1 "I declare that in submitting all work for this assessment I have read, understood, and agreed to the content and expectations of the Assessment Declaration." LIST OF ABBREVIATIONS AGVs Automated Guided Vehicles B/L Bill of Lading CIC Container Imbalance Charge CIF Cost, Insurance and Freight DDP Delivery Duty Paid D/O Delivery Order EXW EX Works GMS - CBTA Greater Mekong Sub-Region Cross Border Transport Facilitation Agreement HCMC Ho Chi Minh City LSS Low Sulphur Surcharge O/F Ocean Freight SRT Saigon Railway Transport SZX Port of Shenzhen THC Terminal Handling Charge 2 VBC Vina Bubbles Cola VRS Vietnam Railways System TABLE OF CONTENTS INTRODUCTION ..................................................................................................................................................................................4 TASK 1 ................................................................................................................................................................................................4 1. Standard Shipment Comparison................................................................................................................................................4 2. Expedited Shipment Comparison .............................................................................................................................................7 3. Challenges ................................................................................................................................................................................9 3.1. Transportation delays and delivery tardiness....................................................................................................................9 3.2. Energy cost escalation and fierce competition ................................................................................................................ 12 4 Recommendations ................................................................................................................................................................... 12 4.1. Chinese supplier ............................................................................................................................................................. 12 4.2. Thai supplier ................................................................................................................................................................... 13 TASK 2 .............................................................................................................................................................................................. 15 CONCLUSION ................................................................................................................................................................................... 19 REFERENCES ................................................................................................................................................................................... 20 APPENDICES .................................................................................................................................................................................... 27 3 INTRODUCTION This report aims to determine the preferable supplier for VBC regarding lead time and cost by comparing and contrasting various transportation modes offered by Shenzhen and potential Bangkok suppliers. Afterwards, recommendations are formulated to both suppliers for further improvements, followed by a new logistics strategy concentrating on route and carrier selection. TASK 1 1. Standard Shipment Comparison VBC metal is packaged in 15 wooden crates, with the dimensions of 150cm length x 70cm width x 50cm height for each. Therefore, a 20-foot container measuring 6,10m by 2,44m is advisable for carrying (Jeremy and Somasiri 1993), with detailed calculations in Appendix 1. Moreover, cycle time and expenses are deciding factors in the transportation evaluation process (Kour and Basu 2017). Table 1 illustrates thorough comparison of these determinants between Chinese and Thai suppliers in standard conditions: Chinese supplier Thai supplier 4 Transportation mode Sea (Shenzhen Haiphong) Rail (Haiphong Hanoi) Rail (Hanoi HCMC) Rail (Bangkok - Phnom Penh) 24 hours (Bradley 2017) 2 days 17 hours (Ports 2023) Transit time Lead time Benefiting from 4 hours (VRS ASEAN - China FTA, 2024) customs process takes less than one day (BPOC 2016). Port turnaround duration is 18 hours Loading/ in China and 20 unloading time hours in Vietnam (Statista 2022). Total lead time Cost Delivery cost 1 hour (SRT 2014) 3 days (RATRACO 2023) Thanks to GMS-CBTA, customs clearance lasts less than one day (OECD and WTO 2015). It requires one day for wooden crate packaging (Sancopack 2022). 