Working Paper 2023.2.4.

15
- Vol 2, No 4

CƠ HỘI VÀ THÁCH THỨC CỦA VIỆC ỨNG DỤNG HỆ THỐNG QUẢN LÝ

KHO HÀNG (WMS) TẠI VIỆT NAM
Nguyễn Vân Anh1, Lâm Minh Chi, Phan Ngọc Khánh, Nguyễn Hồng Nhung, Đỗ Thuỷ Tiên
Sinh viên K59 CLC Kinh tế Đối ngoại - Viện Kinh tế và kinh doanh quốc tế
Trường Đại học Ngoại thương, Hà Nội, Việt Nam

Nguyễn Thị Yến

Giảng viên Viện Kinh tế và kinh doanh quốc tế
Trường Đại học Ngoại thương, Hà Nội, Việt Nam
Tóm tắt
Trong số các hoạt động logistics, hoạt động kho bãi được coi là một trong những khâu quan trọng
nhất trong quá trình thực hiện đơn hàng của khách hàng. Ngành logistic mở rộng tại Việt Nam kết
hợp với sự công nghệ tiên tiến đòi hỏi các doanh nghiệp logistics Việt Nam phải áp dụng ứng dụng
công nghệ vào quản lý kho bãi. Nhóm tác giả đã thực hiện nghiên cứu này nhằm tìm hiểu Hệ thống
Quản lý Kho hàng (WMS), một trong những ứng dụng được sử dụng nhiều nhất để giám sát và tổ
chức các hoạt động kho bãi. Thông qua phương pháp định tính, nghiên cứu chỉ ra những cơ hội và
thách thức mà các công ty logistics Việt Nam phải đối mặt khi triển khai WMS. Một số giải pháp
sẽ được khuyến nghị cho các cơ quan có thẩm quyền và các doanh nghiệp logistics của Việt Nam
để tăng cường sử dụng WMS cả về chất lượng và số lượng.
Từ khóa: Logistics, Kho hàng, Hệ thống Quản lý Kho hàng, WMS, Việt Nam
OPPORTUNITIES AND CHALLENGES OF WAREHOUSE MANAGEMENT
SYSTEM (WMS) APPLICATION IN VIETNAM
Abstract

1
Tác giả liên hệ, Email: k59.2012150007@ftu.edu.vn

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Among logistics activities, warehousing is considered one of the most significant steps during the
realization of a customer's order. The expansion of the logistic industry in Vietnam combined with
the advance of technology require Vietnam’s logistics enterprises to apply technological
application to warehouse management. The group of authors carried out this research to study
Warehouse Management System (WMS) which is among the most used applications to oversee
and organize the warehousing activities. Through the qualitative method, the study presents the
opportunities for and challenges facing Vietnam’s logistics companies when implementing WMS.
Several solutions are recommended to Vietnam's competent authority and logistics companies to
enhance the usage of WMS both in quality and quantity.
Keywords: Logistics, Warehouse, Warehouse Management System, WMS, Vietnam
1. Introduction
1.1. Rationale of the study
Warehousing is a fundamental factor in supply chain management. Playing the role of storing
and coordinating the circularity of goods in the supply chain based on customer’s demand and
firms’ supply, warehousing and inventory storage is the key to success for any Logistics enterprise.
In the background of global integration, Vietnam is considered one of the promising nations in the
production and logistics field. The Vietnamese government also affirmed to make Logistics the
country’s economic spearhead. And with the rapid development of technology, Vietnamese
logistics enterprises have taken several managing software as a booster to enhance their operating
system. Warehouse management system (WMS) – is one of the highly considered programmes for
these enterprises.
Despite the prospective benefit of WMS once being implemented, few Vietnamese firms
actually use WMS to track on their warehousing and inventory storing system due to mere
understanding of the value and compatibility of the system to the pre-existed custom in Vietnam.
Studies on implementing WMS into the Vietnamese logistics industry are limited; therefore, our
research paper will discuss “Opportunities and challenges of Warehouse Management System
(WMS) application in Vietnam”.
1.2. Objectives and scope
The paper will analyze the current situation of warehousing and inventory storage
management of Logistics enterprises located in Vietnam. The authors will also give an evaluation
of WMS application, following by judging the compatibility of WMS with the Vietnamese market
and give suggestions for both the government and Vietnamese enterprises in the process of
implementing WMS efficiency and effectively.
1.3. Methodology
The research design follows qualitative research methodology. The research was carried out
through collecting and analyzing previous observations and reports of Vietnamese enterprises'
warehouse management and the application of WMS in their work process.

