“I declare that in submitting all work for this assessment I have read,
understood, and agree to the content and expectations of the Assessment
Declaration.”
1.
Cover Page
Course code
OMGT2279
Course name
Transportation and Freight
Logistics
Campus
Sai Gon South Campus
Semester
Semester 1 – 2023
Assignment
The Case Study-Report
Lecturer
Tram NTB
Student Name
Nguyen Minh Hoa
Student ID
S3914534
Class time
Wednesday-8h00
Word Count
2092
2. Introduction
VBC is a manufacturer of premium cola products with facilities in Ha Noi and Ho Chi
Minh. As VBC’s Director of Logistics, I will examine the transportation performance of
our existing metal supplier based in Shenzhen and a potential supplier based in
Bangkok, then I will propose a new transport model.
3. Comparison of the transportation model of both suppliers
2.1. Standard shipping
Figure 1 and 2 present the transportation models used for the Chinese supplier and
the Thai supplier respectively in standard shipping with DDP VBC Ha Noi or VBC Ho
Chi Minh Incoterms.
VBC Ha Noi
Supplier,
Shenzhen
Hai Phong Port
VBC Ho Chi Minh
Crates via sea LCL
Crates via intermodal rail
Figure 1. Standard transportation model for Chinese supplier
Supplier,
Bangkok
Phnom Penh
trans-loading
facility
VBC
Ho Chi Minh
VBC
Ha Noi
Pallets via rail
Crates via road
Crates via road or ocean liners
Figure 2. Standard transportation model for Thai supplier
Table 1 and 2 show the transit times and costs for both suppliers to both VBC
campuses, for a shipment of 20 crates (6 cbm, 30,000 kg). Considering the dimensions
of the crates (90cm x 58cm x 58cm) and that the crates can be double stacked, 20
crates can fit within a 20 feet dry container measuring 5.9m long x 2.35m wide x 2.39m
high (Blue Water Shipping (BWS) n.d.) as shown in Figure 3 (2 rows of crates per
layer x 2 layers).
Figure 3. 20 feet dry container loading for 20 crates
Looking at transit time, both suppliers have similar performance delivering to its closest
destination: 6-7 days (Ha Noi for Chinese supplier, Ho Chi Minh for Thai supplier), and
11-12 days for the farther destination.
Considering transport costs, the Thai supplier’s transport cost to Ho Chi Minh seems
to be lower than its Northern counterpart (Chinese supplier to Ha Noi), but costs for
the longer routes (Bangkok – Ha Noi, Shenzhen – Ho Chi Minh) are relatively similar
at 2700-2800 USD.
Time
Unit Cost
Total cost
Sea LCL
Shenzhen – Hai
Phong
5 days (a)
275 USD / 1 cbm/
5,000 kg (a)
1,650 USD/ 6 cbm/
30,000 kg
Rail Hai Phong –
Giap Bat (Ha Noi)
< 1 day (b)
210 USD (d)
Truck Giap Bat –
VBC Ha Noi
< 1 day (b)
5,000,000 VND/
one 20 feet dry
container (b)
Total Shenzhen –
VBC Ha Noi
6-7 days
Rail Hai Phong –
Song Than
5 days (c)
800 VND/kg (c)
1,020 USD (d)
Truck Song Than
train station – VBC
Ho Chi Minh
< 1 day
2,000,000 VND/
one 20 feet dry
container (b)
90 USD (d)
Total Shenzhen –
VBC Ho Chi Minh
11-12 days
1,860 USD
2,760 USD
Table 1. Transport times and costs for Chinese supplier
(a) Kuehne + Nagel (2023) (Annex 1)
(b) Truong Phat Logistics (n.d.)
(c) Van Tai Huong Lan (n.d.)
