The human resources in Vietnam supply chain
THE HUMAN RESOURCES IN VIETNAM SUPPLY CHAIN
Nguyen Thi Dieu Chi
National Economics University
Abstract
Recently, the industrial revolution 4.0 has been mentioned frequently and it has been
impacting much on many fields from systems of production, management, business
administration to the whole economy of the country, labor market, … It is like a new wind
bringing a lot of opportunities and many challenges for every country in the world. In many
business activities, supply chain also contributes significantly on the economic development.
An effective supply chain will help businesses gain many competitive advantages, including
cost advantages and increased customer satisfaction. However, most Vietnamese enterprises
currently do not understand the importance of supply chain as well as supply chain
management. In activities of supply chain, human resources play a key role in all stages. This
article indicates status of human resource in Vietnam supply chain as well as the role of
human factor in the development of the enterprises, from which the article suggests some
long-term solutions to improve the quality and quantity of human resources in Vietnam supply
chain sector.
Keywords: Supply chain; Supply chain management; Human resources
1. Introduction
Today, Industry 4.0 is considered to deliver exciting developments in automation and
process improvement, offering lower production costs, decreased waste, increased flexibility
and higher quality throughout the production and distribution cycle. The opportunity is that all
nations has the same starting point in the 4.0 revolution. The challenge is that by the impact of
technology, cheap labor is no longer an advantage or the gap between the rich and the poor
more and more is getting high. So many countries will have to find ways to adapt to this
trend. Unavoidable from the impact, the logistics industry as well as supply chain is also
many advantages and disadvantages caused by industry 4.0. These influences have become
the premise for the logistics industry is moving to adapt to the industrial 4.0.
Recently, Vietnam Supply chain sector has been receiving more attention. Basing on
the decision No. 2299 / VPCP – KTTH, dated April 6th, 2015 of Vietnam Prime Minister, it
indicates plans to develop the supply chain and logistics services with six task groups: (i)
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formulating and implementing the policies; (ii) building concrete infrastructure; (iii)
developing the market; (iv) improving the services; (v) enhancing the quality of human
resources; (vi) others. The fifth task group relates to the human resource. In fact, the human
factor is not only important with supply chain but also any fields in the economy. Especially
with a potential sector likes logistics sector or supply chain, Vietnam is lacking high-quality
human resources and skilled labors. This study aims to analyze status of human resources in
Vietnam supply chain sector as well as its role in development of the enterprises from which
the article suggests solutions and recommendations improve the quality and quantity of
human resources in the sector.
2. Literature Review
2.1. Human resources
Human factor is considered as the driver of development. In other word, human plays
the role in connecting other resources to implement any activity. According to Joanna
Awoniyi (2009), human resources reflect individual’s capacity in the form of academic
knowledge, experience as well as potential capacity that a citizen can use to dedicate to his
community. This definition is analyzed in view of the evaluation of human resources ‘quality
or the paper acknowledges human potential as the capacity. In a recent study, Henry (2016)
noted that human resources are elements of organizations (with varied sizes and various
functions) that have the potential and ability to involve in the development of the organization
as well as the socio-economic development of the country, region and the world. Or, human
resources are the combination of internal and external elements of individual, with an aim to
ensure the success and the goal achievement of organization (George T. Milkovich and John
W. Boudreau,1997). In Vietnam, the research of Tran Xuan Cau and Mai Quoc Chanh (2008)
also indicates that human resources can create material and spiritual wealth for the society
manifested as quantity and quality specific at a given time.
Opinions about human resources is much when considered in different point of views,
however, we consider that human resource is the backbone of any society as well as
development of enterprises. Because, Human beings, as the basic and permanent constituent
of productive forces, may not be considered solely in terms of quantity or quality, but the
combination of both. And not only the working-age population but also other individuals with
potentiality and capacity can be contributors to the socio-economic growth.
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2.2. Supply chain
A supply chain is a system of organizations, people, activities, information, and
resources involved in moving a product or service from supplier to customer. Or, supply chain
activities involve the transformation of natural resources, raw materials, and components into
a finished product that is delivered to the end customer. (Anna Nagurney, 2006). To simplify,
we can understand a supply chain is the network of all the individuals, organizations,
resources, activities and technology involved in the creation and sale of a product from the
first sellers to the final customer. Or in different point of view, supply chain includes all
participating businesses, directly or indirectly, with an aim to meeting customer needs. This
means, not only manufacturers and suppliers involve in the supply chain process flow but also
transport companies, warehouses, retailers and customers.
