course international transportation and logistics group project comprehensive transportation and logistics analysis of buon ma thuot city

Scope of work:Task 1 Describe transport infrastructure of Buon Ma Thuot City for available modes of transport Road transport overview, main road, infrastructure condition, development or

HO CHI MINH CITY INTERNATIONAL UNIVERSITY

SCHOOL OF INDUSTRIAL ENGINEERING & MANAGEMENT

Phạm Khôi Nguyên – IELSIU19222

Huỳnh Thiện Nhân – IELSIU19224 Hồ Văn Việt Nhật – IELSIU19226 Trần Huỳnh Tố Nhi – IELSIU19054

Vũ Thị Ngọc Nhi – IELSIU19055

HCM, December 2022

Table of Contents

I Introduction 4

II Transport infrastructure of Buon Ma Thuot city for available modes of transport description 8

III The shipment’s multimodal transport operation 15

IV External factors’ influences on Vietnam’s logistics industry and solution 36

V Conclusion 53

VI References 54

VII Appendix 55

Table of Figures

FIGURE 1:BUON MA THUOT CITY MAP 6

FIGURE 2:NATIONAL HIGHWAY 14 CONNECTION 9

FIGURE 3:NATIONAL HIGHWAY 16 CONNECTION 10

FIGURE 4:NATIONAL HIGHWAY 27 CONNECTION 10

FIGURE 5:THE DETAILED SHIPMENT IN ROUTE 1 18

FIGURE 6:THE DETAILED SCHEDULE OF SHIPMENT FROM CAT LAI TERMINAL TO LAUSANNE BY MAERSK 22

FIGURE 7:THE COST QUOTED BY MAERSK 22

FIGURE 8:THE DETAILED SHIPMENT IN ROUTE 2 24

FIGURE 9:THE DETAILED SHIPMENT IN ROUTE 3 28

FIGURE 10:MACRO LOGISTICS SYSTEM 43

FIGURE 11:LOGISTIC INFRASTRUCTURE IN RELATION TO GDP AND INVESTMENTS 44

I Introduction

1 Objective:

This project has several objectives One of the objectives is to research and describe the transport infrastructure of Buon Ma Thuot City for its available transportation modes Another objective is to recommend 3 alternatives for the multimodal transport operation of a shipment from Buon Ma Thuot City to a European city Finally, this project evaluates some external factors’ influences on Vietnam’s logistics industry and recommends at least 3 solutions for further improvement

2 Scope and limitation:

2.1 Scope of work:

Task 1 Describe transport infrastructure of Buon Ma Thuot City for available modes of transport

Road transport (overview, main road, infrastructure condition, development orientation)

Define framework Week 4

Search case, purchase order, sales contract, trade document related to coffee cargo

Week 4

Clarify shipment info and cargo specification Week 5

Find possible routes and corresponding transportation modes

Week 6

Find route information (distance, lead time, cost, document, 3 PLs, etc.)

Week 7

Task 3 Evaluate the impact of some external factors’

influences on Vietnam’s logistics industry and suggest at least 3 solutions for further improvement

List external factors that impact Vietnam’s logistics industry

2.2 Gannt chart:

3 Buon Ma Thuot City overview

Buon Ma Thuot city, situated in the Central Highland of Vietnam, is known as the capital city of Dak Lak province It accounts for about 2.87% of the natural area of Dak Lak province The city boundaries are defined as follows: Cu M'Gar district in The North borders, Krong Ana and Cu Kuin districts In the Southern border, Krong Pak district in the eastern borders; Buon Don and Cu Jut districts (Dak Nong province) in the western borders

Buon Ma Thuot city is divided into 13 wards and 8 communes Several industrial parks and clusters are located surrounding the city such as Hoa Phu, Phu Xuan Industrial Park, Ea Dar, Tan An, and Ea H’Leo industrial cluster, which attract a large number of investors and contribute to the area's economy With a large number of industrial parks and groups, the demand for transporting goods to factories and for its customers in these sites increases This attracts many logistics service providers in Buon Ma Thuot City and Dak Lak province