(d) Exchange rate USD/VND 23,500
Rail Bangkok –
Phnom Penh
Time
Unit Cost
Total cost
2-3 days (e)
16.53 USD/ton (e)
500 USD
950 USD/ one 20
feet dry container
(f)
950 USD
Road Phnom Penh 1-2 days (f)
– Ho Chi Minh
Total Bangkok –
VBC Ho Chi Minh
6-7 days
(including 1-2
days packaging
time in Phnom
Penh)
Road Ho Chi Minh
– Ha Noi
3-4 days (b)
Total Bangkok –
VBC Ha Noi
9-11 days
1,450 USD
29,000,000 VND/
one 20 feet dry
container (b)
1250 USD (d)
2700 USD
Table 2. Transport times and costs for Thai supplier
(e) Thailand Board of Investment (BOI) (2023) (Annex 2, reference to the costs
between Bangkok and ChiangMai due to the route’s similar length to Bangkok
– Phnom Penh’s)
(f) Intertrans (n.d.)
2.2. Expedited shipment
Regarding transit time, the relatively short distances between Shenzhen and Bangkok
to Ha Noi/ Ho Chi Minh mean air transport can take 1-2 days.
Regarding shipping costs, average air freight from Shenzhen to Ha Noi/ Ho Chi Minh
city is around 2 USD/kg (Shenzhen Yanghe International Freight Agency Co., Ltd.
2023) while from Bangkok to Ha Noi/ Ho Chi Minh is less than 0.91 USD/kg (Thailand
BOI 2023).
2.3. Recommendation
In this section I detail the improvement opportunities for standard shipment because
for expedited shipment we should stick to air freight.
2.3.1. For Chines supplier
To save sea transport costs, I propose using FCL instead of LCL for sea shipments
from China to Vietnam. Since the maximum payload for a 20 feet dry container is
28,200kg (BWS n.d.) while 20 crates totaling 30,000kg, I propose each shipment
contains 18 crates only which equal 27,000kg, assuming this change does not
increase material price, and does not impact VBC’s operations. Additionally, FCL will
reduce the sea transport time. LCL is generally known to take longer than FCL
because of the need to consolidate the goods and the potential extended customs
checks due to the diverse cargo types (All Cargo Logistics 2021).
For shipments to VBC Ha Noi, the cost of a 20 feet dry FCL from Shenzhen to Hai
Phong is around 700 USD and the transit time is around 3 days (Email Quotation from
Sea Rates). From Hai Phong Port, the goods can be transported to VBC Ha Noi by
rail.
For shipments to VBC Ho Chi Minh, I propose direct sea FCL shipment from Shenzhen
to Cat Lai Port. According to HP Global (2021), sea shipping time from Shenzhen to
Ho Chi Minh is up to 6 days, while rail shipment from Hai Phong to Ho Chi Minh takes
around 5 days (Van Tai Huong Lan n.d.), which means the current transportation
model for VBC Ho Chi Minh takes at least 8 days (3 days sea FCL shipment from
Shenzhen to Hai Phong, 5 days rail shipment from Hai Phong to Ho Chi Minh), not to
mention the handling time for loading and unloading goods among the different modes
of transport. In terms of cost, the cost of a 20 feet dry FCL from Shenzhen to Ho Chi
Minh is around 850 USD Email Quotation from Sea Rates) while rail transport cost for
18 crates (27,000kg) is around 22 million VND (800 VND/kg (Van Tai Huong Lan n.d.).
2.3.2. For Thai supplier
I suggest the following changes, assuming with Thai supplier we order the same
volume as the Chinese supplier (18 crates, 27,000kg, one 20 feet dry container).
The railway transport from Bangkok to Phnom Penh should be removed. Materials
should not be shipped to a transloading facility in Phnom Penh to be packed into crates
because this step adds additional time and cost and risk to the process. Instead, we
should ask the Thai supplier to use packing services as close to their manufacturing
facility as possible, preferably within Bangkok. Additionally, using rail transport from
Bangkok to Phnom Penh is inefficient. According to the Organization for Economic
Co-operation and Development (OECD) (2020), railway transport occupies an
insignificant market share in Thailand’s transportation, and the volume is shrinking
over the years. In Cambodia, the existing railway system is poorly developed, with
trains can run at the speed of 40km per hour (Xinhua 2023).