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1.4. Structure of the study
The research paper will be in the following sequence:
Part 1. Introduction
Part 2. Literature review: An overall look of Warehouse and WMS
Part 3. Overview: A grasp of Vietnamese warehouse and WMS application
Part 4. Evaluation of WMS application in Vietnam
Part 5. Opportunities and challenges of WMS in Vietnam
Part 6. Recommendations

2. Literature review
2.1. Warehouse
2.1.1. Definition
Warehousing is the act of keeping tangible goods in a specialized warehouse or storage facility
until they are sold or dispersed. Businesses can trace where items are housed, when they arrived,
how long they have been there, and the quantity on hand thanks to warehouses. While a small,
home-based business might keep its belongings in a spare room, cellar, or garage, larger businesses
frequently buy or rent space in a building designed specifically for storage.
2.1.2. Warehouse’s flowchart
Before the order fulfillment process starts, the warehouse management process flow must be
established. A well-designed warehouse management process flow saves many business time and
money. Here is a basic warehouse management process flow chart:

Figure 1: Basic warehouse management process

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Source: Blue Cart
In short, the warehouse operation starts from the time the goods are delivered to the warehouse
until the goods are transferred out of the warehouse to the carrier or the customer.
2.2.3. Warehouse classification
- Based on purpose of usage:
● Distribution center: its key duties include distributing and storing domestic items and
providing value-added services.
● CFS (Container Freight Station): a station or warehouse where a variety of items are kept
in preparation for shipping in one or more containers as a group.
● Cold storage: warehouse used to store meat, fish, dairy goods, poultry, fresh and frozen
perishable fruits and vegetables, or any combination thereof, at a desired temperature to preserve
the product's quality.
● Cross-docking warehouse: without long-term storage, goods are moved straight from
receivables to departing freight.
● Bonded warehouse: a warehouse that is bonded and licensed in accordance with the
Customs and Excise Act, in which products may be stored and secured without paying tax or until
the Act's requirements have been met, and includes any store, house, shed, or other location where
goods are stored in such a manner.

2.2. Warehouse management system (WMS)

2.2.1. Definition
A WMS is a software program that controls supply chain fulfillment activities from the
distribution center to the retail shelf and provides visibility into a company's full inventory. It can
help businesses make the most of their expenditures in equipment, manpower, and space.
2.2.2. Classification of WMS:
a. Standalone: It’s the most basic system. It provides features that enable efficient day-to-
day warehouse operations by monitoring and controlling supply chain flow from when goods
arrive and leave the warehouse
b. Supply Chain Modules: It’s an integrated supply chain management software system
manages all the activities required to create and deliver a product, including inventory
management, transportation and logistics
c. Integrated With ERP: It is a WMS module as part of a larger ERP system. They offer most
of the core applications that streamline 3PL processes: from supply chain planning, procurement,
accounting, customer relationship management, human resources and more.

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 d. Cloud-based: It began as on-premises systems. Cloud management is the process of
monitoring and maximizing efficiency in the use of one or more private or public clouds.
Organizations typically use a cloud management platform to manage cloud usage.

3. Overview
3.1. Overview about Vietnamese warehouse
3.1.1. Growth rate
The revenue of the warehousing industry has grown rapidly and steadily in recent years. Due
to the Covid-19 pandemic, consumers have developed the habit of using e-money and shifted from
direct shopping to online shopping, which has helped the e-commerce sector advance. Recent
projections indicate that the Vietnam e-commerce business might generate 52 billion in US dollars
in sales. In addition, many companies consider the necessity of enlarging warehouses to store raw
materials, semi-finished goods, and final goods close to ports and manufacturing locations, which
has been influenced by the busy commercial transactions that have occurred recently. Therefore,
the Vietnam warehouse leasing market will expand remarkably with a forecasted growth rate of
11%.

Figure 2: Revenue of warehousing services sector, 2015-2019

Source: VIRAC, GSO
3.1.2. Businesses and employee in the market
More and more businesses are engaged in the warehousing business. But up until this point,
Vietnam has been unable to meet the warehousing requirements of both domestic and foreign
businesses, particularly those for modern warehouses.
New established The first 9 months of 2022 The first 9 months of 2022/The first 9
enterprises months of 2022 (%)

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 Number of Registered Number of Number of Registered Number of
enterprises capital employees enterprises capital employees
(billion dong) (billion
dong)

Total number 112.791 1.272.285 696.197 124,2 100,3 116,2

of enterprises

Warehousing 5.500 70.846 25.676 125,4 183,5 121,5

and
transportation
enterprises

Proportion of 4,9 6 3,7

Warehousing
and
transportation
enterprises
(%)