1 hour (SRT 2014) 1 hour (SRT 2014) 8 days 13 hours Shipping Whale (2024) specified Transportation cost is $22 Road (Phnom Penh HCMC) Road (HCMC - Hanoi) 7 hours (Google Maps 2024) Vietnamese customs procedure for imports averaged 36 hours (SGGP 2023). 2 hours (DHL 2024) 2 days (Trans 2023) 2 hours (DHL 2024) 7 days Transportation cost is $366 Transportation cost is calculated at $350 It costs $1059 to Transportation deliver goods fee is offered at 5 Shenzhen to Haiphong O/F is $200. (Appendix 3). Additional expenditure at SZX primarily includes B/L fee ($150) and seal fee ($4) (CMA CGM 2023). (RATRACO 2023). Shipment fee to central Hanoi is $224 (RATRACO 2023). Shipment fee to central HCMC is $163 (RATRACO 2023). $20 (MT 2022) $20 (MT 2022) (Appendix 4). (Appendix 5). Customs clearance fee is estimated at $15 (CamTrans 2024). Customs clearance requires $1 (Vietnam Trade Portal 2024). $20 is required for wooden crate packaging (WPL 2022). $693 by Tran (2023), covering all expenses such as toll fee, handling fee, fuel cost, etc. Surcharges in Haiphong encompass CIC ($50), D/O ($40) and cleaning fee ($6) (Samudera 2023). THC is computed at Loading/ $109 in SZX and Unloading cost $115 in Haiphong. Total cost $79 (CMA CGM 2022) $1489 $20 (MT 2022) $2237 Table 1. Chinese and Thai suppliers’ standard shipment 6 Figure 1. Vietnam Railway Network connecting Haiphong, Hanoi, HCMC (VRS 2020) Evaluation Despite an impressive cost advantage of $748 provided by Chinese supplier, it failed to satisfy the delivery deadline. Since VBC is a premium manufacturer valuing seven-day shipment punctuality, Thai vendor demonstrates superior viability. 2. Expedited Shipment Comparison Air shipment is the favorable mode of expedited transportation thanks to the highest feasibility of two-day or next-day delivery requirements (Dajana et al. 2022). To shorten transportation distance, avoid double customs and eliminate transit time, direct flights from Shenzhen to Hanoi are recommended. 7 Regarding Bangkok supplier, Thailand-Cambodia rail route is maintained for the metal to be packaged in Phnom Penh. Subsequently, two concurrent airplanes transfer the materials straight to HCMC and Hanoi. Despite expensiveness, air freight benefits from simplified customs procedures, accelerated transport duration and top-notch reliability (GH 2020). Further comparison in time and cost of expedited delivery employed by two vendors is elucidated below. Chinese supplier Transportation mode Time (including loading/ unloading time, customs clearance, etc.) Total lead time Cost Total cost Air (Shenzhen - Hanoi) Air (Hanoi - HCMC) 27 hours (Fluent Cargo 2024) 24 hours (Dolphin Services 2022) Thai supplier Rail Air Air (Bangkok - Phnom Penh) (Phnom Penh - HCMC) (Phnom Penh - Hanoi) 24 hours (Table 1) 2 days 3 hours $47,250 (HPW 2022) $18,729 (Nasco Express 2022) 25 hours (Fluent Cargo 2024) 27 hours (Fluent Cargo 2024) 2 days 1-3 hours Total cost deriving from the above calculation is $464. $48,566 (NEX 2024) $65,979 $48,566 (NEX 2024) $49,030 Table 2. Chinese and Thai suppliers’ expedited shipment 8 Evaluation Although two vendors carry products in a similar period, Thai supplier offers a more affordable price by $16,949, highlighting significant competitive advantage over Chinese. 3. Challenges Besides cost and time, VBC’s supply chain could incur considerable influence from these following threats. 3.1. Transportation delays and delivery tardiness From a global perspective, transport interruption might start from extreme weather or traffic overload in Shenzhen (Yao et al. 2021; Cao and Lam 2019). WSC (2021) ranked it as the fourth busiest seaport worldwide. To alleviate the burden, SZX has implemented various cutting-edge technologies, notably AGVs, surveillance, port access control and weather monitoring systems (ITF 2021). Meanwhile, substandard infrastructure in Thailand, Cambodia, and Vietnam poses major obstacles to the freight movement of Bangkok supplier. Infrastructure development of these nations lags behind their economic growth (Nasim et al. 2022). This raises prominent issues, notably disconnections among transportation modes, severe road deterioration, and incomplete traffic regulations. For instance, the national Vietnamese railway has been outdated since establishment in 1881, featuring 14,000 safety-violated positions (Dang 2021). Consequently, cargoes encounter intense vulnerability during transportation and significant risk of accidents. Together with inefficiencies in current incoterms DDP and EXW, suppliers and VBC might face difficulties in undertaking cross-border duties, particularly language barriers and legal ignorance, which probably retards the delivery process (TWB 2020). 