Vietnam's supply chain disruption

The emergence of the highly transmissible COVID-19 variant Delta has ended Vietnam’s much-praised pandemic strategies that it successfully implemented in the early days of the virus spread. 

According to the Ministry of Health, Vietnam is now witnessing a spike in virus infections, which hit a record high of nearly 10,000 cases a day as of August 8.

Transportation industry insiders warn about an unprecedented supply chain breakdown if proper and timely strategies are not implemented to curb the virus spread while maintaining efficient goods circulation at the same time.

What happens inside the city?

Since the onslaught of COVID-19, e-logistics services are said to have reached their tipping point (attributed to the growth of e-commerce in the country), with roughly 40 active startups providing services in the first-mile last-mile sectors, according to a report by early-stage VC firm Do Ventures. However, starting July, e-logistics service providers have faced hardships due to containment measures.

For instance, Shopee, which enjoys the largest market share in the country’s booming e-commerce market, has closed all its delivery options via outsourced fleets. In addition, key players in the food delivery sector, such as NOW, Grab, BAEMIN, and Gojek, also suspended a part of their services in Hanoi, Da Nang, and Ho Chi Minh City until further notice.

“The temporary shutdown of several services may cause certain inconvenience for customers, but we believe that this decision will contribute to the fight against the pandemic,” Grab noted in its announcements about halting GrabFood and GrabExpress 4H.

However, market watchers consider this a short-term rollback and expect the sector to grow exponentially afterwards, primarily when herd immunity is achieved through mass vaccination.

“We are not going backwards in the local delivery space,” said Dave Anderson, managing general partner at Supply Chain Ventures. “The need for firms to complete last-mile deliveries will continue to increase across the globe.” Supply Chain Ventures is a VC firm with investments in more than 30 companies across the US and the EU.

Even during lockdowns, e-commerce platforms continue to stay ahead of the curve amid the outbreak as people rely on them for food, medicines, and other essential goods delivery.

Vietnam’s leading online marketplaces, such as Tiki, Lazada, Sendo, and Shopee, have managed to stay afloat, especially since shippers are officially allowed to travel for delivery purposes. As a result, these sites held their massive shopping day on August 8 and the ASEAN Online Sale Day 2021, which saw more than 100 Vietnamese firms join, according to Vietnam E-commerce and Digital Economy Agency.

In this critical period, both e-commerce and delivery firms should allocate the right order to the right asset (vehicles/warehouses) based on a defined set of criteria and high-level demand prediction based on internal historical data and real-time market and asset information. 

Also read: SCI Ecommerce raises US$38M led by Asia Partners, plans US IPO in end-2021

“Most players are now looking at implementing the right operating system that will be able to leverage analytics and insights systematically to keep growing sustainably,” said Arnaud Houles, Senior Associate at Reefknot Investments. “This will ultimately enable these service providers to optimise the yield per order and meet customer’s constantly growing expectation for faster and cheaper delivery service.”

Reefknot is a Singapore-based global VC fund focused on supply chain technology and innovation.

A broader view of the whole supply chain system

The not-too-bad scenario above partly depicts the last-mile delivery landscape. However, a closer look at the country’s supply chain is showing more of a rocky road.

Data from EcoTruck shows that lockdowns have forced shippers and logistics companies to operate at a much lower capacity. “Compared to the previous outbreak, the fourth wave of the pandemic has much larger and longer effects,” said Anh Le, CEO and founder of EcoTruck, sharing data from the 300 transportation partners and 500 shippers using its services. “Vietnam is still completely inexperienced in dealing with an epidemic on such a large scale.”

EcoTruck is a tech-based startup providing first-mile trucking services for B2B customers. Other supporting services such as fuel, tyre, insurance, trucking parking, trucking financing, for trucking vendors are also available on the system. During the pandemic, the number of operating vehicles using Ecotruck has been in freefall. The main reason is that many drivers are either trapped in epidemic hotspots or are in quarantine. 

The same applies to the sinking freight traffic volume recorded by EcoTruck, which results from the shortage of manufacturing workers and the shutdown of factories that produce goods listed as unessential or registered high infection levels.

The slow verification for vehicles passing through pandemic checkpoints and suspended or delayed supplementary logistics services also leads to a plunge in the average productivity of this sector.

“Vietnam needs to have a better strategy in securing production and ensuring safe freight flows, especially essential goods during the pandemic,” the Ecotruck CEO added.

Since the emergence of the new variant, Vietnam’s prime minister has defined three strategies to contain COVID-19: proactive testing, compulsory technology applications, and lightning-fast vaccination. 

As a result, many technology startups are joining hands to fight the worsening situation, though the effectiveness is still hard to measure.