Source: Calculation from the General Statistics Office data

Figure 3: Rapid growth of ready-built factory and warehouse supply

Source: CBRE Research

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 The warehouse system's distribution is not even. Just 30% of warehouses are created in the
North, in the area around Hanoi and Hai Phong, while 70% are built in the South. In addition,
occupancy rates have notably grown in 2022 (in the southern provinces by 3% and in the northern
provinces by 3.5% over the same period last year), while warehouse rentals continue to rise at a
steady annual rate.
3.1.3. Investment in the warehousing industry
The warehousing industry is also attracting a lot of attention from foreign companies,
especially investment in industrial land. Specifically, the number of investors interested in
industrial land and warehouses will increase by 10% and 7% respectively in 2022 (GSO, 2022).
In the period from 2023 to 2025, the government has also approved a plan to deploy new industrial
parks with investment capital up to nearly 30 trillion VND (GSO, 2022).
In addition, investment in modern facilities, technology and equipment in warehouses is also
focused to improve productivity and operational efficiency, however, the proportion is moderately
low.
3.1.4. Trends in the warehousing industry
The warehousing industry in Vietnam has existed following development trends. The first is
the increase in demand for cold storage, especially for the food industry. The food processing
sector has grown recently as a result of the growing middle class. In the shift from traditional trade
to modern trade, the cold chain (low-temperature logistics) has been a significant development
concern.
The second is the trend of green logistics, focusing on reducing energy consumption and
emissions to the environment. Lastly, there is the tendency toward technology and automation in
the warehouse operation process through the employment of contemporary equipment and
management systems.

3.2. Overview of WMS application in Vietnam

3.2.1. Overview of WMS application in the Vietnamese logistics industry
Historically, WMS were complicated, pricey and time-consuming to deploy, primarily used
by developed countries. However, new digitalization platforms, technologies and integration tools
have enabled Vietnamese enterprises to utilize more accessible and cost-effective WMS. In fact,
the Vietnamese logistics industry has been observed to employ a WMS for almost every good and
service . WMS has so far supported General Warehouse, CFS Warehouse, Distribution Centres,
Bonded Warehouse, Crossdock Warehouse, Project Warehouse, Raw Material Warehouse,
Finished Goods Warehouse, etc.
3.2.2. Investment of WMS in Vietnam

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 a. By logistics companies
Warehousing services are currently receiving escalated investment, i.e. WMS, to increase
value and serve customers. The rate of application of WMS among companies reached 41.4%
(HCMC Department of Industry and Trade, 2022). While multinational enterprises are equipped
with and utilizing WMS with their parent company in the Vietnamese market, large domestic
enterprises such as Saigon Newport Corporation, Vinafco, Transimex, Sotrans, etc., are self-
developing their own WMS to achieve synchronized data between departments. However, the self-
built WMS is currently causing many issues for businesses due to lack of digital technology
infrastructure, qualified internal human resources; low investment cost; difficulty in changing
habits and business customs; and low-quality services etc. Despite challenges, most Vietnamese
logistics firms are eager to invest and apply information technology for better logistics
performance.
International software firms like Oracle, Infor, and Epicor have therefore entered Vietnam.
However, not all businesses have enough resources to apply and deploy these software. Over ages,
the industry is expanding with more global software suppliers offering affordable prices and
simpler installations, namely WMS360, Infor, Infolog, and Indigo Software. Besides, many
domestic WMS on the market today are of comparable quality to the foreign products and offer
higher customization levels at more reasonable costs, with prominent ones being WMS by
INNOTECH Vietnam, TKELog WMS by TKSolution, SWM by Smartlog, MEK-WMS by
Meksmart, etc. WMS businesses help domestic business firms integrate and modernize their
independently created WMS to create a more complete system. For others, a new technological
ecosystem embracing WMS is also being developed. To illustrate, SWM by Smartlog has been
integrated directly into the warehouse system of Sabeco - top firm in the F&B industry, One Mount
Group - leading enterprise in Retail industry, and VN POST - large transportation company in Viet
Nam, etc.
In general, WMS is presently being built to aid in improving the performance of logistics
activities for a wide range of goods and services for practically every firm. WMS and ERP are
typically coupled in enterprises to improve workflow, streamline procedures, and more effectively
handle data. WMS incorporates technological features to enhance operational performance. WMS
tracks product shelf life, keeps track of inventory changes, configures FIFO, LIFO, or FEFO
packing methods, and uses 3D visual analysis to simplify and facilitate the collection and
transportation of products inside the warehouse. Corresponding process of reverse logistics can
also be managed effectively. Another feature is that WMS is embedded with labor management
and automatic task distribution, smoothing the efficient distribution of several work at once.
Currently, WMS software provides multi-language, multi-platform, multi-account accessibility,
and a ton of new features that are tailored to the demands of the firm.
Not only limited to those above-mentioned companies, WMS promises to expand its
application scale even more in the future. Specifically, in a survey in 2021 by VLI, up to 16.67%

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of surveyed businesses plan to build a WMS in the future, in addition to 63.89% of enterprises
already using WMS.

