Spending 30 million euros to build a large warehouse for B2B Ecommerce only
FM Logistic Group is a family company established in 1967 in France, starting from the timber business, then to warehouse management and gradually encroaching on the logistics segment as it is now. FM Logistic currently operates in 14 countries with 27,000 employees and 1.34 billion euros in revenue in 2021.
The group’s new strategy, called “Powering 2030”, is designed to address the rapid changes in retail & FMCG, as well as in supply chain management as people consumers spend more online.
FM Logistic aims to double its revenue to €3 billion by 2030 by focusing on omnichannel supply chain services, urban logistics, automation and sustainability.
In Asia, Vietnam is a key market invested by FM Logistic – besides India. Unlike other logistics businesses, FM Logistic does not do cross-border transportation, but often focuses on the domestic supply chain in each market it comes to.
SO WHY IS FM LOGISTIC SO IMPORTANT VIETNAM MARKET?
According to the Report from the Vietnam E-commerce White book released by the Vietnam E-commerce and Digital Economy Agency (IDEA), Vietnam’s e-commerce industry has achieved growth. 18% in 2020 with a scale of 11.8 billion USD.
Vietnam is expected to become the fastest growing e-commerce market in Southeast Asia, with a total e-commerce merchandise value (GMV) expected to be $56 billion by 2026.
B2B Ecommerce, an e-commerce business model to distribute FMCG products through shopping applications is a new trend in South Asia and Southeast Asia, typically Amazon, Flipkart, TataCliq in India ; Tokopedia in Indonesia; Vinshop, Gro 24/7 and Telio in Vietnam.
Class A urban distribution center at VSIP Bac Ninh of FM Logistic.
There is a great deal of potential for these businesses to grow, in part due to the very low rates of modern commercial market penetration in most Southeast and South Asian economies. Along with that, the level of digitization of traditional distribution networks is relatively low (small retail stores in Vietnam, Kiranas in India, etc.).
Although the e-B2B market is still relatively new in Vietnam (under 150 million USD in 2020), however, the digital and urban logistics solutions deployed by e-B2B businesses are already established. represents a significant turning point in the long-term transformation of urban distribution networks.
This is especially true for Vietnam, which has the highest share of non-organised retail channels among ASEAN countries, at 88% (in the FMCG category) with online sales now accounting for less than 1 percent. % of FMCG sales of the whole country.
Unlike Western countries, the system of traditional department stores has been eliminated after the emergence of the convenience store business model. In Vietnam, with the advent of startups such as VinShop (One Mount) and Bach Hoa Viet (K Group) or the ‘assistance’ of large manufacturing and distribution enterprises like Unilever and DKSH, both the form of a traditional department store and a system of convenience stores developed in parallel.
This situation makes the process of B2B Ecommerce distribution in Vietnam increasingly diverse and complex. However, instead of seeing this as a challenge, FM Logistic thinks of it as an opportunity. Furthermore, ‘admission is optional’! Together with a major partner Smart Logs – in charge of hardware, FM Logistic can help Unilever’s 24/7 VinShop – Gro to manage and deliver goods to the smallest and farthest shops in the two cities of Hanoi – HCMC.
Of course, in order to be able to carry out the aforementioned huge amount of work, FM Logistic is forced to make a large investment in Vietnam. FM Logistic Vietnam currently has an area of more than 60,000m2, with a team of 350 employees operating in 7 warehouse centers.
With a nationwide network of local transport partners and fully digitalized operations (solutions for WMS, TMS, OMS, BI); FM Logistic Vietnam aims to become the leading third-party logistics service provider (3PL) in Vietnam by 2030.
Currently, FM Logistic Vietnam has 3 warehouse locations including Urban Distribution Center Class A at VSIP Bac Ninh; The Urban Distribution Center in Di An – Binh Duong and the Multi-Customer Distribution Center (MCF) at VSIP 2 Binh Duong will be opened in December 2022.
Investment value for 2 warehouses in VSIP Bac Ninh and Di An – Binh Duong is about 30 million Euro; That is not to mention the investment in personnel – technology – operating system. Mr. Stephane Descarpentries – Member of the Board of Directors in charge of business in Asia revealed that the Vietnamese market is accounting for about 15% to 20% of the average total investment per year of the entire FM Logistic Group.
CHALLENGES FROM FM LOGISTIC IN VIETNAM MARKET
Mr. Hamza Harti – Managing Director of FM Logistic Vietnam
“The remarkable growth of the FMCG industry in Vietnam requires that logistics providers develop at the same pace. The fact that the traditional grocery system has developed in tandem with the convenience store chain has resulted in more distribution channels and smaller number of orders. As a result, supply chains and operating systems become increasingly complex.
Therefore, one of our biggest difficulties is how to predict and expand our supply capacity 2 to 3 years in advance for customers. The fact that we always build warehouses is much larger than the current demand and although both warehouses in Bac Ninh – Di An are only using 50% of their capacity, there are still plans to build more new warehouses; is to prepare for this story“, added Mr. Hamza Harti – Managing Director of FM Logistic Vietnam.
In addition, with many restrictions on delivery time frames in urban areas, traffic congestion and air pollution are increasing; As a result, brands, manufacturers and distributors in Vietnam in particular and Southeast Asia in general are under pressure to find innovative ways to bring products to consumers efficiently and effectively. more sustainable.
To achieve the above goals, FM Logistic has selected some effective ideas from experiences in other cities. For example, in France, where home delivery costs are already very high (matching the penetration of e-commerce), companies like FM Logistic have started developing mobile lockers to help people Consumers can easily pick up goods at a fixed location.
However, with the current context in Vietnam, these solutions are unlikely to become a popular trend in big cities because in the online shopping race, super-fast delivery services are currently popular. (compared to home delivery or delivery within 24/48 hours).
“Our view of the development of last mile delivery networks in Vietnam closely resembles that of FM Logistic in Spain, China or India. With the strong development of a large urban distribution network throughout the city center, it is sometimes built from areas where there are not many orders – for example, Di An – Binh Duong.
In Vietnam, we have ambitions to consolidate FMCG distribution supply chains in urban areas with the goal of increasing productivity, reducing overall costs and minimizing impact on the environment.“, said Mr. Hamza Harti- Managing Director of FM Logistic Vietnam.
Acting as a neutral player in the FMCG Supply Chain, FM Logistic can take advantage of “Pooling” solutions, first implemented in Europe in the early 2000s. where it has been applied to the FMCG and Cosmetics industries to synergize urban delivery resources (trucks, storage centers, human resources and sometimes order management) in order to increase labor rates. Up to 100% utilization of all resources involved.
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