Handling cargoes and forwarding are traditional services of Haiphong port, while logistics is a new service applied in freight forwarding; However, this type of service has been continuously developing in Haiphong port. 2.2. Freight forwarding and logistics services in Haiphong port. 2.2.1. Advanced condition of Haiphong port for logistics applicability in freight forwarding. 2.2.1.1. Geography. Haiphong port embraces a lot of advanced condition for logistics applicability. Firstly, it is the geographical condition. Haiphong port has always plays an important role of the “Border Gate” interface in the North of the country. It locates on the International maritime road. From Haiphong port, we can easily and conveniently transport or have cargoes transported to other ports on the world by sea rout, or to main economic zones by sea rout or to main economic zones of Vietnam or to the South of China by inland waterway, railway and national highways with the shortest time and in the most efficient manner. Table 2.3 Distance from Port of Haiphong to some main seaports. Seaport Knots Seaport Knots Danang 320 Klang 1528 Saigon 799 Penang 1730 ZhangZiang 200 Busan 1749 Hongkong 500 Vladivostok 2114 KaoShiung 940 Tokyo 2349 Bangkok 1390 Sydney 5560 Singapore 1442 Roxtexdam 9770 (Source: Agent shipping and brokerage department- 2006) Further more. Haiphong port is located in Haiphong city, one of the most highly developed cities of Vietnam. Haiphong city is linked to other cities by the convenient transport systems: road, railway, water and airline. Therefore, Haiphong city is central transportation of the North; link other cities of the North to world market by Haiphong port. 2.2.1.2. Material condition. Haiphong port has the biggest cargo throughput among the ports in the North of Vietnam. The port is equipped with modern facilities and equipments and has safe sufficient infrastructure which meets all international modes of transport and trade. Haiphong port has total 14 safe berths with 2215m in length, having depth alongside from -8.5m to -8.7m with total area of 36550 m2. The warehouses are divided into specialized areas, which are suitable for storage, handling, and transportation of each kind of cargo. Of these warehouses, there is a standard Container Freight Station (CFS). Haiphong port has 7500 m2 warehouse with, which are used for cargo consolidation and distribution of LCL containers and a storage yard with total area of 394000 m2 includes 223000 m2 of container yard, used for container stacking and storage and 171000 m2 for steel, equipments, bulk, cargoes and other cargoes. 2.2.1.3. IT system and equipment. Haiphong port is equipped with modern technology. These technology and equipment are very necessary for developing logistics service in Haiphong port. In Haiphong port, the Management Information System (MIS) has officially been put into operation at all departments, divisions and sections like: operation, cargo receipt and delivery, equipment protection and maintenance, operational and financial accounting. MIS is applied at 3 main areas of Haiphong port, 18 buildings and more than 50 functioning departments. Furthermore, Haiphong port has applied the Custer Sever HP TC 4100, which operates 24 hours a day Beside 3 other servers are in reserve at affiliate enterprises, 233 affiliated computers are linked together and they are also linked to the Head quarter where it is used by more than 400 officers on the local area network 100 Mps ( fiber optics cable/ UIP) and WAN 2 Mps (bonze cable is used to link between ChuaVe terminal and Management Building at No 8A Tranphu street) 2.2.1.4. Abundant human resources. Logistics is a new kind of service in Haiphong port. Although Haiphong port lacks thorough knowledge about Logistics as well as professional logisticians, staff of Haiphong port is over 400 people, mostly graduated from Maritime University. These staff are knowledgeable about transport, shipping and etc; they can meet the requirements of logistics services. Because logistics service requires many staff, who understand about transportation and forwarding. 2.2.2. Applying logistics in freight forwarding in Haiphong port. Haiphong port is not the first company supplying logistics services in freight forwarding in Vietnam. However, Haiphong port is trying their best to make full-advantage of its advanced conditions to develop logistics service. Because Haiphong port is aware of the huge benefits from logistics services. At present, logistics providers in Haiphong port receive the cargoes from other shipper in the port. Moreover, after that, they will bag, pack and transport the cargoes on demand. It is different from in the past, Haiphong port just handled the cargoes and gave it to the shippers. Haiphong port has been providing rail carriers services for decades. However, they only transport containers form Haiphong to Lao Cai and vice versa by railway. With the rapid growth in neighboring ports as domestics and cross-border trade, rail carrier service in Haiphong port has gained popularity among shippers, importers as an invaluable alternative for freight services. The containers rail service has seen a remarkable growth in Haiphong port. Total rail cargo handled in Haiphong port recorded a growth of 15.5% , equivalent to 463,889 tons in 2006. In