Buon Ma Thuot has its advantages in coffee production, with an output of over 550,000 tons of green coffee per year Another principal industrial crop in Dak Lak is rubber, which greatly impacts the region's growth, stability, and export turnover, with an annual output of over 34000 tons The products are exported to several nations in the world including Germany, the Netherlands, Malaysia, the United States, and China Overall, the agricultural products of Buon Ma Thuot - Dak Lak are sold to more than 68 nations and territories worldwide, particularly in major markets like the United Kingdom, France, the US, and Japan which have high standards for product quality and food safety Buon Ma Thuot - Dak Lak currently has more than 90 import-export businesses, 21 of which engage in the regular import-export business, and 3 businesses with foreign investment In the 2016–2020 period, exports of USD 2,898 million reached 76.8% of the plan (USD 3,765 million), growing at an average rate of 5% per year; imports of USD 471 million increased at an average rate of 108.9% per year, reaching 636.5% of the plan (USD 74 million)

II Transport infrastructure of Buon Ma Thuot city for available modes of transport description

1 Road transport

1.1 Overview

The road transport system of Buon Ma Thuot City has 3 main expressways and several minor road networks which help the city easily do freight transportation between Buon Ma Thuot and its neighboring regions and connect to the coastal city which has a harbor to conduct sea transportation to other regions of Vietnam and foreign nations Buon Ma Thuot's road infrastructure basically satisfies the people and freight demand, but the road condition is badly degraded

The Buon Ma Thuot road transportation has its regulations that the peak time frame of freight transportation operates between 6 a.m to 8 a.m, and 4 p.m to 6 p.m The restriction of peak hours is intended to organize traffic efficiently and improve urban traffic safety Buon Ma Thuot; gradually and successfully implement provincial laws governing urban road transportation operations and the percentage of passenger vehicles that can accommodate individuals with impairments traveling there

1.2 Main roads

Buon Ma Thuot City possesses the intersection of the three National Highways including National Highways 14, 26, and 27 National Highway 14 connects the cities in the North such as Pleiku city (178 km), Kon Tum city (228 km), Da Nang (520 km), and cities in the South including Dak Nong (83.5 km), Binh Phuoc (220 km), Binh Duong (291 km), Ho Chi Minh City (363 km) in the South of the city National Highway 26 links the city to the East which has coastal cities, connecting Ninh Hoa (154 km) and Nha Trang (187 km) which is the

national marine tourism center and the hub of international sea transportation with the Van Phong deep-water port, considered as a critical sea gateway of the Central Highlands National Highway 27 connects the city to Da Lat City (211 km) and to Phan Rang - Thap Cham City (314 km) Currently, the national highway is small and degraded, with many regular traffic accidents

Figure 2: National Highway 14 connection

Figure 3: National Highway 16 connection

1.3 Infrastructure condition

The transport network in the province is quite complete, meeting the demand for goods freighting and the people's travel needs, which creates favorable conditions for cooperation and development among the provinces in several fields However, in comparison to other regions in the country, the road traffic system in Buon Ma Thuot City and Dak Lak province is still on the small scale Many roads that have been constructed and operated for more than 15 years are degraded currently but have not been repaired and upgraded upgrade The road transport network only serves inter-provincial and inter-regional connectivity in the Central Highlands and Central coastal regions, furthermore, the infrastructure in the Cambodia-Laos-Vietnam development triangle has not yet met the requirement The national highway system has not been subsidized for renovation and upgrading

This national highway condition in Buon Ma Thuot City is degraded, which causes goods trade to slow, spending a long time to transport goods, and logistics costs high This led to losing considerable competitive opportunities for goods, and agricultural products which cannot be transported for too long As a result, the bad road infrastructure hinders the goods and services growth and the province’s economic development

1.4 Development orientation

At the end of 2019, the Dak Lak Provincial Party Committee issued a policy to build the Khanh Hoa - Buon Ma Thuot expressway which has a length of 117.5 km, a total investment of nearly VND 22,000 billion, is expected to start before November 30, 2023, and be complete in December 2026 The expressway is expected to decrease the travel time between the two areas and at the same time support the province's socio-economic growth The expressway’s starting point is the intersection of national highway 26B and national highway

1, Nam Van Phong port area, Ninh Hoa town (Khanh Hoa) The endpoint will intersect Ho Chi Minh road to avoid the east of Buon Ma Thuot city (Dak Lak)