Figure 4: Technology applications and development trends that enterprises are providing or plan
to provide to customers using logistics services
Source: Vietnam Logistics Research and Development Institute – VLI (2021)
b. At ports and logistics centers
Currently, many logistics companies are investing in developing a modern WMS at ports,
border gates and logistics centers. Cities with high import and export volumes like Hai Phong, Ho
Chi Minh City, Ba Ria - Vung Tau; or the northern border gates with China such as Lang Son,
Quang Ninh, Lao Cai, have seen noticeable development, including incorporating IT and
automation into warehouse management, i.e. WMS.
In 2020, many logistics centers in Vietnam already transformed from traditional to new-
generation centers applying 4.0 technology. The Vietnam Logistics Report 2022 has recorded
several logistics centers and projects with huge potentials in digital transformation and WMS
implementation. Examples include:
● Vinatrans Da Nang logistics center: The project covers an area of over 1 hectare, with a
WMS built modernly to distribute and store aquatic products, FMCGs, fresh food products,
imported fruits,... The logistics center serves seafood import and export companies, production
and export companies, trading businesses in the field of frozen food and supermarket chains in Da
Nang, the Central region and the Central Highlands.
● Da Nang ITL logistics center: The project is on an 31,244m2 area, having a Grade A
standard service quality with 7-storey storage shelves and a WMS capable of integrating in
accordance with customer requirements and the port of entry with automatic lifting platform,…

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 Apart from large-scale logistics centers, many micro-warehouses are potential candidates for
WMS deployment, especially for e-commerce, which may be the trend in 2023. These warehouses
make many new points in the logistics network, bring goods closer to customers, shorten delivery
time, and facilitate last-mile delivery in urban areas.

4. Evaluation of WMS application in Vietnam

Overally, WMS helps solve the backlog problems of logistics activities in traditional
warehouse system: including problems that arise throughout the logistics chain as well as
specific difficulties of each enterprise, in terms of the main aspects below:
● Optimized operational execution: WMS offers businesses real-time visibility into
inventory levels and warehouse operations, allowing businesses to spot bottlenecks and
inefficiencies and take corrective action timely. The manual duties associated with warehouse
operations are also automated by WMS.. WMS also fosters collaboration with stakeholders in the
logistics chain, including suppliers, customers, and transportation service providers, increasing the
flow of data and goods throughout the supply chain.
● Risk management: WMS helps companies keep accurate inventory records, manage
shipments, create invoices, and handle returns and refunds. By such functions, WMS helps manage
risk and enhances operational efficiency, profitability, and compliance with regulations, ultimately
reducing late payments, financial losses and enhancing customer satisfaction.
● Improved logistics services performance: WMS monitors performance indicators such
product quality, delivery time, and transportation costs. This aids companies in identifying issues
and enhancing the efficacy of their logistics services.
● Flexibility and adaptability: WMS may be scalable to account for adjustments in
warehouse operations, allowing firms to develop and react to shifting market conditions. By
modifying and interacting with corporate systems like ERP and CRM, WMS may increase
efficiency and information flow. Its flexibility and adaptability help firms to act swiftly in response
to market changes and seize new possibilities, facilitating digital transformation.
However, WMS adoption in Vietnam still faces limitations, namely:
● High investment costs, lack of government guidance, and fragmented IT development:
Businesses still encounter various challenges when requesting funding from international investors
due to the high investment cost, also, the government hasn't really provided clear guidance to
support and promote firms' use of WMS, the enterprise's IT development is carried out in a
fragmented and non-systematic manner, so the investment results are not as expected.
● Slow growth rate and investment rate: The growth rate and investment rate in WMS are
still comparatively slow when compared to developed nations. In general, the foundation of
Vietnam's warehouse system is not of high standards, and many logistics enterprises have not yet
provided a complete supply chain services system, mostly in parts. The supply system of logistics

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service chains lacks integration and digitization for total management, and automation in operation
is still a new concept.
● Uneven development: There are also problems with connecting infrastructure and goods
sources between localities; port congestion; lack of transshipment station system and the
controversy related to the port infrastructure fee collection - "bottlenecks" in both infrastructure
and management aspects. The discrepancy exists even among businesses of various sizes. Almost
only large businesses can invest in a private WMS system while small enterprises frequently
overlook or have to outsource due to high cost.
The above limitations have reduced the effectiveness and efficiency of logistics activities.
Many localities and businesses are unable to establish linkages in terms of goods sources and
logistics with big cities, reducing the ability to optimize resources to improve competitiveness at
local and national level. Logistics development in localities far from major economic centers is
still slow compared to the expectations of the community; thereby leading to a decrease in
investment attraction in this field.