Haiphong port, coastal and ocean freight services play an important role in International shipment of goods. International shipments handled in Haiphong port are more than 75% of marine tonnage. In July 2007, the port has signed an agreement to cooperate with KaoShung port in China. So, in the next years, Haiphong port will provide containerized freight services, conventional freight services (for bulk carriers) to Kunming and KaoShung in China. With the advantage of material conditions such as large warehouse, yard, berth and modern equipment, Haiphong port is extending their services. In other words, Haiphong port is trying to apply logistics services in freight forwarding. Haiphong port is one of the few enterprises in Vietnam is equipped Electronic Data Interchange (EDI) system. The time delivery of goods is reliant on the smooth flow of documents. Documents can and do get held up at several intersections in the transport process. EDI system enables the directly exchange data and expedite the clearance of goods. In order to realize the full benefits from EDI, all the key players in the logistics channels must be integrated electronically into the system. However full integration has not taken place yet in Vietnam. Many logistics companies in Vietnam do not have this system because the cost for applying EDI system is expensive, which obviously increases their logistics cost. So, it is very difficult for Haiphong port to coordinate with other logistics companies. At present, Haiphong port provides logistics services in 2nd Providers Logistics (PL). Meanwhile, in the world, professional logisticians are called 4th PL logistics providers who manage the “supply chain process” - the process of planning, implementing and controlling the efficient cost, effective flow and storage of raw materials, in process inventory, finished goods, and related information form point of origin to point of consumption for the purpose of conforming to customer’s requirement. It shows that logistics services in Haiphong port are at the first stage of development. However, by applying logistics services in freight forwarding, Haiphong port has reduced the cost of transport and increased the trade. Therefore, the total cargoes delivered by the port has continuously increased through years. Figure 2.4 Container Volume (TEU) from 1995 to 2006. (Source: Haiphong port’s business department -2007) Haiphong port is trying to improve its logistics service in order to meet the international standards. At present, Haiphong port is using the loan from Japanese ODA Fund ( through the Japanese bank for International Cooperation) to invest in building a new access channel which has depth of 7.3m, building 2 more new berths at Chuave Terminal, one enterprise of Haiphong port and buying handling equipments. Therefore, in the near future, it is hopeful the logistics service of the port will develop and meet the international standards. CHAPTER 3: RECOMMENDATIONS TO IMPROVE PERFORMANCE OF FREIGHT FORWARDING SERVICES IN HAIPHONG PORT 3.1. Some comments on difficulties of Haiphong Port and some possible causes Logistics services of Haiphong port is at the first stage of development. It is desultory, lack of integration. Like many logistics providers in Vietnam, Haiphong port acts as 2PL logistics provider. We cannot compare 2 PL logistics providers with 3 PL or 4 PL logistics providers like APL logistics. This show that the underdevelopment of Haiphong port in the term of scale of activities and logistics experiences. Besides that, Haiphong port does not have cooperation with other firm in logistics sector. Meanwhile, the logistics service requires a lot of capital for training and high tech equipment. Haiphong port has not really attracted many customers in using logistics service of the port. 3.1.1. Transportation infrastructure of Vietnam Infrastructure is one of the most important key to support logistics development. At present, the transportation infrastructure of Vietnam is underdeveloped in comparison with other Asian countries. Table 3.1:Availability of transport infrastructure Country Total roads (1000 km2) % roads that are paved Railways (km/1000km2) Number of airport with paved runways longer than 1523m/1000km2 Vietnam 283.1 25.1 9.5 45.5 Malaysia 196.1 75.3 5.5 63.7 Korea 888.9 74.7 31.7 375.7 Thailand 125.7 97.5 7.9 75.9 Indonesia 178.5 46.3 3.4 32.8 (Source: Policy research Corporation (2005)) The table above shows that, transportation infrastructure of Vietnam is poorly integrated. The number of total roads of Vietnamese is not a small number, but the percentage of paved roads is rather small. This is a really challenge to transporting. Highway no.5A built in 1998 which links Haiphong city to Hanoi has no longer suitable for container transportation or multimodal transport. This highway is only used for containers less than 30 tons. Meanwhile, international standard TEU (ISO 668) is 20 tons for 20-foot containers and 30.5 tons for 40-foot containers. Haiphong port is equipped with modern technique, computer system. However, the intermodal transport system of mostly other neighboring districts are poorly integrated, with no streamline procedures to support the seamless movement of containers between coastal and inland areas. Many of them lack containers freight stations, yards, and trucks in their inland regions. 