2 Air transport

2.1 Overview

Buon Ma Thuoc Airport is situated near the provincial capital Buon Ma Thuot in Đắk Lắk province, which can be accessed by National Highway 27 The airport has another name, Phung-Duc Airport, which possesses an active runway and a second incomplete runway that cannot be operated The airport plays a crucial role in inter-regional traffic, connecting the Central Highlands with the Southeast, Central, and South Central Coast The airport This airport is expected to be handled 1,500,000 passengers in 2022

The airport runway has a length of 3,000 meters and a width of 45 meters with auxiliary equipment including night lights, ladder trucks, forklifts, and conveyors to ensure that this airport can meet the operation of commercial aircraft such as A320, A321, and modern military aircraft day and night The airport capacity is designed to serve business development tasks economy, security, and defense in the Central Highlands region

2.2 Route and operating agency

Buon Ma Thuot airport connects to other domestic airports across Vietnam regions, which play an important role in the city and Dak Lak province to transport freight and passenger to other Vietnam regions

Route Operating agency Distance (km)

Lead time (hour)

Buon Ma Thuot - Tan Son Nhat International Airport, Ho Chi Minh City

VietJet Air, Vietnam Airlines, Pacific Airlines

2.3 Infrastructure condition

a Runway

After many upgrades and renovations, Buon Ma Thuot airport currently possesses 01 take-off and a landing runway with an area of 3,000mx 45m, with the symbol 09/27 Along with that is a taxiway with a size of 209m x 18m, which connects the take-off and landing runways with the apron

b Aircraft parking lot

The aircraft parking lot (Apron) of Buon Ma Thuot airport is divided into 5 parking positions to guarantee safe distance for small to medium-sized aircraft, such as ATR72, A320/321, and equivalent Buon Ma Thuot airport nowadays only serves domestic flight routes, connecting with several major cities in the country, there are no flights to regional and international countries

c Terminal

Buon Ma Thuot airport terminal was built with 1 ground floor and 1 mezzanine floor with separate functional areas Both floors are equipped with advanced aviation technologies and techniques including 04 exits, 12 check-in counters, 03 baggage carousels, 01 VIP room, an automatic fire fighting system, security scanners devices, etc

2.4 Development orientation

Nowadays, Buon Ma Thuot Airport is invested to enhance its facilities which will satisfy the need for transportation in the future The Vietnam Ministry of Transport approved the plan to improve Buon Ma Thuoc Airport from 2015 to 2025 With the vision to 2025, Buon

Ma Thuot Airport will be upgraded to an international airport, boosting the development of Dak Lak province and the Central Highland region The airport is oriented to become a 4C-class airport and military airport level I Constructing more parallel runways with the size of 3000m x 18m This expansion is to ensure that the airport capacity can serve modern aircraft types such as A320/A321, ATR-72, F 70, and equivalent aircraft The number of aircraft receiving at peak hours is 7, the number of passengers received is 800,000 passengers/year, and the number of passengers during rush hour is 420 passengers/peak hour

III The shipment’s multimodal transport operation

1 Initial information of the shipment

The detailed information of the shipment is as followed:

− Commodity: Vietnam Robusta Coffee - Grade 1, Screen 16, 2% BB − Place of delivery: Buon Me Thuot Province

− Destination: Avenue des Mousquines 12, CH – 1325 Lausanne, Switzerland − Volume: 151.20 MT, corresponding to 30 lots

− Quantity: 2520 bags, (dimension 100 cm x 65 cm x 27 cm per bag)

− Price: To be fixed at USD 1,115 per MT under LIFFE May – 2011 at the Seller ‘s call − Incoterm: DPU

− Payment: 100% Invoice value by an irrevocable Letter of Credit at sight − Time: December 2010 at Buyer’s option

− Documents:

o Full set 3/3 Bill of Lading

o Commercial invoice in triplicate

o Certificate of Origin (GSP & ICO)

o Phytosanitary Certificate, Fumigation Certificate if required

❖ Quality:

- Moisture: 12.5% Max by oven test

- Black and Broken Beans: 2% Max

- Foreign matter (excelsa, arabica, catimor): 0.5% Max

- Bean size: min 90% of beans on screen No 16 (6.3 mm) Crop 2009 – 2010

- Free from fermented, moldy and spongy beans

- Subject to pre-shipment sample approval by Noble coffee Vietnam

❖ Transport requirement:

• Use ventilated containers (coffee containers):

Since voyages involve transits from a warm to a colder climate, the beans emit moisture which results in condensation on the inside of the container

• Stowage space requirements:Cool, dry, good ventilation.