When crate packaging is established in Bangkok, I propose we use sea FCL shipment
directly from Bangkok to Vietnam (Cat Lai Port for VBC Ho Chi Minh, and Hai Phong
Port for VBC Ha Noi). According to Thailand BOI (2023), the cargo rate of a 20 feet
dry container from Bangkok to Cat Lai Port is 180 USD (Annex 3), and additional 295
USD from Cat Lai Port to Hai Phong Port (Cuoc Van Chuyen n.d.). From Cat Lai or
Hai Phong Port, goods can be transported by truck to VBC Ho Chi Minh and Ha Noi
respectively. According to Siam Shipping (n.d.), sea transit time between Bangkok and
Ho Chi Minh is around 5 days, and between Bangkok and Hai Phong is around 12
days.
2.4. Potential challenges for VBC
2.4.1. Local challenges
For VBC Ha Noi, despite its proximity to Shenzhen, the freight options from the
supplier are relatively limited. International imports and exports to Northern Vietnam
are mostly through Hai Phong Port (Nguyen and Kim 2015), so there is high risk of
port congestion. Another option in case sea or air transportation is temporarily not
available can be road transport; however, Northern Vietnam generally has rough
mountainous terrains which create difficulties for road transport (Nguyet 2022).
For VBC Ho Chi Minh, lack of proximity to China means extended transport lead time
in standard shipment. In addition, the preference for Cat Lai Port over other major
seaports in Southern Vietnam, also leads to port congestion and causes significant
delays (Das 2019). Cat Lai Port is not a deep-water port, which implies greater
transshipment costs (Das 2019).
2.4.2 National challenges
On a national level, manufacturers in Vietnam, VBC included, faces several logistic
challenges.
Generally, transport infrastructure including road, rail, and port infrastructure is not
highly developed and requires significant improvements. Our road paving rate is only
at about 20%, and the materials are of low to medium quality, leading to bumpy
surfaces and cracks, and increasing maintenance costs (ARC Group 2023). The
proportion of national highway length in the overall road network is also limited at
0.18% in 2019, leading to frequent congestion and degraded road quality (Pham and
Nguyen 2020). Our railway infrastructure is also considered backward and there is a
lack of connectivity of the railway network to major ports, causing increased reliance
on road transport (Das 2019). Our ports are less competitive in performance than other
countries in the region: Vietnam was ranked 80 among 139 countries in port
infrastructure quality from 2006-2018 (Samuel 2021).
Moreover, drug abuse is also a challenge for intra-national transport. Long-haul NorthSouth truck drivers are known to often resort to drugs to stay awake on long shifts
(Tuoi Tre News 2019).
2.4.3. International challenges
In cross-border trading, our lengthy customs clearance procedures add time and cost
to the transport process (Das 2019). According to The World Bank’s 2020 Doing
Business in Vietnam report, our time and cost to import in terms of documentary
compliance are a lot higher than the average numbers for East Asian and Pacific
regions (76 versus 53.7 hours, and 183 USD versus 108.4 USD).
4. Proposal of a new transportation model for VBC
While the new Thai supplier seems compatible to our existing Chinese supplier, I
believe we should implement a dual sourcing strategy to enjoy the benefits of both
suppliers for our 2 VBC campuses, instead of switching entirely from the Chinese
supplier to the Thai supplier.
Specifically, due to geographical proximity, VBC Ha Noi should continue to buy from
the Shenzhen-based supplier, while VBC Ho Chi Minh should start sourcing from the
Bangkok-based supplier. Expedited shipping remains the same and therefore will not
be presented, while standard shipping will be different as shown in Table 3. Because
each campus has its own staff taking care of the material purchase and logistic
procedures, I believe there should be no administrative complexities added when
dealing with two different suppliers and transport processes.