In early June, the Ministry of Information and Communication established the National Technology Centre for COVID-19 prevention and control, bringing in various members from the tech startup community. The names include Hung Tran, CEO of GotIt!, Manh Phan, CEO of An Vui (which is working in the long-distance transportation industry), and Cuong Vong, CEO of Kompa Group (owner of social listening tool Boomerang).

An Vui, for instance, was selected by the Directorate for Roads of Viet Nam to develop a QR-code identity tag system, called “in a flash”, which aims to digitise data of vehicles, drivers, goods, and transportation routes. It is aimed at shortening verification time at pandemic checkpoints.

“In essence, the adoption of QR-code technology reduces the time for drivers to show identification papers or perform administrative formalities when passing through checkpoints,” said Phan. “With a truckload of up to 1.3 million vehicles, there is a huge opportunity to promote the development of Vietnam’s supply chain, but so many problems remain.”

There are, however, controversies over how the QR-code method supports goods circulation. Ecotruck’s founder argued that this technology has further increased the burden of businesses to deal with a new type of formalities. “None of the current technologies showed any effect so far,” Le noted.

In the early days of the introduction of the app, the system was overloaded and hacked. This was because of the time constraints and confusion over the definition of “essential goods”, combined with a flurry of registers. In addition, it delayed trucks to enter the country’s “green channel” to maintain goods flow, reported various local news sites.

Manh Phan said to e27 that the system is now more secured, stable, and flexible as local authorities are getting used to the operations.

In a chat with us, Long Pham, CEO of Abivin, a prominent Vietnam’s logistics tech startup, shared his proposal to provide a supply chain planning system for Hanoi and HCMC authorities, aiming to optimise the flows of goods during lockdowns.

“We see that the authorities have a huge stake in governing the production and supply of essential goods for people, but they still lack visibility, synergies, and forecast over the whole supply chain, especially during lockdowns,” said Pham. “It is high time that the industry applied proper technologies to adapt to the swift spread of new coronavirus variants and satisfy the fluctuating COVID-related customer demand.”

Also read: Vietnam’s Abivin lifts Startup World Cup 2019, takes home US$1M prize money

As per his proposal, Abivin’s AI-powered logistics platform will employ its proprietary algorithms to help cities generate optimal routing and loading plans during lockdowns. The platform will consider constraints such as the type of goods defined as essential, pop-up containment zones, and matching orders to suitable delivery fleets inside blockage areas in the plan-making process.

However, this application of the proposed technology remains on the paper when this article went out.

Which technologies will play a key role?

The need to navigate through unpredictable customer demand during the virus outbreak, coupled with the lack of real-time information sharing, reinforced the need for technology in the industry.

“The players that are not able to optimise their asset network on the go will have a tough time dealing with COVID-related customer demand fluctuation to scale further and sustainably,” said Arnaud Houles of Reefknot.

He added that digital logistics, on-demand transportation, and maritime technology solutions would become burgeoning markets for startups to support the recovery of the regional supply chain.

According to Dave Anderson, the pandemic accelerated the “ship anything from anywhere” model from a global point of view. It also encouraged the adoption of concepts such as drop ship, the ability to source/ship a product or materials from various partners in a supply chain network or omnichannel delivery system. 

In addition, the pandemic also prompted companies to use cheaper and faster strategies using multiple options to meet demands rather than to rely on traditional “linear” supply chains.

“Will it all go back to ‘normal’ when we get to the other side of the COVID economy?” asked Anderson. “The simple answer is ‘no’. Omnichannel supply chain strategies powered by dropship are here to stay.”

He emphasised that the new paradigm will require upgraded supply chain decision software. It will be capable of rapidly deciding which product source is the best to meet customer needs or which manufacturer or supplier can manage a local delivery, especially one requiring special handling.

Houles echoed this viewpoint as he stated that Reefknot also witnessed the adoption of clearly defined e-commerce strategies based on decentralised asset-light networks. With this, they are “looking to orchestrate orders across modes, nodes and countries.”

On the contrary, Anderson also sees opportunities for startups, such as Shipday, Inventoro, or Fisherman, to develop “slimmed down and inexpensive technology” to serve tiny local businesses.

“The democratisation of supply chain technology is a real and important trend, one that will help create a better world for many,” he affirmed.

Moreover, the rapid pace of growth in e-commerce in the region has also impacted the requirements of supply chain technologies.

Weighing rising markets for supply chain technologies adoption, Houles mentioned that importing countries would tend to deploy technologies earlier than the exporting countries. At the same time, Anderson suggested that Asia has the advantage to adopt newer logistics options as its legacy supply chains are not as advanced and thus have fewer investments in assets, such as warehouses and trucks, to amortise.

“Finally, governments are playing a big role in these changes by promoting open data frameworks and encouraging corporates to focus more on innovation,” said Houles.

Image credit: 123rf

The post Vietnam’s supply chain amid worst COVID-19 outbreak: How tech startups are getting along appeared first on e27.

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