The containers should be stowed below the deck away from heat sources External meteorological conditions do not then have a direct effect on the containers They are shielded from the external conditions by the surrounding containers and the ship’s walls, meaning that the hold air, with its temperature and moisture/humidity values, constitutes the decisive external influence The risk of frost on the one hand and major daily variations in temperature may result in spoilage of the coffee, so stow below deck where possible

Attention must also be paid to stowage patterns which may be required as a result of special considerations, such as ventilation measures

• Specific service requirements from customers:

− Temperatures should be between 10 and 20°C during the transport of green coffee beans

− Deny wetness: bubble foil/cardboard/solid stow method − Assure air circulation

− Deny lack of proper lining, excessive humidity, or taped container air holes are met by lack of due diligence at the receiving end

3 The appropriate services

To help the seller to deliver the goods to the destination as defined in the Purchase Order, three typical routes are first determined accompanied by their corresponding and an overview of each route is presented in Table ## Each route is designed with different third-party logistics providers, so the characteristics and requirements of each route will differ

3.1.Route 1

Route 1 is designed with the combination of road transportation offered by Lien Quoc Transportation (LQ Transportation) Company and intermodal transportation offered by Maersk - Logistics Company

The completed detailed shipment in route 1 is displayed in Figure 5

Figure 5: The detailed shipment in Route 1

The shipment information for the whole route includes • Type of container: 40 ft HC

• Payload per container: 25.2 MT (~ 5 lots of coffee bags) • Number of required containers: 6 containers

• Mode of container shipment: Full Container Load

First, LQ Transportation Company is responsible for transporting the goods from the origin (CP Azzan Company, Buon Ma Thuoc City, Dak Lak Province) to Tan Cang - Cai Mep Thi Vai Port, Ba Ria - Vung Tau Province This is the intercity transportation, in which the shipment will travel from Dak Lak Province to Nha Trang Province and later from Nha Trang Province to the defined port The service is the door-to-port shipping service

The specific quotation from the shipping company based on its shipping rate list [1] is presented as follows:

Estimated distance (km)

Estimated price (VNĐ)

Lead time (days)

CP Azzan Company, 119 Hung Vuong, Tu An, Buon Ma Thuot City, Dak Lak Province

Nha Trang Province

Cat Lai Port, Ho Chi Minh City

Table 2: Route 1's distance, lead time and delivery cost in Vietnam

(Source: https://www.vantailienquoc.com)

So, the total rate is around 23,000,000 VNĐ, not including VAT and other surcharges The lead time may vary from 3 to 6 days

Next, Maersk will receive the shipment at the Tan Cang - Cai Mep Thi Vai Port and is then responsible for transporting it to the destination This is an international and intermodal transportation, in which the shipment will travel from HCMC Port to Malaysia Port, then to Netherlands Port by sea, and to Lausanne by train Maersk offers port-to-door shipping service for this route

The specific quotation from the shipping company from its website is presented as follows:

Estimated distance (km)

Estimated price (VNĐ)

Lead time (days)

Cat Lai Port, Ho Chi Minh City

Pelabuhan Tanjung Pelepas Terminal, Tanjung Pelepas, Malaysia

945,000,000

3

Pelabuhan Tanjung Pelepas Terminal, Tanjung Pelepas, Malaysia

APM 2 Terminal Maasvlakte II, Rotterdam, Netherlands

27

APM 2 Terminal Maasvlakte II, Rotterdam, Netherlands

Laussane-Gare,

Lausanne, Switzerland

Laussane-Gare, Lausanne, Switzerland

Noble Group Avenue des Mousquines 12, CH – 1325 Lausanne, Switzerland

Table 3: Route 1's cost of delivery from Cat Lai Port to Switzerland

The costs incurred during the transportation offered by Maersk also include: • Export customs clearance in Vietnam, costing 210 USD

• Import customs clearance, including Domestic Transit Import, in Switzerland, costing 438 USD

• Cargo Protection and Insurance (up to 15,000 USD), costing 29 USD Those costs do not include surcharges, such as detention costs, etc