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5. Opportunities and challenges of WMS in Vietnam
5.1. Opportunities
Vietnamese distribution centers are increasingly implementing technology to help them
become more efficient and productive. Vietnam has become a manufacturing hub in South East
Asia and providing efficient warehousing facilities plays a vital role in the overall supply chain
process. In Vietnam especially, an increasing number of companies are adopting a WMS that
supports effective order and inventory management. Deploying a WMS is part of a macro strategy
for logistics management, opening opportunities for the businesses to optimize aspects of
warehouse management.
5.1.1. Develop logistics activities through smart warehouse solution:
The application of information technology in the field of logistics is an extremely important
factor determining the competitiveness of enterprises (MOIT, 2020). With supportive policies
from the government, businesses need to improve synchronously and gradually automate, actively
develop information technology systems in logistics to gradually replace logistics platforms and
applications exploited by foreign companies.
a. Optimizing the import and export process in the warehouse (Inbound and Outbound
logistic)
When goods arrive at the warehouse, WMS helps speed up the receiving process. Users can
optimize the location of inventory and equipment, and how it moves around the warehouse. When
it comes to picking items, a lot of problems can arise. First, pickers can take a long time to find
the right goods in stock to take orders. Second, sometimes pickers choose the wrong product or
quantity and ship them for packaging. As a result, customers are not satisfied because they receive
goods for which they did not ask. Third, with the lack of prioritization, urgent orders can be
dropped while less important ones are being fulfilled first. Finally, warehouse pick-up routes are
not optimized, leaving workers with hours of searching for needed goods.

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Figure 5: Inbound and Outbound logistic process
Source: Smartlog
Using a mobile device to receive items automatically assigns batch numbers, serial numbers,
bin locations, and inventory status when items are received. With WMS, receiving goods and
putting goods into each position of cells and shelves will be simpler than ever through scanning
barcodes on products. From there, it is possible to reduce management costs, calculate and arrange
goods more scientifically.
b. Improve Inventory Visibility
Many e-commerce businesses struggle with maintaining the correct amount of inventory in
their warehouse or distribution center. The process of inventorying all products can take days or
even weeks depending on the size of the warehouse and the volume of products stored. Tracking
inventory manually is a time-consuming process, and the results of this process can cost a lot of
money. This is especially true for operations that operate in a complex supply chain, where
products are frequently transported between multiple warehouses, distribution centers, and stores.
If inventory is done traditionally, inaccuracies are inevitable.
WMS provides real-time data on the inventory through barcodes, serial numbers and Radio
Frequency Identification (RFID) tagging. These methods allow the user to record each item as it
enters the warehouse, all its movements on the warehouse floor as well as its movement during
transportation from one location to another.
With advancements in technology such as RFID and barcode scanners, inventory tracking can
be much more automated than in the past, allowing for a more efficient use of time and capital.
The serial number placed on the final product allows the user to track the item back to the original
batch ID to determine if the product was part of a defective batch. Traceability ensures that
businesses only have to recall damaged goods, rather than examine all goods that are suspected to
have been damaged.

Figure 6: Warehouse Inventory Visibility feature in WMS

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Source: Smartlog
This type of visibility is needed to generate demand forecasts, providing insight into which
products are most popular with customers during specific times of the year. These forecasts assist
leadership in deciding which products to invest in and which products may lose ground in the
market. The traceability of one company's inventory is one of the many advantages of WMS
involved that is also extremely useful in the event of a recall.
c. Labor Management & Productivity
According to Intech Group, the average labor cost accounts for two thirds of warehouse
operating costs in Vietnam. However, if human resources are used properly, these warehouse costs
can be reduced without affecting overall operational efficiency. Performance monitoring is
complicated, especially when a business has multiple departments.
Performance visibility suffers and it becomes difficult to gauge the work of the department as
well as that of individual warehouse workers. Without the right tools, businesses cannot understand
what the overall workload is and who is responsible for the individual activities. Uneven workload
distribution leads to lower performance and inability to achieve key e-commerce business goals.
WMS allows assigning tasks to each employee. So employers proactively forecast the amount
of labor required for the operation. Manual processes are cut down to save working time. For
example, instead of recording product information, employees can scan product codes. The system
automatically records and updates the data.
In addition to creating schedules and daily work assignments, WMS software can be used to
gain a broader understanding of the workforce. WMS solutions can identify the best employees
for the job. Considering factors such as skill level, proximity and other tasks, WMS helps users to
assign work to each team member. Using labor forecasting and KPIs, warehouse managers can see
when they may need more or less staff, identify top performers, and look for areas of improvement.
With labor costs accounting for 65% of the average warehouse budget, fully understanding those
resources are being spent is extremely important.
5.1.2. Create favorable conditions for Vietnam to participate in FTAs
Vietnam has signed and implemented 15 FTAs, becoming an important link in global supply
chains; including the EU-Vietnam Free Trade Agreement (EVFTA), the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive
Economic Partnership (RCEP), etc. The development trend of new generation FTAs is to establish
a comprehensive free trade area, remove all barriers, and facilitate member countries to expand
market access.
Participating in a new generation FTA helps Vietnamese businesses to seize opportunities to
boost exports to markets of countries participating in the agreement. General Department of
Vietnam Customs that in the first eight months of 2022, exports to other CPTPP members reached
some 41 billion USD, up 38.7% year on year. Shipments to the EU also increased 24.2% to over

