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OMGT2279 – Transportation and Freight logistics

CASE STUDY

Lecturer : Dr. Tram Nguyen

Student : Lê Hoàng Sơn – s

Vina Bubbles Cola Blows Its Top!

Course OMGT2279 – Transportation and Freight logistics Assignment Name The Case Study - Vina Bubbles Cola Blows Its Top! Lecturer Dr. Tram Nguyen Student name Lê Hoàng Sơn – s Semester B – 2022 Word count 1920 (Not including Reference List, Heading)

I declare that in submitting all work for this assessment I have read, understood and

agree to the content and expectations of the Assessment Declaration.

I. Introduction

Vina Bubble Cola (VBC) is a Vietnamese company that primarily produces high-end cola products and operates in Ho Chi Minh City and Hanoi. The focus of this case study will be the plastic used to make the bottle top for their main offering, a reusable shiny metal 750 ml bottle of coke. Currently, VBC purchases plastic pellets from Shenzhen via Hai Phong port, and then the plastic pellets will be delivered to final warehouses in Hanoi and HCMC by railway. However, it is having trouble when the transit time is longer than VBC requested, in addition, another Bangkok seller also introduces the same service with similar packaging to VBC. This report aims to research and identify routes and intermodal based on Mode Selection and Carrier Selection Criteria with data collected by contacting to Chinese, Thai, and Vietnamese carriers to see which path will bring more benefits for VCB. The selection of the proper mode of transportation undertakes the success of business and logistics management in a timely, cost-efficient, and safe. When transportation tools and modes are utilized efficiently, shipping and logistics costs are drastically lowered (Engebrethsen and Dauzère- Pérès 2019). In order to determine which route will be most advantageous for VCB, this paper seeks to investigate and identify routes and intermodal using information obtained by contacting Chinese, Thai, and Vietnamese carriers.

II. Analyzation

1. Compare and contrast the standard and expedited modes of transportation between China and Thailand a. Accessibility In this day and age, due to the flat terrain, interconnected road system, and developed maritime transport between Thailand – Cambodia – Vietnam, and Vietnam – China, it is possible to connect these nations to create an efficient transport network. b. Capacity According to the double-walled corrugate carton information used to pack the plastic, the total cubic meter for one shipment is 10.8 or equal to 6.8 tons, therefore, all of the intermodal specified are suitable for the regular need for VCB. c. Transit time In terms of transit time, the China supplier is less competitive because the transit time from China would be longer than the other from Thailand. Two main causes of the difference in time are the distance between countries and the modal of transportation. According to ports (n.d.), the

distance from the port of Shenzhen to the port of Hai Phong is more than 1000km, moreover, sea is the modal characteristic that has the longest transit time (Tram 2022). Additionally, the extra handling of cargo from Haiphong port to Hanoi or Ho Chi Minh City results in an increase in lead time. On the other hand, the distance from Bangkok to Phnom Penh is about 536 km (Rail n.d), in addition, rail is considered the most suitable transport modal since it is affordable, and adaptable for moving heavy, oversized objects across vast distances. (Hyland et al 2016). Route Distance Shenzhen - Hai Phong - Hanoi 1279 km Shenzhen - Hai Phong - Ho Chi Minh City 2298 km Bangkok - Phnom Penh - Hanoi 2026 km Bangkok - Phnom Penh - Ho Chi Minh City 766 km Table 1: Distance from 2 suppliers to Ho Chi Minh city and Hanoi. Route Modal Transit time Shenzhen - Hai Phong Sea 2-3 days Hai Phong – Ha Noi Rail 3 hours Average total transit time 3 days Table 2 Transit time from Shenzhen to Hanoi. Route Modal Transit time Shenzhen - Hai Phong Sea 2 - 3 days Hai Phong - Ho Chi Minh City Rail 3 - 5 days Average total transit time 5 - 8 days Table 3: Transit time from Shenzhen to Ho Chi Minh City. Route Modal Transit time Bangkok - Phnom Penh Rail 1 days Phnom Penh - Ha Noi Truck 2 - 3 days Average total transit time 3 - 4 days Table 4: Transit time from Bangkok to Hanoi. Route Modal Transit time Bangkok - Phnom Penh Rail 1 days Phnom Penh - Ho Chi Minh City Truck 1 - 2 days Average total transit time 2 - 3 days Table 5: Transit time from Bangkok to Ho Chi Minh City.