So, the total rate is around 962,929,290 VNĐ, not including certain surcharges The lead time is estimated to vary from 35 to 39 days

The detailed schedule by Maersk is illustrated in Figure 6 and the estimated cost is displayed in Figure 7

Figure 6: The detailed schedule of shipment from Cat Lai Terminal to Lausanne by Maersk

Source: twill.net

Figure 7: The cost quoted by Maersk

conducted by 3PLs (Maersk) • Only 2 third-party logistics providers

are needed for the route, which simplifies the tracking and tracing

• Multiple 3PLs may cause difficulty in the transfer of containers

• The route from Daklak to Cat Lai Port is longer due to the limit in container shipment by LQ Transportation Company

Table 4: Route 1's advantages and disadvantages

3.2 Route 2

With the suggestion of using the rail transportation service, we found Ratraco Solution Company was a reasonable selection Our shipment is proposed to come across more than 6 nations by railway and finish at Duisburg Station, Germany Because Ratraco Solution Company does not provide first-mile and last-mile services, we have to find other logistics partners providing road transportation, namely Trong Tan Transportation and DHL Express

The whole detailed shipment in Route 2 is displayed in Figure 8

Figure 8: The detailed shipment in Route 2

Firstly, the shipment will be carried by Trong Tan Transportation from Daklak and unloaded at Yen Vien Railway Station, Hanoi Ratraco Solutions Company continues to transport shipments along the international railway After that, the shipments will depart from Ha Noi to Duisburg Railway Station, Germany At this point, DHL Express plays a role as the cross-border and last-mile transporter to deliver shipments contractual destination in Switzerland

The shipment information for the whole route includes• Type of container: 40 ft HC

• Payload per container: 25.2 MT (~ 5 lots of coffee bags) • Number of required containers: 6 containers

• Mode of container shipment: Full Container Load

Estimated distance: 13,336 km and lead time: 35 – 39 days, detailed in table 5.

CP Azzan Company, 119 Hung Vuong, Tu

Yen Vien Rail Station, Ha Noi

An, Buon Ma Thuot City, Dak

Lak Province

Yen Vien Rail Station, Ha Noi

Pingxiang Rail Station, China

Rail

167

28 - 30 days Pingxiang Rail

Station, China

Altynkol Rail Station, Kazakhstan

5,414

Altynkol Rail Station, Kazakhstan

Moscow Rail Station, Russia

3,364

Moscow Rail Station, Russia

Małaszewicze Rail Station,

Poland

1,009

Małaszewicze Rail Station,

Poland

Duisburg Rail Station, German

Lausanne, Switzerland

Table 5: Route 2 distance and lead time

The total estimated cost of transportation is approximately 1,260,218,480 VND The detailed quotation and lead time from all the logistics partners from its website and customer consulting service via the digital platform (Zalo) are presented as follows:

62,808,160

Total88,418,480

Table 8: Route 2’s cost of door delivery from Germany to Switzerland (DHL Express)

This route does bring several benefits; however, it also causes some drawbacks Its pros and cons are presented in the table below

• High transportation cost • It takes a lot of time to be

approved by foreign custom clearance (6 nations)

Table 9: Route 2's advantages and disadvantages

3.3 Route 3

In case of any complication with the operation of the direct route from Ho Chi Minh City to Switzerland, route 3 is introduced as an indirect route which goes through another country to approach Switzerland

An overview of the route shows that it begins with the first state from 119 Hung Vuong, Tu An, Buon Ma Thuot City, Dak Lak Province, to SP-ITC International Container Terminal by road transport, then the shipment will be transported from SP-ITC International Container

Finally, the goods will travel from Hamburg, Germany and get to Lausanne, Switzerland with a combination of road, maritime and rail transport

A visual and detailed description of this route is displayed in figure 9:

Figure 9: The detailed shipment in Route 3

The estimated distance of this route is 20884.3Km, and the estimated lead time is 48 days 7 hours, detailed as in table 10.