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32 billion USD. Meanwhile, Vietnam’s exports to other members of the RCEP agreement hit
108.48 billion USD in the first nine months of 2022, rising 16.4% from a year earlier. With this
upward trend, the implementation of FTAs will continue generating fruitful results for Vietnam in
2023, especially when it comes to potential markets, the official opined.
Vietnam joining FTAs has helped the country secure impressive export growth and partly
mitigate the pandemic’s adverse impacts on the economy. It is these new trends that have been and
will create momentum for domestic logistics activities to develop strongly.
This is also a golden opportunity for businesses to apply technology, innovate and improve
their competitiveness in the logistic and supply chain field. Applying better technology in logistics
activities will be the key for Vietnamese businesses to reduce operating costs, improve
competitiveness and make breakthroughs in the integration period. Digitization and technology
automation will be the journey for Vietnam's logistics industry to reach out to the world.
5.1.3. Increase competitiveness in the market
Located in the dynamic development area of the world, where the flow of goods is
concentrated and exchanged, Vietnam is considered to have an advantage to develop the logistics
service industry. Among many solutions to take advantage, develop logistics into a large economic
sector, such as promoting linkages to create a strong logistics network, improving the quality of
human resources, investing in infrastructure, etc. Digital transformation and automation is the key
factor to leverage the logistic industry.
Applying technology to the logistics industry is a solution to improve efficiency, optimize
operational productivity and save operating costs for logistics businesses (Diep, 2022). Thereby,
logistics development and operation units closely connect with each other, improving operational
efficiency. Similarly, a representative of Kargo 365 Joint Stock Company said that digital
transformation will help businesses create many breakthroughs in resource exploitation, market
expansion, and competitiveness. Applying better technology in logistics activities will be the key
for Vietnamese businesses to reduce operating costs, improve competitiveness and make
breakthroughs in the integration period.
The digital transformation revolution in economic and social fields, specifically industries and
services in Logistics 4.0 contributes to reducing delivery time, transportation costs,
communication costs, thereby optimizing business costs and meeting the increasingly different
needs of customers. Digital transformation in WMS helps the logistics supply chain system of
companies and enterprises in the country step by step integrate, improve the level of governance,
be more transparent and competitive.
In today’s world, e-commerce sales are higher than ever, and the trend shows no signs of
slowing down. This ever-growing flow of goods all around the world puts a strain on both
producers and distributors. To stay competitive, companies need to streamline their processes as
much as possible. Warehouse automation technologies can be classified into those that assist in
moving goods and those that improve the handling of goods.

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5.2. Challenges
In Vietnam, many businesses have applied the WMS model to their production activities.
However, the application is not optimal, leading to low efficiency in warehouse management. New
generation WMSs also have to connect to the warehouse operating system, which is often
automated with embedded programmable control systems with artificial intelligence instead of
traditional standard management processes. However, the supply of WMS in Vietnam is currently
very limited. Most domestic software enterprises do not fully understand the required features,
business models of logistics service enterprises, and inexperienced technical support staff.
For domestic enterprises, only large enterprises specializing in distribution warehouses such
as some member units of Tan Cang Corporation are transforming their model into import-export
distribution centers, or enterprises such as: Gemadept Logistics, VINAFCO, U&I, TBS,
Transimex, Sotrans, etc. are developing WMS applications. These businesses often face
difficulties when developing applications, often have to buy foreign products, the installation and
commissioning process is difficult, and the connection process internally and with customers is
necessary. Most of the small and medium logistics enterprises in Vietnam do not have financial
capacity, along with the thought of being afraid to invest, so they do not have a good management
system. Even though the rate of WMS is estimated at 41.4% now for Vietnamese enterprises, there
are still many challenges in applying WMS effectively and efficiently.
5.2.1. Challenge of smart warehouse investment
Many logistics companies have had strategies and plans to invest in developing modern
warehousing systems, forming accredited logistics centers or licensed inland ports. However, in
general, the foundation of Vietnam's warehousing system is not of high standard, and many
logistics enterprises have not yet provided a chain of services in the entire supply chain.
Meanwhile, the demand for a modern logistics system combined with automation to meet the
development of retailers and the e-commerce industry in Vietnam is very high. The supply chain
logistics system lacks integration, has not yet applied the digitization of total management, and
automation in operation is still a new concept.
The relatively weak financial capability of Vietnam’s logistics enterprises is another obstacle
to them when realizing a smart warehouse. Whether it is physics-based or process-based, the cost
of smart warehouse implementation is subject to its degree of complexity, depth and width. The
estimated initial cost of building a smart warehouse ranges from 10 million to 25 million dollars,
which is a huge number for Vietnam’s logistics companies.
Therefore, modernization in the logistics management operation system to create a
professional management system is a combination not only in modern infrastructure combined
with technology application but also integration between modern and professional logistics service
providers to create values for the logistics industry, for logistics to adapt and develop stronger.