Supplier
VBC Ha Noi
VBC Ho Chi Minh
Chinese supplier
Thai supplier
Transport
▪
model
–
Standard
▪
shipping
▪
Incoterms: DDP VBC Ha Noi
▪
Sea FCL transport from
Shenzhen to Hai Phong Port
▪
Rail transport from Hai Phong
Port to VBC Ha Noi
▪
Incoterms: DDP VBC Ho Chi
Minh
Sea FCL transport from
Bangkok to Cat Lai Port
Road transport from Cat Lai
Port to VBC Ho Chi Minh
Transit
time
4-5 days (compared to existing 6- 6-7 days
7 days)
Cost
(USD)
910 USD (compared to existing 270 USD (compared to existing
1860 USD)
1450 USD)
(700 USD Sea shipment and 210 (180 USD Sea shipment and 90
USD rail/road shipment)
USD rail/road shipment)
Table 3. New transportation model
The following steps need to be taken before implementing the new model:
First, I need support from VBC’s Purchasing department to negotiate with our suppliers
to have each standard shipment volume of 18 crates instead of the current 20 crates.
This is for the weight to fit within a standard 20 feet container.
Second, I need the Thai Supplier to agree to conduct the packaging of the metal sheets
into crates inside or in an area as close to Bangkok as possible, and not to transport
them to the transloading packaging facility in Phnom Penh.
Third, I will run a tender to select a capable, cost-effective logistics service provider
who has established experience with both routes (Shenzhen – Ha Noi and Bangkok –
Ho Chi Minh).
I believe the new freight model allows us to save cost and transit time while maintaining
2 active suppliers also gives us greater flexibility during times of supply disruptions.
References
All Cargo Logistics (2021) What Do Less than Container Load (LCL) And Full
Container Load (FCL) Mean In Shipping Terms?, All Cargo Logistics website,
accessed 19 May 2023. https://www.allcargologistics.com/less-than-container-loadand-full-containerload#:~:text=LCL%20shipments%20take%20longer%20than,cargoes%20are%20to
%20be%20inspected
ARC Group (2023) Vietnam’s Supply Chain: A Comprehensive Overview, ACR Group
website, accessed 19 May 2023. https://arc-group.com/vietnam-supply-chain/
(BWS) Blue Water Shipping (n.d.) Specifications 20’ dry container, BWS website,
accessed 20 May 2023. https://www.bws.net/toolbox/container-specifications/20-footdry
Cuoc Van Chuyen (n.d.) Cuoc van chuyen va phu phi (Freight and fees), Cuoc Van
Chuyen website, accessed 18 May 2023. https://cuocvanchuyen.vn/tinhphi/start=185&end=186&sl20=1&sl40=0&sl40hq=0&type=flc
Das K (2019) Port Infrastructure in Vietnam: 3 Regional Hubs for Importers and
Exporters, Viet Nam Briefing website, accessed 18 May 2023. https://www.vietnambriefing.com/news/port-infrastructure-vietnam-3-hubs-for-importers-exporters.html/
HP Global (2021) Freight from Shenzhen to Vietnam, HP Global website, accessed
17 May 2023. https://hptoancau.com/en/freight-from-shenzhen-to-vietnam/
Intertrans (n.d.) Van chuyen hang di Campuchi gia re (Affordable goods transport to
Cambodia),
Intertrans
website,
accessed
19
May
2023.
https://www.intertrans.com.vn/van-chuyen-hang-di-campuchia/
Kuehne + Nagel (2023), myKN website, accessed 22 May 2023. https://mykn.kuehnenagel.com/
Nguyen DM and Kim SJ (2015) ‘Comparative Analysis of Container Terminals in
Northern Vietnam, 2005-2014’, Journal of Navigation and Port Research, 39(5):417422, doi: 10.5394/KINPR.2015.39.5.417.
