The Urgency To Transform Vietnam's Cold Chain Logistics

Updated: 4 days ago

The Vietnamese Cold Chain’s potential to develop is evaluated to be ranked 17th worldwide (1). Recently, with a number of new trade agreements, a new goal for Vietnam in the current context is set to become a smarter cold chain that can fully exploit its potential.



I. Vietnamese Cold Chain - a lucrative potential, yet untapped industry


With the rise of living standards in Vietnam, the demand for high-quality food is increasing rapidly. Therefore, the trend of consuming frozen goods with the requirements of food hygiene and safety in the domestic market is increasing.


Currently, Vietnam is one of the five largest fruit and vegetable exporting countries in the world thanks to strong growth in markets such as China, Japan, the USA, Russia, Indonesia, Taiwan, and South Korea (2).


However, despite its potential, the cold chain logistics sector in Vietnam has been fragmented with small and medium service providers that provide localized services that do not cover the end-to-end food supply chain (3).


“Broken cold chain logistics is a common occurrence in Vietnam’s food retail market, especially the general trade channels”

In the context of newly signed trade agreements, transforming the cold chain is an ultimate goal. However, to achieve that, understanding the weakness is of paramount importance.


II. Challenges posed in the context of new trade agreements


Tax on exports, such as agriculture, fishery, electricity, and electronics will be eliminated when the trade agreement (FTAs) takes effect (4).


It is undeniable that the newly signed trade agreements will be a great stepping stone for Vietnam's cold supply chain - the main transportation service for the above commodities. However, this is definitely not a magic wand to boost Vietnam's cold chain. In order to do that, Vietnam needs to overcome numerous obstacles set forth by these agreements.


1. High food losses and waste


As a demanding market, the requirements of food safety, traceability, and especially product quality must be strictly ensured. However, in Vietnam, food losses in the process of harvesting, processing, storing, and transporting are a pressing problem. the average loss rate for Vietnam fruits and vegetable products is about 32% of the production, 14% and 12% for meat and seafood respectively.


Agricultural production and post-harvest handling, storage and transportation losses for Vietnam compared to and FAO results for South-Southeast Asia.


The major cause of damaged goods is coming from transportation management, especially the ineffective management of refrigerated containers (6). With many difficulties, such as the inability to optimize vehicle capacity, in particular, refrigerated truck delivery in the city, the lack of visibility over the transporting process, cutting food waste remains a big challenge for Vietnam businesses. Whenever problems occur during the transportation process such as unplanned mileage, the driver forgets to close the cold storage,... it is difficult for businesses to handle the issues promptly.


Along with the strict conditions of the EU market, Vietnam's cold chain logistics infrastructure is in great demand to be innovated.


2. The lack of transport facilities


Image Source


Alongside the inability to track and control the transportation, the number of suitable vehicles serving the transportation of frozen goods is still low. There are delays in unloading, lack of refrigeration, and improper coordination along the supply chain in Vietnam which pose an issue to the cold chain industry in the country. (7) The country has a broken cold chain during transportation, storage, and last kilometer and these facilities are not only lacking but the operation quality is not guaranteed.


As a typical example, because the infrastructure and facilities are rudimentary, the price of agricultural products in the Mekong Delta region - the key area of aquaculture and processing seafood exports of Vietnam faces many difficulties in competing on the market. (8)


3. Unqualified Human Resources


Vietnam's labor force is abundant with nearly 48 million people, but it lacks skilled labor, and labor productivity remains low. Foreign language proficiency of workers is also weak compared to other countries in the region (Singapore, Thailand, Malaysia,...) (9). Thus, to meet the quality standard of the foreign market, human errors are needed to be eliminated.


And since the cold chain in Vietnam is still operating with many manual processes, a number of common issues related to human errors can be (10).

  • Bad handling —damaged containers due to haphazard handling.

  • Bad practices —leaving the refrigerator door open during last-mile deliveries.

  • Bad paperwork —leading to unnecessary delays or detention.


III. Three key essentials to transform into a smarter cold chain


As mentioned above, part of the cold chain’s problems in Vietnam is rooted in the lack of each transportation and fleet management. In addition, unnecessary human intervention and low-quality human resources are issues that need to be improved. So on the path becoming a SMART COLD CHAIN, cold chain technologies are the missing part of the big picture.