FTU Working Paper Series, Vol. 2 No. 4 (08/2023) | 16

5.2.2. Challenge of selecting the appropriate WMS
Finding the right WMS is the first challenge that companies face during the implementation
process. With thousands of different WMS options available on the market, it can be a daunting
task to select one that is perfect for one business. Each warehouse has its own unique set of
challenges and requirements, therefore finding a solution that is a perfect fit is not that simple.
WMS services vary in areas such as usability, adaptability, decision support, scalability, and
lifecycle costs. For example, high throughput, multi-channel operations with multiple options,
changing needs, and hundreds of thousands of SKUs (Stock Keeping Unit) require a powerful
WMS. Companies should be aware of any unique aspects of their operations, knowing that WMS
vendors may not have developed their systems for the specific processes or needs of the
organization.
With the complicated requirements of being able to find the right WMS for one business
model, finding a suitable deployment partner also plays an extremely important role. A business
partner understands specific needs and can implement a WMS in a way that is most beneficial to
a business.
5.2.3. Challenge of high installation cost
The cost of such synchronous IT infrastructure investment is up to hundreds of billions of
dong, which is a big burden for small and medium logistics enterprises. Vietnam has more than
98.1% of SMEs (GSO, 2021) and almost all of these enterprises are facing difficulties in capital.
Small logistics businesses handle orders and sort goods manually, so they only provide simple,
slow, sporadic services within the local area.
In addition, WMS systems include a custom code which makes it quite expensive. The
upgrade or maintenance can also create an even more expensive and troublesome situation.
Businesses could incur many costs from their vendor for testing, coding, and debugging. All these
things are done as they need to follow the previous code and all changes made must still fit the old
system's functionality and what business needs.
5.2.4. Challenge of human resources and quality
In the context of the developing logistics market in recent years, Vietnam's logistics manpower
has strengths: young, dynamic, and willing to take on challenges. However, According to the
"Logistics Skills Forecast Report 2021 - 2023" the problem that Vietnam is facing is the lack of
human resources logistics in terms of quantity, expertise and professionals.
Regarding "Logistics Skills Forecast Report 2021 - 2023", the logistics sector is currently
facing a serious shortage of human resource both in terms of quantity and quantity. Most logistics
enterprises in Vietnam are small and micro enterprises, so the need to use high-quality human
resources is not high. Enterprises of this type have an average staff size of 10 to 20 employees.
Due to limited financial capacity, they often do not invest deeply in technology. And because of

FTU Working Paper Series, Vol. 2 No. 4 (08/2023) | 17

such a small scale, most Vietnam's logistics enterprises only need to hire employees with basic
knowledge of foreign trade, forwarding, transportation, and warehouses, there is no need to recruit
high-quality human resources due to inability to pay competitive wages. In contrast to big logistics
firms in Vietnam that operate 5PL logistics, e-commerce suffers from a severe shortage of highly
trained human resources with specialized logistics technology to manage the system.
The 4.0 technology revolution has changed the way of production, business and management,
requiring administrators to apply technology flexibly, traditional human resource managers need
to improve their capacity to catch up with new trends. Especially for the Logistic industry when
the application of technology in processes is gradually becoming essential, it is an inevitable trend
in the 4.0 era when technology is crowned because it requires skillful human resources and creates
many value added.
Implementing a WMS can be a challenging process, but with the right preparation and team
in place, one business can overcome these challenges and reap the benefits of a well-run
warehouse. This is indeed a fertile ground for businesses providing software solutions because of
the pressure of globalization and the strict demands of customers as well as the rapid growth of e-
commerce. Enterprises are put in a situation where they have to apply technology to improve their
competitiveness.

