CHAPTER 2: SITUATION OF LOGISTICS SERVICE QUALITY AT
2.3. Logistics service business situation of Vinalines Logistics Vietnam Joint
2.3.1. The current state of infrastructure and human resources for the Company's Logistics activities
Facilities play an important role in building service quality. The facilities here are the transportation system, the quality of the warehouse and the human resource factor.
a) Bonded warehouse
Warehousing is a place to store goods, ensure goods safety, this is also the main revenue-generating service for the Company. The company provides the entire warehouse rental service for Texhong at VMSC - Hai Phong (3480m2); in Hai An - Hai Phong (4000m2), Hung Yen (2700m2), Cai Lan - Quang Ninh (5800m2),...besides, Lao Cai ICD port has a container storage area of 65000m2, a CFS warehouse of 9000m2 goods distribution center, providing general logistics services, transportation and forwarding services; is a domestic customs clearance point for import/export, receiving/sending goods by container; is an important freight transport hub in the logistics service system in the Northeast and Northwest regions of Vietnam and transit goods from China's Yunnan through Hai Phong and Quang Ninh ports. And there are many
warehouse systems located from the North to the South to serve the storage and preservation of goods for customers.
b) Trucking fleet
Besides warehousing, the fleet of trucks also affects the quality of the Company's logistics services. According to statistics from the annual report, the number of vehicles in the Company is about 20 vehicles. However, in a special time, Vinalines Logistics' fleet of vehicles fell into a shortage of delivery trucks, which did not guarantee the delivery time of goods. However, logistics is the solution, so despite the shortage of vehicles, Vinalines still ensures on-time delivery by linking with other partners. Actively looking for more suppliers, seeking out experienced fleets of vehicles. In terms of equipment, the company has 2 crane trucks, one is leasing and operating at ICD Thakhet, Laos since May 2019. 45-ton bridge truck for rent at Quy Nhon Port from June 2020. Currently both vehicles are operating and operating stably.
c) Electronic information system
Vinalines Logistics has built an information system to support customers directly from the customer to the dispatching and vehicle management department. The traditional means of communication is an open phone to serve 24/24, continuously 7 day of the week. The company has a website system vnll.com.vn that provides all information such as introduction of business history, products and services, annual reports, financial statements. However, the company's website does not have a section to answer questions directly with customers. Currently, Vinalines only provides phone numbers and email mailboxes for customers to contact when needed.
d) Human resources
Customers are assured of the service quality of Logistics, partly because of the human factor. The employees of Vinalines Logistics are well- trained, proactive and have a high sense of responsibility in their work.
Table 2.3: Statistics of personnel at Vinalines Logistics Joint Stock Company
Staff with
university degrees
Staff with
degrees
Technical workers
Professional warehouse staff
Other staff
Total
(Source: Human Resources Department) Through the above data table, we can see that the employees in Vinalines Logistics Vietnam Joint Stock Corporation have not changed significantly. However, the number of highly qualified workers is increasing, showing that the quality of labor is improving.
The low number of employees shows that the employees are mainly old people who have rich working experience, especially the sales and customer service staff who are well qualified, and are important part of customer service. Moreover, the leaders are all highly qualified people from master's level and above, and have a lot of real combat experience, so they regularly organize exchange or training sessions for lower-level employees to improve their performance. Professional knowledge and experience in the field of Logistics.
2.3.2. Logistics service business results of Vinalines Logistics Vietnam Joint Stock Company in the period of 2018 - 2020
2.3.2.1. Profit from logistics service business
Table 2.4: Profit from logistics service business
Forms of Transportation
Transportation by airplanes Transportation by railways Transportation by sea lines Total
(Source: Financial statements for the year 2020 - audited figures)
39.96%
40.25%
35.36%
Transportation by airplanes Transportation by railways Transportation by sea lines
Graph 2.3: Percentage of revenue by business method
Regarding the figures of this graphs, the logistics department's entire revenue is mostly based on three main business methods: sea transport, air transport, and rail transport. These three main business strategies account for the majority of the Company's total revenue and the Logistics department's revenue in particular.
For sea transport: With income of VND 10.2 billion and VND 12.1 billion in 2019 and 2020, respectively, accounting for 39.96 percent and 43.93 percent, this is the business approach with the largest revenue. From 2019 to
2020, marine transportation will still contribute for about a quarter of total revenue. The company's Logistics business relies heavily on this strategy. This is comprehensible given VIMC's large fleet of 104 ships, which includes container ships, bulk carriers, and oil tankers with a combined cargo of approximately 1.2 million DWT. Furthermore, the Company places a high priority on the development of seaports, with the company's seaport system being invested in a coordinated manner to successfully exploit the area of shipping. The northern port cluster at Hai Phong, Quang Ninh, and the southern port cluster in Cai Mep, Thi Vai, and Ho Chi Minh City, both in Quang Ninh .
Rail transport: Only after maritime transport did they account for a significant fraction of the total. Railway Transport generated VND 8.9 billion in total income in 2019, accounting for 35.36 percent of total revenue and ranking second among the three business modes. By 2020, the revenue has increased significantly from VND 8.9 billion to VND 11.09 billion, and it is only 1 billion VND less than that of marine transport. Because of its advantages, such as a huge amount of freight, rail transport is one of the forms of transportation that VIMC concentrates on; Rail freight has a higher level of safety than other modes of transportation, and it is usually less expensive. The only disadvantage of this kind of transportation is that it takes longer to ship than most other modes of transportation.