CP Azzan Company, 119 Hung Vuong, Tu An, Buon Ma Thuot City, Dak Lak Province

SP-ITC International Container Terminal Road 990, Phu Huu Ward, District 9, City Ho Chi Minh

SP-ITC International

Vung Tau, Viet Nam

Inland Waterway (Barge)

Container Terminal Road 990, Phu Huu Ward, District 9, City Ho Chi Minh Vung Tau, Viet Nam

Hamburg, Germany

Vessel: ONE CRANE Hamburg,

Germany

Bremerhaven, Germany

2 days Bremerhaven,

Germany

Rotterdam,

Rotterdam, Netherlands

Avenue des Mousquines 12 CH – 1325 Lausanne,

Table 10: Route 3's distance and lead time

The shipment information for the whole route includes• Type of container: 40 ft HC

• Payload per container: 25.2 MT (~ 5 lots of coffee bags) • Number of required containers: 6 containers

• Mode of container shipment: Full Container Load

First of all, the shipment will be transported from CP Azzan Company at 119 Hung Vuong, Tu An, Buon Ma Thuot City, Dak Lak Province to SP-ITC International Container Terminal at Road 990, Phu Huu Ward, District 9, City Ho Chi Minh by road transport by Van Tai Tay Nguyen Company The estimated distance is 333km and the estimated lead time is 7 hours The fees needed to cover are from [2] which are demonstrated below:

- Service rate: 5,650,000 VND- Custom: 400,000 VND

- Transportation: 75,600,000 VND

CP Azzan Company, 119 Hung Vuong, Tu An, Buon Ma Thuot City, Dak Lak Province

SP-ITC International Container Terminal Road 990, Phu Huu Ward, District 9, City Ho Chi Minh

Table 11: Route 3's distance and lead time in Vietnam (Vantaitaynguyen)

Next, the goods will be transported from Ho Chi Minh City to Hamburg in Germany In this case, Hapag-Lloyd AG might be a suitable choice since this is a German Company, so it will be more reliable and experienced with the routes related to Germany Hapag-Lloyd will transport the goods from Ho Chi Minh City to Vung Tau by the barge since this area has an interlaced river system, which will be good for inland waterway Next, the goods will be moved

from Vung Tau to Hamburg by a vessel named ONE CRANE This is a vessel weighted 14026 TEU, 364 in length and 51 in breadth This vessel was built in 2016 and owned by Ocean Network Express This vessel, along with the barge will take 38 days to cover 19186km from Ho Chi Minh City to Hamburg

The fees needed to cover are from [3] which are demonstrated below:Identify transport cost for 40'STD

− Terminal Handling Charge Dest.: 245 EUR = 6,048,000 − Terminal Security Charge Dest.: 12 EUR = 296,000 − Equipment Inspection Fee: 12 EUR = 296,000

SP-ITC International Container Terminal Road 990, Phu Huu Ward, District 9, City Ho Chi Minh

Vung Tau, Viet Nam

Inland Waterway (Barge)

Vung Tau, Viet Nam

Hamburg, Germany

Vessel: ONE CRANE

Table 12: Route 3's distance and lead time from Vietnam to Germany

( Hapag-Lloyd AG)

Finally, Maersk will be responsible for transferring the goods from Hamburg port to the buyer’s company in Lausanne, it will use the combination of truck, ocean and rail transport via another city from German - Bremerhaven, to Rotterdam, Netherlands and finally get to Lausanne, Switzerland The cost proposed by Maersk is 633,913,000 VND which is from [4]

Hamburg, Germany

Bremerhaven, Germany

Bremerhaven, Germany

Rotterdam, Netherlands

Rotterdam, Netherlands

Avenue des Mousquines 12

CH – 1325 Lausanne, Switzerland

Table 13: Route 3's distance and lead time from Germany to Switzerland (Maersk)

Therefore, the total charge is estimated to be 1,091,691,000 VND, with a lead time of 48 days and 7 hours The total cost of this route is analyzed as followed:

Transporting cost 1,052,000,000 VND Import surcharges 6,640,000 VND Export surcharges 10,235,000 VND Marine Fuel Recovery 22,816,000 VND Estimated total cost 1,091,691,000 VND

Table 14: Route 3's cost

Although this route has some advantages related to the choice of 3PL, and additional options, it raises some concerns regarding the lead time and conflict of transit A detailed analysis of this route’s advantages and disadvantages is as followed:

− Since Hapag-Lloyd AG is a German Company, it will be more reliable and experienced with the routes related to Germany

− The estimated lead time is 48 days 7 hours in total, which is quiet long for coffee since this product is fresh and in best condition in 2 months