6. Recommendations
6.1. For the government, ministries and authorized organizations
a. Building digital government
In the context of Industry 4.0, digitalization being implemented on the state level is expected
to deeply encourage logistics businesses to accelerate their own digitization process (Lam, 2021).
By bringing the information technology into logistics related tasks such as paperless
documentation and transaction system, electronic payment, electronic invoice, e-logistics portal
system, etc, the application of WMS in Vietnam would be widespread and thoroughly controlled.
b. Realizing the nationwide logistics center system
According to the approval for nationwide logistics center system development planning by
2020 and orientation towards 2030 signed by the Prime Minister, the government shall take charge
and cooperate with other Ministries, agencies, the People’s Committees of provinces relevant to
construct numerous logistics centers across the country. However, apart from the existing logistics
centers, the brand new ones planned in the Decision above will be located in areas where the
customers have not had demand for warehousing. Hence, what should be done are emerging the
land fund for logistics activities and cost-effectively planning them, and equipping the said centers
with technology like WMS.
c. Creating favorable conditions for modernization process in warehousing management of
Vietnam’s logistics enterprises

FTU Working Paper Series, Vol. 2 No. 4 (08/2023) | 18

 While multinational companies and big corporations specializing in distribution warehouses
are developing inventory management applications, SMEs are finding it difficult to do so due to
significant investment expenses (Lang, 2022). Therefore, it is recommended that the competent
authority support Vietnam’s logistics enterprises in terms of finance and technique as the
warehouse modernization of such companies has not got rid of its infancy stage.
d. Implementing synchronous solutions to improve the investment and business environment
As investment helps boost the resources to advance the modernization and automation of
Vietnam’s logistics enterprises, the government shall command ministries and related departments
to propose feasible policies to attract foreign investors, increase the transparency and convenience
for investors. The next crucial step is to create a fair competitive business environment for
enterprises to effectively use the capital received and generate higher value added so that the
investors earn attractive returns and logistics enterprises obtain financial autonomy to promote
their own WMS instead of being dependent on outside financial resources.

6.2. For Vietnamese logistics enterprises

a. Targeting the most suitable software vendors
Logistics enterprises companies are prone to confusion and information crises due to the large
number of software vendors of all scales. There is neither perfect nor standardized WMS, which
means the companies shall analyze the supply market to pick out the right vendor for their
businesses based on their current situation and needs. Some of the criteria enterprises can take into
account are: simple dashboard, the layout of menu arrangement, pallet diagram, compatibility with
other softwares, customizability, costs, etc.
b. Obtaining and training skilled labor with basic grasp in modernized logistics in general and
in WMS in particular
This can be made by tightening the selection criteria for employees in the first place.
Companies shall prioritize recruiting applicants with either basic knowledge in using technology
or logistics certificates such as CPIM, CSCP, FIATA, etc for further training after being employed.
Each enterprise needs to equip appropriate training courses in using WMS for their employees,
and there should also be annual quality inspections to ensure their ability to work with technology.
Firms can, furthermore, implement Labour Management System (LMS) – as a tool to track the
compatibility between WMS and their labor.
c. Allocating warehouses among the locations that are either not densely distributed or belong
to the planning of government
Most Vietnamese enterprises are focused on developing warehousing systems in the Southern
part of the nation, leaving other areas to have poorer warehousing and inventory storage systems.
The firm should develop their warehouses in potential trading and industrial areas to ensure that

FTU Working Paper Series, Vol. 2 No. 4 (08/2023) | 19

the supply chain will not face mere chances of being interrupted and the existing warehouses will
not be overexploited.
d. Develop synchronous logistics modernization strategies
The Ministry of Industry and Trade announced an action plan to improve competitiveness and
enhance logistics in Vietnam by 2025. In which, the Ministry clearly stated the scientific research
and technology transfer as forerunners in the integration trend. Hence, logistics businesses,
especially 3PLs, shall consider developing a common digital platform for stakeholders to access
simultaneously, share data and information, and oversee the whole process. Besides WMS, other
softwares namely ERP, MES, TMS, etc are highly recommended for companies desiring for
automation chain of logistics activities. However, it is game changing that all of the modifications
and transformations are synchronized to promote the inner connection which, in turn, helps
enhance the sustainability and profitability.

7. Conclusion
In the face of competition and the explosion of the digital economy, along with the increasing
speed of e-commerce, especially under the pressure of recovery after the COVID-19 pandemic,
logistics businesses have implemented applications technology into business activities to improve
economic efficiency, as well as optimization in the supply chain of production and logistics.
However, only successful implementation of WMS can help meet those requirements and bring
the expected competitive advantage to Vietnamese enterprises in the market. Therefore, the
research paper provides an overview of warehouse management and WMS, as well as the
opportunities and challenges in WMS implementation in Vietnam and possible solutions to
overcome the limitations.

FTU Working Paper Series, Vol. 2 No. 4 (08/2023) | 20

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