Basing on concepts about supply chain, some authors indicate views about supply
chain management (SCM). SCM is about designing and managing of cross-cutting processes
that create value for organizations to meet the real needs of end-customers. The
accompanying of human resources and technology is the key to successful supply chain
integration. Moreover, supply chain management as the integration of activities taking place
at the basis of networks to create materials, move them into intermediate products and then to
final finished product and product distribution to the customer through the distribution
system. (H.L. Lee and C. Billington 1995).
Besides, some point of views argues that, SCM includes all the planning and
administration which relate to supply and logistics management. Additionally, it comprises
coordination with partners such as vendors, intermediaries, third-party service providers and
customers. Essentially, supply chain management integrates supply and demand management
within and outside the company. Or supply chain management is an integrated function, of
which the primary responsibility is to connect major business functions and business
processes within companies into a cohesive and high-performance business model. It covers
all logistics management activities as well as manufacturing activities, and it promotes
collaborative processes and activities with marketing, sales, product design, finance and
information technology. Some other views suggest that SCM is the oversight of materials,
information, and finances as they move in a process from supplier to manufacturer to
wholesaler to retailer, and to consumer. The three main flows of the supply chain are the
product flow, the information flow and the finances flow, and SCM involves coordinating and
integrating these flows both within and among enterprises.
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With the customers, the goal of any supply chain is to maximize the overall value of
the chain. The value of a chain is generated from the difference and transformation between
the final product that the customer received, and the cost covered to meet the customer
demand. With the suppliers, the objective of the supply chain is that the total cost of the entire
system from transportation, distribution to inventory storage is always minimized, and its
profit is calculated as gross profit shared throughout the chain. The success of the supply
chain should be measured in terms of the profitability of the whole chain rather than of each
individual stage. It means that the importance of supply chain management is: (i) reduce
costs, optimize profits; (ii) improve competitiveness in the market due to the availability of
goods/services at the right time and in the right place; and (iii) optimize inventory, improve
order turnaround.
3. Current situation of human resources in Vietnam supply chain
3.1. General situation of Vietnam supply chain
According to the StoxPlus (2017), Vietnam's supply chain costs are around 20.8% of
GDP and may be up to 25% in the coming years. These are considerably high number
compared to those of other countries. Large supply chain costs also increase the payment for
industrial production and reduce the competitiveness of Vietnamese goods compared with
products of other countries in the region as well as in the world.
Figure 1. Logistics costs as a percentage of GDP, 2016
Source: StoxPlus, 2017
There are two main reasons that could explain that high logistics or supply chain costs
over GDP of Vietnam. First, it is underdevelopment infrastructures (road, seaports) results in
traffic jams and low productivity, in turn leading to high logistics cost. Second, the reason is
delay of transportation/delivery due to traffic jam and clearance time in port inspection.
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According to Ministry of Industry and Trade, 2017, only 36% of Vietnamese
enterprises has involved in global supply chains, of which are mostly large-scale enterprises.
This rate is low compared to that of other countries in the region (the rate of Thailand is 60%).
In addition to large-scale enterprises, only 21% of SMEs enter the global supply chain while
the ratios in Thailand and Malaysia are 30% and 46% respectively. As a result, Vietnamese
enterprises have not truly benefited from the spillover effect of foreign investment, from
technology transfer and productivity enhancement in the supply chain.
3.2. Current situation of human resources in Vietnam supply chain
Supply chain or logistics is one of fast growing industries. And Vietnamese
enterprises have gradually acknowledged the role of SCM to the competitiveness of their
business in the market. Businesses are now trying their best to streamline the supply chain and
that means they need qualified labors for the department. However, there are not many skilled
employees with formal qualifications in this sector. Although, Vietnam has the advantage of
being located on the international maritime transport axis, as well as Vietnam has enough
conditions to become the center of logistics in the region and the world. However, one of
problems of Vietnam is the lack of human resources.