Overall, purchasing materials from Shenzhen supplier is more considerable for VBC in terms of costs, flexibility, adaptability, and customs clearance. However, the transit time to Ho Chi Minh city is still a problem that needs solving because it exceeds the standard shipping leading time for VBC. On the other hand, with a shorter lead time from rail and truck transport, VCB would deal with not only higher transportation costs but also customs clearance through the two countries.

2. Recommendation a. Reducing transit time from Shenzhen to Ho Chi Minh city Transit time to Hanoi is acceptable in response to the demand from VCB that goods be received within seven days (Table 2). Nonetheless, according to table 3, the average total transit time from Shenzhen to Ho Chi Minh city in the normal circumstance is quite long (5 – 8 days), almost exceeding the red line set by VBC. Hence, it is recommended the cargo be sent straight from Shenzhen to HCMC via Cat Lai port instead of Hai Phong port. In accordance with hptoancau (2022), the transit time to Ho Chi Minh is around three to four days, saving nearly three days for the lead time of VBC’s demand. Furthermore, the total price for shipping plastic to Ho Chi Minh also be reduced to approximately $500 (Figure 2). Figure 2: The total cost from Shenzhen to Ho Chi Minh (Cuocvanchuyen n.d.). b. Reducing cost freight from Thailand to Ho Chi Minh city and Hanoi Because truck modal is considered to have much higher fee compared to the others, maritime transport has been researched to replace it. The cartons are able to be transported directly from Bangkok to Ho Chi Minh City by ocean shipping, after which they would be transported to Hanoi by train. Consequently, multiple customs clearances will be avoided during sea transportation, in addition, the freight cost of two shipping times would be reduced. Figure 3 indicates that there is a decrease in the cost of freight compared to the cost in table 7. Additionally, with six days in total transit time from Bangkok to Ho Chi Minh city and Ho Chi Minh city to Hanoi, it still satisfies the VBC’s requirement for the lead time.

Figure 3: The total cost from Bangkok to Ho Chi Minh city (Cuocvanchuyen n.d.).

III. New detailed logistic plan from Bangkok supplier

As mentioned above in task 1, the maritime carrier with the shortest transit time and lowest cost of freight will be selected for importing plastic from Bangkok, Thailand. Furthermore, more than two-thirds of businesses are willing to pay higher transit costs in order to get the goods sooner and avoid having their production process interrupted and losing market share (US Department of Transportation 2014). Hence, truck carriers will be selected for transporting cartons to VBC’s warehouse in Vietnam.

1. Maritime from Bangkok to VBC’s warehouse in Ho Chi Minh city First of all, the plastic will be packed in double-walled corrugate cartons, and put in the container at the Bangkok port. Figure 4 shows the distance and travel time of the ship from Thailand to Vietnam. With 870 nautical miles (more than 1600km), it would take the ship three days to get to Cat Lai port. In this case, Cuocvanchuyen company will be responsible for not only providing ship but also for all insurance costs, freight charges and import fees, duties, demurrage, taxes, etc. incurred on each shipment, and title, as well as the risk of loss according to the standard DDP Destination options. After the ship docked at Cat Lai and completed the necessary customs procedures, VBC will contact Maersk to unload the container and ship to VBC’s warehouse by truck. Maersk has an affordable price for transport costs compared to its experience, 30 years of experience of handling cargo damage. Maersk offers $500 - 600 for each container and the transit time to the warehouse is within a day (Maersk n.d.). Route Modal Cost Transit time Bangkok – Cat Lai Sea $516 3 days Cat Lai port – VBC’s warehouse Truck $500-600 Within a day

