Legal issues of Logistics services in Vietnam

CHAPTER 1. OVERVIEW OF LOGISTICS AND LOGISTICS SERVICE BUSINESSES

1. OVERVIEW OF LOGISTICS

1.1. Logistics concept

Entering the 20th century, thanks to the application of scientific and technological advances, especially achievements in the field of information technology, the production of material wealth of society has achieved high productivity. However, to optimize the production process while reducing product costs and enhancing the competitiveness of goods in the market, it is necessary to perfect the material distribution management system to minimize losses due to inventory, backlog of raw materials, and semi-finished products during the production and circulation process. This material distribution system is called Logistics.[17,20]

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The term logistics is a military term that has been around for several hundred years. It was first used in the military and meant “logistics” or “supply”. General Chauncey B. Baker, author of “Transportation of Troops and Merterial” published by Hudson in Kansas City, wrote: “A branch of the art of war that deals with the movement and supply of food, supplies and equipment to the army is called “Logistics”. During World War II, the armies of all the countries involved in the war used Logistics very effectively, ensuring logistics for the fighting forces. Today, the term Logistics continues to be widely used both inside and outside the military.

Along with the development of socio-economy, Logistics has been studied in depth and widely applied in many other fields such as production and business. The term Logistics today is understood to mean the management of the physical distribution system of production and business units in society. However, up to now, there has not been any complete definition of Logistics. The concept of Logistics is based on many research perspectives. Here are some concepts of Logistics:

According to the American Logistics Council - 1988: Logistics is the process of planning, implementing, and controlling the efficient, cost-effective flow and

storage of raw materials, inventories, finished goods and related information from the point of origin to the point of consumption, for the purpose of satisfying customer requirements.[30,10]

Logistics is defined by the American Logistics Management Council as follows: Logistics is the process of planning, selecting the optimal solution to implement management, control the movement and storage in the most cost-effective and shortest time for raw materials, semi-finished products, as well as corresponding information from the pre-production stage until the goods reach the final consumer to meet customer requirements. [30,11]

The 2005 Law on Commerce of Vietnam does not introduce the concept of "Logistics" but introduces the concept of "logistics services" in Article 233:

“Logistics services are commercial activities in which traders organize the performance of one or more tasks including receiving goods, transporting, storing, storing, carrying out customs procedures, other paperwork, consulting customers, packaging, marking, delivering goods or other services related to goods as agreed with customers in order to receive remuneration. Logistics services are transcribed in Vietnamese as logistic services.”

Through the above concepts, we can see that although there are different expressions in terms of words and presentation, in the content all authors believe that Logistics is the activity of managing the flow of raw materials from the procurement stage through the storage process, manufacturing products and distributing them to consumers. The purpose is to minimize costs that arise or will arise in the shortest time during the transportation of raw materials to serve the production process as well as distributing goods in a timely manner.[17,22]

So we can understand Logistics as follows: Logistics is the art of organizing the movement of goods and raw materials from the time of purchase, through the processes of storage, production, distribution until they reach the hands of consumers.

Up to now, Logistics has not been translated into Vietnamese so this term is used as a loan word in Vietnam. Because there is no common unified point of view and Logistics includes many types of services and a complete list of Logistics services is not satisfactory.[17,22]

1.2. Logistics classification

Logistics is a very broad category, it covers many fields and is classified based on many different criteria.

1.2.1 By form

- First Party Logistics (1PL): The owner of the goods organizes logistics activities himself to meet his own needs.

- Second Party Logistics (2PL – Second Party Logistics): A second party Logistics service provider is a service provider for individual activities in the chain of Logistics activities (such as transportation, warehousing, customs clearance, payment) to meet customer needs.

- Third Party Logistics (3PL – Third Party Logistics): This person represents the owner of the goods and manages and performs Logistics services for each functional department.

- 4th Party Logistics (4PL – Forth Party Logistics): is an integrator, connecting its resources, potentials and scientific and technical facilities with other organizations to design, build and operate Logistics chain solutions.