Figure 2. Survey results on limitations of Vietnam Logistics human resouces
21.58
24.21
18.95
35.26
Lack of high quality human resource
Lack of professionalism
Lacking training facilities
Lack of titles of Logistics staff in enterprises
Source: Dang Dinh Dao et al.(2017)
Basing on survey result in figure 2. 24.12% of aswerers indicated that Vietnam
Logistics human resource lack of quality, 35.26% is lacking professionalism; 18.95% is
lacking training facilities and 21.58% is lacking titles of Logistics staff in enteprises. All of
results proved that it is to focus on develop logistics human resources.
Moreover, there have been different figures about the number of companies operating in
logistics field in Vietnam and about the number of people working in the field. At least
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300,000 firms have operated in the logistics sector so far and 1.5 million people work in this
field nationwide which HCMC accounts for 40 percent. However, most of enterprises are
small and weak in ability. They meet around 20-25% of requirements only. The current
human resources accordingly meet the needs of these small-scaled enterprises and thus,
training tasks have not been received appropriate attention.
According to results of investigations by Dang Dinh Dao et al. (2017), 80.26% of personnel
of logistics enterprises is trained from their daily work; 23.6% takes part in training courses in the
country; 6.8% is trained by hired foreign experts; and 3.9% receives training abroad. In addition,
Vietnam’s logistics human resources mainly come from liners’ agencies, freight forwarding
companies and it is used according to their current abilities. Human resources with basic
knowledge of logistics is already small and thus it is almost impossible to have one with deep
knowledge of logistics sector. It is estimated that by 2020, Vietnam supply chain management
sector needs more than 20000 high-quality staffs with professional qualifications (Moit, 2017).
Figure 3. Survey results on quality of Vietnam supply chain human resouces
16.70%
53.30%
30%
Enterprises lack high skill employees in supply chain sector
Enterprises must retrain employees about supply chain
Enterprises satisfy with knowledge about supply chain of employees
Source: Ho Chi Minh Research and Development Institute
In a different study of Ho Chi Minh Research and Development Institute, over 50% of
interviewed enterprises answered that they lack high quality employees in supply chain sector.
Moreover, 30% of enterprises must retain employees in process of working. As results, it
affect on the expenses as well as the business efficiency of the enterprises. In addition, a very
small percentage (16,7%) of enterprises is satisfied with the quality of their employees.
However, according to the research results, Vietnam supply chain’s human resource is
very weak. Most of enterprises are not satisfied with the quality of human resources. They
must retrain the employees to meet the demand of the business activities. With the current
level and conditions, this is one of the great challenges for Vietnam supply chain’s human
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resource development
3.3. Difficulties affecting the development of Vietnam supply chain’s human resources in
the process of industrial revolution 4.0
In the context of fierce competition towards the trend of international integration,
especially, it is the development of industrial revolution 4.0, Vietnam supply chain services
requires high quality human resource with skills, professional knowledge and specialized
English proficiency. However, at present, human resources in Vietnam logistics are weak and
lacking in both quality and quantity. The reason of this problem is that although, in Vietnam,
the content of logistics theory has been approached and integrated in subjects such as
Production techniques, Supply management, logistics management, ... for a long time, only
when the economy turns into market mechanism, logistics is officially taught in some
universities. Full-time training institutions in the trade and transport sectors is mainly
responsible for human resources training of the field. For example, University of Transports
and Communication has specialized transport operation and logistics management majors and
University of Transport Technology specializes in Logistics and Multilateral Transport.
Currently, there are only some Vietnam universities enroll students of Bachelor of
Business in logistics, including Vietnam Maritime University, RMIT Vietnam and Ho Chi
Minh City University of Transport, National Economics University, Foreign Trade
University. Besides, there are some training centers providing short courses from 3 days to 4
months. Japan-Mekong Regional Logistics Training Center in Vietnam, Logistics Institute
under Vietnam Logistics Business Association, Logistics Training Center under Vietnam
Aviation Academy. The number of training institutes is few while the demand of human
resources is very large. This is one of difficulties of develop human resources in logistics as
well as supply chain sector of Vietnam.