Nguyet D (2022) Logistics vung nui phia Bac – tiem nang phat trien nho dac trung dia
hinh (Northern mountainous areas with potential logistic growth thanks to terrain
characteristics),
Vnexpress
website,
accessed
21
May
2023.
https://vnexpress.net/logistics-vung-nui-phia-bac-tiem-nang-phat-trien-nho-dactrung-dia-hinh-4459031.html
(OECD) Organization for Economic Co-operation and Development (2020) OECD
Competition
Assessment
Reviews:
Logistics
Sector
in
Thailand.
https://www.oecd.org/daf/competition/oecd-competition-assessment-reviewsthailand-2020.pdf
Pham NML and Nguyen TTH (2020) ‘The Supply Chain and Logistics of Vietnam in
the Context of International Economic Integration’, International Business Research,
13(7), doi:10.5539/ibr.v13n7p27.
Samuel P (2021) Relocating Production: Comparing Vietnam and its Regional Peers,
Viet Nam Briefing website, accessed 18 May 2023. https://www.vietnambriefing.com/news/relocating-production-comparing-vietnam-and-its-peers.html/
Siam Shipping (n.d.) Freight Thailand TH – Vietnam VN: Rates, Transit times, Taxes,
Siam
Shipping
website,
accessed
19
May
2023.
https://siamshipping.com/destination-guide/freight-from-thailand-to-vietnam/
Shenzhen Yanghe International Freight Agency Co., Ltd (2023) China Air transport
cheap freight forwarder China shipping to Vietnam HAN/SGN, Made-In-China website,
accessed
22
May
2023.
https://yhifa888.en.made-inchina.com/product/yvJnuWNVLOrC/China-Air-Transport-Cheap-Freight-ForwarderChina-Shipping-to-Vietnam-HAN-SGN-.html
Thailand (BOI) Board of Investment (2023) Transportation costs including fuel and
freight
rates,
Thailand
BOI
website,
accessed
22
May
2023.
https://www.boi.go.th/en/transportation_costs_including_fuel_and_freight_rates
The World Bank (2020) Ease of Doing Business in Vietnam, The World Bank website,
accessed
20
May
2023.
https://archive.doingbusiness.org/en/data/exploreeconomies/vietnam#DB_tab
Truong Phat Logistics (n.d.) Bang gia cuoc van tai container duong bo noi dia moi
(New container truck transport freight list), Truong Phat Logistics website, accessed
20 May 2023. https://truongphatlogistics.com/gia-cuoc-van-chuyen-container-duongbo/
Tuoi Tre News (2019) Driver of sleeper bus with 40 on board tests positive with meth
in
Vietnam,
Tuoi Tre
News
website,
accessed
21
May 2023.
https://tuoitrenews.vn/news/society/20190126/driver-of-sleeper-bus-with-40-onboard-tests-positive-with-meth-in-vietnam/48706.html
Van Tai Huong Lan (n.d.) Gui van chuyen hang hoa tu Sai Gon di ra Hai Phong bang
duong sat (Railway transport from Sai Gon to Hai Phong), Van Tai Huong Lan
website, accessed 18 May 2023. https://vantaihuonglan.vn/van-chuyen-hang-hoa/guivan-chuyen-hang-hoa-tu-sai-gon-di-ra-hai-phong-bang-duong-sat/
Xinhua (2023) Cambodia plans over $4b high-speed rail linking Thai, China Daily
Hong
Kong
website,
accessed
18
May
2023.
https://www.chinadailyhk.com/article/311783
Annex
Annex 1. Kuehne + Nagel quote for sea LCL Shenzhen-Hai Phong (accessed 22 May
2023)
Annex 2. Rail transportation costs from Bangkok (per ton) (Thailand BOI 2023)
Annex 3. Shipping Cargo Rates from Bangkok (Thailand BOI 2023)