- Fifth Party Logistics (5PL): Has been mentioned in recent years. This is a more advanced form of fourth party logistics that goes along with the development of e-commerce.

1.2.2 By scope

Divided into the following 4 types: [29.8]

- Logistics in the field of production and business (Business Logistics): Each business field and specific goods will have different ways of preserving, transporting and managing goods. Therefore, the Logistics chain of each subject has its own characteristics. For example:

+ Fast Moving Consumer Goods Logistics (FMCG): With this type of goods, the most important requirement is to ensure delivery time, the time from when the goods are produced until they reach the final consumer.

+ Automotive Logistics: This industry requires smooth coordination between factories and departments producing individual spare parts, ensuring that the final time of one stage is the beginning time of the next stage.

Avoid waiting times. Of particular importance is the storage and distribution of spare parts.

+ There are also other types such as: Chemical Logistics; Pharmaceutical Logistics; Petroleum Logistics...

- Military Logistics: Planning and integrating all aspects of support for military combat capabilities (in the deployment of troops or stationing troops) and military equipment designs to ensure readiness, reliability and efficiency. Many documents cite the operation of the Ho Chi Minh trail as a typical example of Logistics in the war against America.

- Event Logistics: A network of activities, facilities and people needed to organize, plan and deploy the above resources for an event to take place and end effectively.

- Service Logistics: Providing, planning and managing facilities/capital, human resources and materials to support or ensure a service or business operation.

1.2.3 By field

- Inbound Logistics: is the activity of ensuring the supply of input resources (raw materials, information, capital ...) for the production and business activities of the enterprise in an optimal way in terms of location, time and cost.

- Outbound Logistics: are activities that ensure the delivery of components to consumers in a good way in terms of location, time and cost to meet the goals of the business.

- Reverse Logistics: is the process of collecting by-products, scrap, waste, and environmental factors arising from the production, distribution, and consumption processes for recycling or processing.[29, 8]

2. LOGISTICS SERVICES AND LOGISTICS SERVICE BUSINESSES

2.1. Concept of logistics services

Along with the development of productive forces and the effective support of the scientific and technological revolution in the world, the volume of goods and material products has increased.

The quality of goods produced is increasing day by day. As the gap in traditional competitive areas such as product quality or price is narrowing, manufacturers have shifted to competing in other aspects such as: inventory management, delivery speed, rationalization of the flow of raw materials and semi-finished products, ... including the physical distribution management system of the enterprise. In that process, Logistics is simply considered a new business method, with the potential to develop and bring production efficiency to the enterprise. Over time, Logistics has been specialized and developed to become one of the service industries playing an important role in international trade.[21]

The concept of Logistics services was first codified in the 2005 Commercial Code: “Logistics services are commercial activities in which traders organize the implementation of one or more stages including receiving goods, transporting, storing, storing, customs procedures, other documents, customer consulting, packaging, marking, delivery or other services related to goods as agreed with customers to receive remuneration”. Although there are still many different views, the concepts of Logistics services can be divided into two groups:

- The narrow definition group, typically the definition of the 2005 Commercial Law, has a narrow meaning, considering Logistics similar to the delivery of goods. However, it is also necessary to note that the definition in the Commercial Law is open, shown in the italicized paragraph "or other services related to goods". The concept of Logistics in some specialized fields is also considered narrow, that is, limited to the scope and objects of that industry (such as the example in the military field). According to this point of view, the nature of Logistics services is the collection of supporting factors for the process of transporting products from the place of production to the place of consumption. Thus, Logistics services have many transportation factors, and Logistics service providers according to this concept are not much different from multimodal transport service providers (MTO).

- The definition group has a wide scope: According to this point of view, Logistics services are associated with the entire process of importing raw materials and fuels as input for the production process.