9 Considering a local viewpoint, overburden of personal vehicles in Hanoi and HCMC frequently causes bottlenecks in harbors, airports, industrial and residential zones (Nguyen and Nguyen 2021). This impedes VBC’s manufacturing process and last-mile delivery, provoking customer dissatisfaction (Cihan et al. 2017). 10 Figure 2,3,4. Supervision at Chinese ports using 5G Cloud Computing (Cyrus 2023), RFID weather monitoring system and AGVs (Le et al. 2023) Figure 5. Vietnamese degraded train crossed densely populated areas (Pham 2022) 11 3.2. Energy cost escalation and fierce competition The ongoing global recession has eroded Vietnamese purchasing power (McKinsey 2023), while fuel and commodity expenses have surged under the impact of Russia-Ukraine war (Le 2023). Simultaneously, the domestic soft-drink industry witnesses dynamic competition with numerous players, noticeably Coca-Cola, Pepsi... striving to offer the most affordable price (VietnamPlus 2023). This necessitates VBC formulating an economical transportation strategy to minimize costs while preserving outstanding quality, since transportation constitutes 60% of logistics spending in Vietnam (VIRAC 2023). 4. Recommendations To mitigate interruption risk, VBC should constantly update geopolitical situations and natural disasters, combined with supervising and evaluating suppliers’ delivery performance to identify potential disruptions (Ross et al. 2016). Cultivating seller-buyer partnership is also advisable to proactively and promptly tackle unexpected scenarios. Furthermore, supplier diversification can complement each stakeholder’s deficiencies and diminish VBC’s passivity in DDP (Golmohammadi and Hassini 2020). Based on above analyses, the report proposes Thai vendor as the primary source, and Chinese being the alternative supply, with recommendations for each to economize time and cost: Chinese supplier To resolve lengthened transportation, they should leverage trucks instead of trains to transfer materials. According to Kemal and Saygili (2021), road shipment is optimal for short distances between Haiphong-Hanoi (120km), and provides greater flexibility in departure time and routes. This allows door-to-door delivery to VBC buildings, saving loading time from trains to transit cars. 12 Meanwhile, Shenzhen-Haiphong maritime course is retained thanks to both ports’ proximity and continuous schedule (Pham and Yeo 2018). Consequently, transportation time is remarkably reduced to 7 days 13 hours, given a marginal price increase of $166. Shenzhen - Haiphong Transportation mode Sea (Current) Haiphong - Hanoi Rail (Current) Road (Recommended) Hanoi - HCMC Rail (Current) Road (Recommended) 3 days 1 hour 2 days 2 hours (Table 1) $549 $693 (Table 1) It takes 4 hours in total, comprising 2Time 5 days 7 hours 5 hours hour transportation (Nitoda 2021) and 2-hour handling materials (DHL 2024). Cost $674 $266 $288 (Nitoda 2021) Table 3. Suggested route for Chinese supplier Thai supplier For Phnom Penh-HCMC transmission, barges are more promising than trucks in lessening transportation expenditure. Hoang (2023) articulated that Vietnam-Cambodia ocean shipment expenses are 50%-60% lower than other methods. Following this replacement, the overall transportation cost of Bangkok vendor plummets to $1517, showcasing price competitiveness against Chinese ($1489). 13 Phnom Penh - HCMC Transportation mode Road (Current) Sea (Recommended) On-board time is 2 days (5StarTrans 2023). Time 2 days It takes 2 hours to load and unload cargo (DHL 2024). Total expenditure is $414, including: Transit fee ($120) Freight pick-up cost ($36) Cost $1080 Delivery to VBC warehouse in HCMC ($18) (Gemadept 2017) THC ($120) LSS ($40) Document charges ($40) Telex release ($30) Seal fee ($10) (Fast Shipping 2023) Table 4. Suggestion for Thai supplier 14 TASK 2 This section focuses on outlining a thorough logistics plan for Thailand vendor as the major supply. To remedy limitations of DDP and EXW, VBC should adopt CIF to allocate power to both parties (Piltz 2019). To elaborate, Bangkok supplier takes responsibility until materials reach HCMC, including transportation, customs fees and product insurance. Then, VBC organizes paperwork, pay customs expense in Cat Lai Port and distribution to their factories. Consequently, both could share risks and exploit their competence. For implementation, trucking became the temporary solution during the construction of Thailand-Cambodia railway. Given this route, road shipment proves fastest and low-priced compared to other approaches (CargoRouter 2024). Specifically, a 20-foot lorry of AGS transfers 26.25 tonnes of metal pallets from Bangkok supplier warehouse to the packing station in Phnom Penh. After parceled in wooden crates, materials are shifted to Phnom Penh Port and boarded to Cat Lai Port by Gemadept. These harbors are chosen thanks to close distance and enormous capacity to handle overweight cargoes (CMA CGM 2023). From Cat Lai, Gemadept conveys half to VBC manufacturer in HCMC, while TruongNam delivers the rest to VBC Hanoi. Detailed timeline, budget and rationale for carrier selection are demonstrated in Table 5. This plan enables intermodal connectivity by utilizing the optimal transportation mode for each route, thus facilitating timeliness, affordability, practicality and quality assurance. 