Air freight: The revenue structure only accounts for a minor fraction of the total. Air Transport revenue fluctuated between VND 6.3 billion in 2019 and VND 4.3 billion in 2020. Despite having a shorter transit time than the other two modes of transportation, this method of transport can only convey commodities of medium and small volume. In addition, the cost of air freight is very expensive. In 2020, due to the serious impact of the Covid-19 pandemic, airlines have tightened quarantine and security, which makes air transportation more difficult, complicated and the revenue of the vehicle more expensive. This mode of transport declined.
2.2.1.3. Profit from logistics service business by market structure Table 2.5: Profit from logistics service business breakdown by
market structure Markets
Vietnam Asian European Africa America Middle East Total sales
(Source: Financial statements for the year 2020 - audited figures)
2019 2020
13%
12% 31%
7%
9%
28%
Graph 2.4: Proportion of revenue by market structure - Comment on revenue by market structure:
primary operational market, and goods movement from the north to the south is quite constant. Domestic revenue also helps the Company maintain its operations business because the Company has many branches operating
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throughout the country and has been operating for many years. Because the Company has many branches operating throughout the country and has been operating for many years, it has gained great trust and confidence from domestic customers. Only the Asian region has a relative revenue compared to the home market; the rest of the overseas regions have much smaller revenue.
However, the Company's revenue and wider network of operations are aided by its spread across continents. Because the European and American markets are intrinsically challenging, growth in these two markets is more difficult.
However, with income of VND 4.01 billion and VND 4.55 billion, these are still viable markets. The corporation has not fully explored the rest of the African and Middle Eastern markets, therefore revenue accounts for only 10%
of total sales. Logistics activities generated a total revenue of VND 25.43 billion in 2019, an exceptional result since the company's inception. In 2019, VIMC Company was awarded 16.2 hectares of warehouse space at Vietnam National Shipping Lines' Dinh Vu Industrial Park for Vinalines Logistics - Hai Phong Branch to manage and operate. In addition, one of the reasons for the Company's significant growth in the Logistics business is the establishment of a Joint Venture Company, Vinalines Hoa Lac Logistics Joint Stock Company (VLHL), which is expected to be completed by the end of 2019. VIMC, following the market's lead, caught up to the market's pace and drove revenue to a stable level.
Due to the severe impact of the Covid outbreak, several nations have stepped up to tighten international trade security by 2020, resulting in a drop in income in regions such as Europe, Africa, and America from 17%, 10%, and 15% to 12%, 7%, and 9%, respectively. The pandemic affected the global economy in general and the logistics industry in particular during this time period, but thanks to good management, the markets in Asia, the Middle East, and Vietnam were quickly stabilized epidemic situation and still achieved revenue growth despite the rather bleak global market. Asia and the Middle
East both had minor increases in revenue of VND 1.5 billion and VND 1 billion, respectively, while domestic revenue grew from VND 6.5 billion to VND 8.6 billion. VIMC has made significant efforts to strictly enforce the Government's epidemic prevention and control rules, in line with the development of production and business activities, in order to accomplish growth during this tough period. However, because of the epidemic's restrictions, the growth rate is still low.
2.3.3. Some indicators on the results of the Company's logistics activities Table 2.7: Some indicators of VIMC's logistics business results
Targets Net sales
Expenses
Net profit from business activities
Net profit before tax Net profit after tax
(Source: Financial statements for the year 2020 - audited figures) Comments on costs: The overall cost in 2019 is 18.3 billion VND, which is relatively expensive in terms of income. The cost of transportation, particularly sea freight, is the greatest, accounting for roughly 45 percent of the Logistics department's overall cost. The high cost is due to the fact that the worldwide transportation and logistics industry in 2019 is influenced by a number of major factors, including: key technological advancements, worldwide trade fluctuations, and trends new e-commerce regulations, as well as new logistics requirements for environmental protection and climate change mitigation. With the linked consequences of new generation FTAs and trade barriers, global commerce becomes increasingly unpredictable… Many micro, small, and medium firms in emerging markets have been able to access global
consumers by increasing their marketing channels, distribution networks, and cross-border logistics thanks to the emergence of global e-payment and commerce platforms such as Alibaba, Amazon, and e-Bay. Increased competition from domestic businesses. Furthermore, the country's socioeconomic status continues to encounter several obstacles and challenges.
Although input prices have risen dramatically, the logistics industry's production is under competitive pressure. The total profit is not as large as the income indicated in the table above; in 2019, the profit was only 6.2 billion VND, a figure that is not comparable to the cost. Profits are extremely low. To explain such a big difference, the Logistics department has given a number of reasons as follows:
• The volatility of the foreign currency exchange rate has an impact on the Logistics department's payment transactions for exchange and payment transactions in foreign currencies with international partners and ships.
• Domestic and foreign businesses are currently putting pressure on the Company's operational area and business fields.
Although total revenue climbed by 7.725 percent from 2019 to VND 27.6 billion in 2020, costs increased by 15%, and profit fell by 25.68 percent, a worrisome statistic for the Department of Logistics. The Covid-19 pandemic has had a significant impact on socioeconomic activity in general and enterprises in particular, and 2020 will be no exception. Despite the fact that the Logistics Department's business is stable, the number of domestic visitors is expected to rise in 2020, bringing considerable revenue to the Department.
The Covid-19 pandemic has had a major impact on socioeconomic activities in general and businesses in particular, and 2020 will be no different. Despite the fact that the Logistics Department's business is stable, the number of domestic tourists is predicted to increase in 2020, giving the Department significant revenue.