, producing goods and putting them into circulation and distribution channels to reach the final consumers. This group of definitions of Logistics services contributes to clearly distinguishing between providers of individual services such as transportation, delivery, customs clearance, distribution, production support services, management consulting, etc. with a professional Logistics service provider, who will undertake all stages in the process of forming and delivering goods to the final consumers. Thus, a professional Logistics service provider is required to have solid professional expertise to provide a complete service to manufacturers. It can be said that this is a highly specialized job.[21]

2.2 Classification of logistics services

2.2.1 According to WTO classification

- Core Logistics Service: Essential services in Logistics activities and need to be liberalized to promote service flow including: cargo handling services, warehousing services, transportation agency services and other support services.

- Transport related services: Services related to the effective provision of integrated logistics services as well as providing a favorable environment for the development of third-party logistics operations include freight transport (sea, inland waterway, air, rail, road and rental of unmanned vehicles) and other services related to logistics services including technical analysis and testing services, delivery services, commission agency services, wholesale and retail services.

- Secondary or complementary services (Non-core Logistics Service): include computer and computer-related services, packaging services and management consulting services.

2.2.2 According to the provisions of the Commercial Law

According to Article 233 of the 2005 Law on Commerce of Vietnam, Logistics services are specifically regulated as follows:

- Main Logistics services include:

+ Cargo handling services, including container handling activities.

+ Warehousing and storage services include both container warehousing and raw material and equipment processing warehouses.

+ Transport agency services, including customs clearance agency activities and cargo loading and unloading planning

+ Other supporting services, including activities of receiving, storing and managing information related to the transportation and storage of goods throughout the logistics chain; activities of reprocessing goods, inventory, returned goods, obsolete goods and redistribution; activities of leasing and hire-purchase of containers.

- Logistics services related to transportation include:

+ Maritime transport services

+ Inland waterway transport services

+ Air freight services

+ Railway transport services.

+ Road transport services.

+ Pipeline transportation services

- Other related services

+ Technical testing and analysis services.

+ Postal services

+ Wholesale trade services.

+ Retail services include warehouse management, collection, aggregation, classification, distribution and delivery,

+ Other transportation support services.

This classification is consistent with Vietnam's WTO Commitments on Transport Services, but it does not reflect modern service types under current conditions.[18,21]

2.2.3 According to service content

- Logistics design and strategic planning service group for businesses (Designing/Planning): Providing Logistics services to design plans to restructure the customer's supply chain to achieve optimal results and maximize competitive advantages. Here, Logistics service providers will base on the customer's production organization status to build a suitable supply chain, build a reasonable production process, ensuring to minimize unnecessary time and costs.

- Inbound Logistics service group, including:

+ Kitting: manages the process of selecting, contributing and transporting unassembled components to the company's production line.

+ Quality control / Quality assurance: Conduct quality checks at the warehouse and remove substandard products and transport them back to the manufacturer to replace substandard components.

+ Sequencing: Arranging parts and materials for a production line in a specific order for ease of production and packaging.

+ Milk runs: Optimize the flow of goods by consolidating and delivering to multiple customers at the same time. Design complex routes with multiple loading and unloading points, combining multiple orders from multiple customers at the same time. The purpose is to maximize the vehicle's carrying capacity and save transportation costs.[29]

+ VIM (Vendor Inventory Management): Collect goods from many small suppliers of goods or materials necessary for the customer's production and business process, store and distribute to customers.

- Manufacturing Support services group, including:

+ Sub – Assembly: Applicable to electronics, automobiles, and fast-moving consumer goods industries. The Logistics Company will also undertake the task of assembling basic product parts from individual components.

+ Inventory Planning: Plan and control the warehousing process with the most modern warehouse management systems to ensure optimal inventory and minimize costs.

+ Packing/ Labeling: Packing and labeling goods.

- Outbound Logistics/Warehousing and Distribution: With a modern and large-scale warehouse system, Logistics companies can undertake the storage of finished products and distribution to consumers at low cost. In addition, to meet customer requirements, these companies also provide a number of special warehouse services such as: Contract warehousing; Dedicated warehousing; Multi-user warehousing; Bonded warehousing, Automated warehousing; Cross-docking warehousing.

Legal issues of Logistics services in Vietnam - 2

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