1. Real-time Condition & Location Monitoring


When it comes to products transported through cold chains - fresh and frozen produce, pharmaceutical compounds, Real-time Condition & Location Monitoring is becoming increasingly powerful because it enables businesses to determine the cold chain shipment’s health more accurately.


To do this, equipping new supply chains with new technologies such as Telematics or Transportation Management Software will be the first choice for businesses if they want to ensure good product quality as well as quality and time. Not only with the ability to control issues such as truck start/stop, door open/close, telematics equipment also helps businesses understand data fields like refrigerated transport’s temperature, fuel usage, speed, and mileage.


Our logistics optimization platform Abivin vRoute can be integrated into multiple telematics sensors to give you the most comprehensive control of your fleet on the road. Besides route optimization, transportation management provided by Abivin, you can also view multiple data fields like truck start/stop, temperature, door open/close on the interface of Abivin vRoute.


Abivin vRoute - All-in-one Dynamic Logistics Optimization and Transportation Management Platform

2. Monitoring at the Package-level


Cold chain consignments that are smaller or haven’t been packaged in large aggregated containers are at greater risk of temperature excursions due to their lower thermal mass (11).


Thus, in addition to detecting heat in cold storage using the technologies above, the arrangement of boxes appropriately will help minimize risks, and make it easier to detect hotspots or temperature spikes that may have occurred for individual packages that were closest to the refrigerator door, outside cold rooms for longer than the rest of the shipment…

Abivin vRoute 3D Loading Feature

To help businesses monitor their cold chain at the package-level, new technologies such as 3D Loading have been developed to help businesses find the most efficient packing method while minimizing errors thanks to effective load plan designs. And more importantly, with packages that are fragile or have special temperature requirements, this feature makes the loading work more accurate.


3. Digitize paperwork to avoid errors


The digitization of paperwork will help avoid unnecessary errors that affect import and export procedures, transporting processes as well as increase transparency. Although they may have entered the EU market, Vietnamese companies must also be prepared to face international commercial litigations from foreign competitors, both from the EU or from other countries.


Thus, for a market that requires a lot of requirements on product origin, safety inspection, the transparency of goods paperwork, and reports is extremely necessary.


Conclusion


Having influences from the fastest-growing economies – India and China – and the growth of trade in Indonesia, Vietnam, and Singapore turning them into prospering economic and social centers, the cold-chain industry is considered as a solution to solve food wastage, to develop the warehousing industry and create jobs opportunities.


To capture such a prime opportunity, Vietnamese cold chains still have to innovate themselves in terms of quality, technology, and sustainable standards to reduce risks and avoid being too reliant on one single market.


Want to Transform your Cold Chain?

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References:


1. https://longhau.com.vn/truyen-thong/tin-tuc-su-kien/chuoi-cung-ung-lanh-tai-viet-nam-nhieu-kho-khan-thach-thuc-doanh-nghiep-trong-nganh

2. http://vlr.vn/logistics/news-1480.vlr

3. https://vietnamtimes.org.vn/vietnams-cold-chain-logistics-sector-sees-improvements-3328.html

4. https://vietnamnews.vn/economy/591834/new-generation-ftas-to-bring-opportunities-but-also-risks-and-challenges-says-minister.html

5. http://vnews.gov.vn/giai-bai-toan-chuoi-cung-ung-lanh-cho-nong-san

6. https://www.foodlogistics.com/cold-chain/article/21010074/food-losses-in-vietnam-the-shocking-reality

7. https://www.kenresearch.com/blog/2018/01/vietnam-cold-chain-market-research-report-to-2021-ken-research/

8. http://vlr.vn/logistics/su-cap-thiet-ve-chuoi-cung-ung-lanh-tai-dong-bang-song-cuu-long-4662.vlr

9. http://kinhtedothi.vn/viet-nam-tham-gia-cac-hiep-dinh-thuong-mai-tu-do-the-he-moi-noi-lo-thua-lao-dong-tay-nghe-thap-301456.html

10. https://www.foodlogistics.com/cold-chain/blog/21008563/5-risks-in-cold-chain-management-and-how-to-ensure-it-wont-happen-to-you

11. https://blog.roambee.com/supply-chain-technology/topic/package-level-monitoring

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