3.1.2. Legal framework. The law dealing with logistics service in Vietnam is plentiful. However, logistics activities are stipulated in the Commercial Law 2005, from article 233 to article 240. But the articles lack stability, consistency. Therefore, it creates many additional problems for logistics firms. They are not clearly about their rights and obligations as well as their scope of activities. 3.1.3. Capital. Logistics service requires a lot a capital for training and equipments. Now, Haiphong port has 6 cranes: 2 Gantry cranes (with lifting capacity is 40 tons), 4 Rubber Tyred Gantry Crave 40 tons, 2 floating cranes 10 – 80 tons. Each crane costs 4.5 to 6.5 millions USD. Meanwhile, Singapore port has 100 cranes, which cost 8.5 to 11 million per each. EDI system has been used in Haiphong port. However, many users in the port complain that the EDI system in Haiphong port is not consistent with international EDI system, resulting in double logging. It does not only incur cost but also impose unnecessary delays for the efficient movement of cargo. If equiping a new EDI system, the port has to spend a huge amount of money. Meanwhile, Haiphong port is mobilizing capital on the Port rehabilitation project. This project will be finished in 2010. Therefore, at present, Haiphong port lacks capital for developing logistics service. 3.1.4. Human resources. In every industry, human resources and knowledge are the keys to success. An enterprise cannot meet their goals nor perform the task efficiently if they lack skilled workers. Logistics is a new kind of service in Vietnam, so the skillful labors for this service is still very poor. In Haiphong port, almost staff has knowledge about shipping industry, forwarding, but they do not have thorough knowledge about logistics. Almost of them have to learn by themselves to improve the logistics knowledge. Haiphong port does not have any certified professional logisticians. The port also has not sent any staff into oversea training course. So, they understand about logistics vaguely and inaccurately. Some of them think that freight forwarding and logistics are the same. 3.1.5. Competition Some large Vietnam maritime companies such as Vietnam Ocean Shipping Company (VOSCO), Vinaship or Falcon Shipping Company- which have managed to develop their own brands and gradually adapt to help from reliable foreign partners. Nevertheless, most local companies appear unable to compete with bigger shipping lines. Haiphong port competes not only with foreign firms like Wanhai Lines, APL, but also with large Vietnam maritime companies like Vinaship or Vosco. Furthermore, at present, Haiphong port is mobilizing capital and human resources on” the rehabilitation of DinhVu and ChuaVe project”. Therefore, in this year, logistics sector has major opened to foreign players such as Wanhai Lines, APL logistics. 3.2. Recommendations. 3.2.1. To the government. Logistics is a kind of service, which can bring huge benefits for society. So, Vietnamese government should set up logistics strategies and put forward policies to attract more investment in logistics. Firstly, the government should improve the transportation infrastructure of Vietnam in order to meet the international standards. For example, the high way 1A needs to be rebuilt to meet international standards TEU (ISO 668), for 30.5 tons and 40 feet container. At present, this high way can only be used for less than 30tons containers. Besides that, the government can support logistics enterprises in term of high technologies or capital to rebuild or enhance their equipment for logistics like warehouse, yard, and IT system. Secondly, the government should offer tax incentives to logistics services and logistics providers. For example, the government can reduce the income tax for logistics enterprises or reduce export and import taxes when they use logistics services of local logistics enterprises. This method will stimulate the Vietnamese logistics providers to develop their service. Information technology (IT) is considered as a key factor for the development of logistics. However, according to the assessment of World Bank, the IT system of Vietnam is underdeveloped and the cost of this service is rather high. For example, with Asymmetric Digital Suberibers Lines (ADSL), connects 24/24, speed 1.5 – 2.0 Mbit/s, Vietnamese has to pay 250 USD per month, and meanwhile, Chinese has to pay 24 USD/month. Few Vietnamese enterprises have EDI system, which is very necessary for logistics service. EDI systems enable directly exchange data and expedite the clearance of goods. Therefore, the government should develop the IT system to support logistics service effectively. An EDI system among ports of Vietnam and other terminals in the South East Asia need to be set up. Furthermore, the government should improve the internet system to modernize communicating system by ADSL, which helps transferring information among enterprises quickly and accurately. The government should enforce legal provisions to facilitate logistics development. In concrete, Vietnam should have legal provisions, which guide logistics providers to implement the articles in Commercial Law 2005 on logistics. It is necessary to explain more clearly and accurately such things as logistics definition, logistics