Industry 4.0 has placed Vietnam in front of a huge challenge: profuse and cheap labor
source is not a factor creating competitive advantage and attract foreign investment to
Vietnam any more. Instead, it is a high quality human resource, meeting the evolution of the
Industry 4.0. In today’s trend, industry 4.0 is at its beginning stage, countries have almost
“equal” opportunity of approaching this revolution. Hence, Vietnam can take the advantage of
this opportunity to shorten the gap with developed countries. To do this, besides, Vietnam
needs have to go straight to researching and applying or attracting new technology
investment, we also need focus on develop high skill human resource because the human
resource is one of important factors to implement and manage all stages of supply chain.
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4. Propose some solution to develop human resources in Vietnam supply chain sector
Recruiting the right people, with the right skills, is essential for business success.
Therefore, it is necessary to have solutions to develop human resources especially for
development of potential logistics sector.
Firstly, it is necessary to have a legal framework in supply chain services. In this point
of view, the State needs build and improve legal documents relating to supply chain as well as
logistics sector. The government should also set a clear strategy for the development of the
logistics sector to attract quality human resources. The move would show the government's
interest in developing the supply chain and, indirectly, suggest to people of working-age
about the increasing need for high-quality staff working in logistics sector.
Secondly, the Ministry of Education should consider opening more training in the
supply chain service sector. While there are many professional training institutions for
traditional economic majors such as auditing, accounting, business administration, marketing
which contribute an output of high quality employees, in contrast, a potential industry such as
logistics is starving for qualified human resources. In addition, career orientation should be
emphasized so that prospective students have more information about the potential growth of
the logistics industry as well as supply chain services in the future.
Thirdly, supply chain training institutions can promote networking with partners in
logistics sector. This allows students to gain access to internship opportunities when studying
at schools. Students who have learned the theory in the lecture hall can also go to practice
applying their knowledge, from which can help them draw and accumulate experience. These
students then recognize what the business needs and what the labor market is lacking to guide
themselves. This creates a good environment for students to develop and become a well-
rounded and skilled professional in the future.
Finally, not only Vietnam government, but also every organizations need cooperate
with international partner in training logistics human resource. Vietnam has been in a long
distance behind the world. And thus, there should be cooperation in training, training
programs, and books… In the Project of Developing Logistics Services in the field of
transport until 2020, orientation to 2030 approved by the Prime Minister, human resources
training is attached to international cooperation. And it is not merely the Minister of
Transport’s tasks. There should be cooperation from other Ministries as Trade and
Commerce, Education and Training and local authorities.
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5. Conclusions
Industrial Revolution 4.0 with the achievement in the field of artificial intelligence
with the Internet of Things (IoT) is beginning to change the entire global logistics landscape.
The global logistics sector will shift its focus to emerging markets in Asia. Investing in
technology and people will be the decisive factor in the development of logistics in the future.
Vietnam's supply chain has been around for a long time but is still considered to be young
compared to that of other countries in the region. Although the country has geographically
advantage to facilitate the development of this service sector, Vietnam has not really made
breakthroughs for the logistics industry to fully utilize its potential. To reach this purpose, the
first issue which Vietnam needs implement is to develop human resources to adapt
development demand of logistics in this future.
6. References
Anna Nagurney, 2006. Nagurney, A. (2006). Supply chain network economics: Dynamics of
prices, flows, and profits. Northampton: Edward Elgar Publishing.
Dang Dinh Dao et al. (2017). Hệ thống logistics ở nước ta trong tiến trình hội nhập và phát
triển, Labor and Society Publishing House.
George T. Milkovich and John W. Boudreau,1997. Human Resource Management. Eighth
edition. Irwin Pulishing House
H.L. Lee and C. Billington 1995. The Evolution of supply chain management models and
practice at Hewlert – Packard. Interfaces, Vol.25, No.5, pp.42-63.
Henry, N (2016). Public Administration and Public Affairs.Twelfth edition. Rouledge
Publishing House
Joanna Awoniyi 2009. The effect of globalization on United Nations. Master thesis of Jowa
State University.
Ministry of Industry and Trade 2017. Vietnam Logistics report 2017. Industry and Trade
Publishing House
StoxPlus's report 2017. Vietnam Logistics Market 2017.
Tran Xuan Cau and Mai Quoc Chanh 2008. Giáo trình kinh tế nguồn nhân lực. National
Economics University Publishing House.
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