15 Carrier TRUCK BARGE TRUCK Thai supplier (Bangkok) Packaging Factory (Phnom Penh) Phnom Penh Port (Phnom Penh) - Cat Lai Port (HCMC) Cat Lai Port (HCMC) VBC’s Warehouse (Hanoi) AGS Movers Gemadept Truong Nam Logistics (TNL) Total transit time and customs clearance takes 25 hours (JICA 2013). Time Wooden crate packing demands one day (Sancopack 2022). 2 days 2 hours (Table 4) 2 days 2 hours (Table 1) 1 hour is spent on loading/ unloading materials (SRT 2014). Total time Cost Total cost 6 days 6 hours $439 (BOI 2023) $414 (Table 4) $693 (Table 1) $1546 16 AGS gained 15-year experience in Cambodia and 26-year experience in Thailand (AGS 2024). Reliability Having offices in Bangkok, Phnom Penh, HCMC and Hanoi, AGS could seamlessly work with VBC, suppliers and manage cargoes at both ends. Reasons for choosing Diverse services Their all-in-one package ranges from transportation, packing, customs clearance, documentation to storage, with well-trained staff and 24/7 tracking (AGS 2024). Established in 1990, Gemadept spearheaded cross-border water shipment, being the most reliable domestic carrier (Vietnam Report 2021). TNL accumulated 26-year expertise in transporting goods nationwide, with branches and warehouses in HCMC and Hanoi (TNL 2024). It has operated Phnom Penh - HCMC route Transparent contracts and since 2004, with consistent weekly compensation policies protect schedules and cutting-edge technologies VBC and guarantee timely (Figure 6). intact delivery (TNL 2024). Besides barge shipment that ensures arrival time, Gemadept conducts customs procedures, freight loading/ unloading, warehousing and door-to-door delivery (Gemadept 2024). TNL provides end-to-end transportation without external charges and tailors shortest routes (DaNang News 2022). Table 5. Carrier and Route Selection 17 Figure 6. Technologies adopted by Gemadept (Gemadept 2017) Figure 7. Suggested route visualization 18 CONCLUSION In recapitulation, Chinese vendor gains cost effectiveness yet suffers from overdue dispatch, while Thai supplier deliver materials timely with extravagant budget. Besides, both confront multi-level threats related to transportation disruptions, namely congestion in Shenzhen, inferior infrastructure systems in Southeast Asia and Vietnamese railway degradation. Accordingly, specific recommendations are developed to overcome each weakness. By substituting trucks for trains, Chinese supplier better suits VBC requirements for seven-day shipment. Nonetheless, since VBC prioritizes promptness, Bangkok supplier should become the fundamental source. Consequently, a comprehensive transportation strategy is devised with carrier nomination and route customization following VBC supply chain activities. Bringing to execution, this plan enhances competitive advantages for VBC by curtailing abundant expenses and accelerating the entire SC process. 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APPENDICES 26 Appendix 1: Calculations for selecting 20-foot container ● Volume of one crate of metal: 150cm x 70cm x 50cm = 525,000 cm³ = 0,525 m³ ● Volume of 15 crates: 0,525 x 15 = 7,875 m³ < Maximum volume of a 20-foot container (approximately 33 m³) ● Total weight of 15 crates: 1750 x 15 = 26250 kg < Maximum weight of a 20-foot container (28,280 kg) Appendix 2: Surcharges for an imported 20-foot dry container in Port of Haiphong (Samudera 2023) Appendix 3: Calculation of railway transportation cost from Haiphong to Hanoi Railway transportation cost from Ha Noi to HCMC is 366 USD (Appendix 4). The railway distance from Ha Noi to HCMC is 1730 (Phuong 2023). 27 Hence, railway delivery fee from Haiphong to Ha Noi, with a distance of 102km (VNPay 2023), is calculated at 102 x 366 / 1730 = $21.58. Appendix 4: Calculation of railway transportation cost from Bangkok to Phnom Penh The distance between Bangkok and Phnom Penh is 647 km (Google Maps 2024). Referring to the above table (BOI 2023), railway transportation cost for this route is $13.3 per ton. Therefore, the total cost of moving 26.25 tons would be 13.3 x 26.25 = $349. 28 Appendix 5: Calculation of roadway transportation cost from Phnom Penh to HCMC (Referred to JICA, MOT and TDSI 2000) Transportation cost of 26.25 tons of metal through a distance of 230 km from Phnom Penh to HCMC is 4,300 x 26.25 x 230 = 25,961,250 (VND) = $1059. 29