Vietnam has registered incredible economic growth over the past few years, thanks to its growing middle-class population and young workforce. Moreover, the increment in pay levels along with the fast development of the retail industry has made Vietnam a viable option for investment and growth by the third-party (3PL) and the fourth-party (4PL) logistics sector.
According to the American Chamber of Commerce, in 2015, 90% of 3PL service demands were derived from Vietnam’s retail fast-moving consumer goods (FMCG) industry. This ever-increasing demand for logistics supply both in import and export businesses has led to the signing of several trade agreements such as ASEAN Economic Community (AEC), the EU-Vietnam Free Trade Agreement (EVFTA) and the Vietnam-Korean Free Trade Agreement (VKFTA). The need for transportation has also grown rapidly, given the speedy economic developments taking place in the country.
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Today, in spite of restricted connectivity, Vietnam’s logistics infrastructure has made quick developments. Moreover, the commodity composition of the country’s freight flows has enabled the logistics sector to maintain a high economic growth rate. As the manufacturing and trading activities are expected to grow considerable the country is clearly set on a path to becoming a major logistics hub
Understanding 3PL and 4PL
When looking for fulfillment providers, ‘3PL’ and ‘4PL’ are two terms that you would most likely come across. Now, let’s look at the difference between the two.
3PL – Third Party Logistics
While outsourcing logistics and fulfillment services to a 3PL, the businesses work directly with their logistics partner who is in-charge of the entire fulfillment process.
In order to avoid managing a warehouse and being time-efficient, eCommerce firms outsource fulfillment to a 3PL partner. This saves time and efforts spent on packing as well as shipping boxes and inventory tracking.
4PL – Fourth Party logistics
On the contrary, a 4PL, is a more indirect method, as it allows an extra layer of separation. It manages the relationship between all the 3PLs and the retailer. The 4PL can also be referred to as the control tower model, they don’t own any assets, and instead, simply work with partners who do own assets throughout the supply chain.
3PL vs 4PL: What’s the difference?
Following are some crucial differences between a 3PL and a 4PL:
Order fulfillment
Order fulfillment incorporates picking and packing orders, warehousing, and shipping packages which is done by a 3PL firm. A 4PL firm manages the supply chain comprehensively on its own, including transportation, fulfillment, and technology. With a 4PL company, they constantly work with 3PLs to provide solutions to issues that occur anywhere in the supply chain.
Customer communications
In the 4PL setup, various 3PLs depend on instructions from the 4PL. Owing to this mediation by the 4PL merchants, resolving issues could take time. With such customer service, there is hardly any onus at the 3PL level, which might raise some concerns for the merchant. With a 3PL arrangement, you are in direct touch with the customer service team, which will lead to a faster as well as a better solution to the problem.
3PL companies in Vietnam:
Gemadept Corporation
Founded in 1990, Gemadept Corporation is one of the first top 3 companies that received equitization by the government in 1993.
During the last three decades, Gemadept pioneered in many sectors. Today, it has several enterprises that are leading in its core businesses such as port operation and logistics in Vietnam. In fact, it is one of the largest companies when it comes to ports and logistics networks located at prime locations within and outside the country.
Gemadept makes the largest contribution of corporate income tax to the national budget and places a crucial role in fostering the country’s economic growth.
ITL (Indo Trans Logistics Corporation)
ITL happens to be one of the premier companies in providing solutions related to integrated logistics, freight management, warehousing, and distribution. They have over 300,000 square meters of warehousing space throughout North and South Vietnam, making them the largest providers of warehousing services in the country. It owns a fleet of over 300 containers and 250 chassis, located in South, Central, and North Vietnam. ITL also provides high-end road transport solutions. It further offers value-added services across its supply chain. Moreover, it is also planning to transform the future by acquiring expertise in e-Commerce.
DHL
A part of the USD 61 billion DPDHL group, DHL is the world’s foremost contract logistics provider. It also offers management and value-added services with unconventional fulfillment and distribution channels. It offers resolutions to issues associated with the auto-mobility, consumer, chemicals, energy, engineering & manufacturing, retail and technology, life sciences & healthcare sectors. As the global market expands, they are ready to offer innovative logistics solutions.
4PL companies in Vietnam
CBIP Logistics
CBIP offers business solutions based on its years of field knowledge and advanced technology and sustainable logistics plans. They provide a platform for the global expansion of businesses, especially E-commerce businesses. With the growing popularity of eCommerce and Vietnam’s status as a manufacturing hub, logistics is an industry in demand.
As a thriving business today, you will want to have a global presence for your business ventures, perhaps in countries that follow a different set of rules and regulations. Modern logistics cannot rely on old-school networks or for instance on B2B logistics. With a stronghold over almost 10 markets, CBIP provides an effective logistics solution for your business.
As of the publishing date of this article, CBIP remains the only 4PL in Vietnam.
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