time to Hanoi is 3-4 days for paired goods or retail goods, however, A Chau corporation provides a package shipping service, guaranteeing reducing transit time to 2-3 days (vanchuyenachau n.d.). Route Modal Cost Transit time Bangkok – Cat Lai Sea $ 516 3 days Cat Lai – VBC’s warehouse Truck $ 850 – 2000 2-3 days Total $ 1366 – 2516 5-6 days Table 9: Option 1 for cost and transit time from Bangkok to VBC’s warehouse in Hanoi Second option: Bangkok port to Hai Phong port to Hanoi warehouse After packing the cartons and putting them to the ship, it will depart from Bangkok port to Hai Phong port. According to ports (n.d.), the total distance between two ports is 1730 nautical miles, more than 3200 kilometers. Therefore, the cost of freight would be higher compared to a shipment to Cat Lai port, which is 732 US dollars (figure 5). The vessel keeps sailing to dock at Hai Phong port and Lacco will undertake to delivery cartons directly to VBC’s warehouse in Hanoi. Lacco offers $700 – 850 for each container the transit time to warehouse is approximately 7 hours (Lacco n.d.). Figure 5: The total cost from Bangkok to Hai Phong (Cuocvanchuyen n.d.). Route Modal Cost Transit time Bangkok – Hai Phong Sea $732 5 days Hai Phong – VBC’s warehouse Truck $700 – 850 7 hours Total $1432 – 1582 5 days and 7 hours

Table 10: Option 2 for cost and transit time from Bangkok to VBC’s warehouse in Hanoi VBC needs an additional option due to Vietnam's harsh climate, which is a flood season from July to November in central Vietnam. A case in point is that Central Vietnam has suffered from 13 consecutive tropical storms, causing the worst floods and landslides (Lesley Miller n.d.). Owing to that, transporting goods by road will face a lot of difficulties, hence, delivering goods through the ocean is more suitable during this time.

3. Recommendation Changing in Incoterm Although VBC has two delivery alternatives to select from, choosing expedited shipping puts VCB at a disadvantage. Because the business manages all procedures, fees, and insurance after the seller's warehouse gate until the cargo is fully loaded into Vietnamese warehouses. Furthermore, EXW is not the most advantageous incoterm in a global transaction (Deloitte 2020). Therefore, it is suggested to replace EXW with the CIF term, making the VCB responsible for risk only halfway through transportation and one-third for documents, cost, and freight (Figure 6). Figure 6: Conditions in Incoterms 2020 (lotusport 2022).

IV. Conclusion

Lotusport (2022) Tìm Hiểu Trách Nhiệm Của Người Bán Và Người Mua Trong Incoterm 2020 , Lotusport website, accessed 14 September 2022. https://www.lotusport.com/tim-hieu-trach-nhiem- cua-nguoi-ban-va-nguoi-mua-trong-incoterm- Michael F. Hyland, Hani S. Mahmassani, Lama Bou Mjahed (2016) ‘Analytical models of rail transportation service in the grain supply chain: Deconstructing the operational and economic advantages of shuttle train service’, Transportation Research Part E: Logistics and Transportation Review , 93:294-315, doi:10.1016/j.tre.2016.06.008. Ports (n.d.) Port of Shenzhen to Port of Hai Phong , ports website, accessed 13 September 2022. http://ports.com/sea-route/port-of-shenzhen,china/port-of-hai-phong,vietnam/#/?a=0&b=0&c=Port %20of%20Shenzhen,%20China&d=Port%20of%20Hai%20Phong,%20Vietnam Rail (n.d.) Băng Cốc đến Phnôm Pênh bằng tàu hỏa , Rail website, accessed 13 September 2022. https://rail.cc/vi/tau-hoa/bang-coc-den-phnom-penh#r Tram N (2022) ‘Modal Characteristics’ [PowerPoint slides, OMGT2279], RMIT University. U.S. Department of Transportation 2014, FREIGHT TRANSPORTATION: Improvements and the Economy , Federal Highway Administration, accessed 14 September 2022. https://ops.fhwa.dot.gov/freight/documents/improve_econ.pdf vantailuule (18 February 2022) ‘Dịch vụ Gửi/Vận chuyển hàng hóa từ Hải Phòng đi Sài Gòn uy tín, giá rẻ’, vantailuule , accessed 14 September 2022. https://vantailuule.vn/blogs/gui-hang-hp-mien- nam/chuyen-hang-hai-phong-sai-gon