WHAT IS LOGISTICS? WHY DOES IT MATTER TO BUSINESSES?

Along with the rapid development of the global economy toward globalization and regional integration, logistics has increasingly played a critical role as a key linkage tool within the Global Value Chain (GVC) – connecting activities from sourcing and production to circulation, distribution, and market expansion.

As global markets evolve alongside technological advancements, particularly with market liberalization in developing and less-developed countries, logistics is increasingly regarded by business leaders as a strategic tool and an essential means of integrating various components of corporate strategy.

So, what exactly is logistics, and what role does it play for businesses? Let Nhat Long Logistics explore these questions with you in the article below.

What Is Logistics?

The term logistics is officially defined in Vietnam’s Commercial Law 2005 as follows:“Logistics services are commercial activities whereby traders organize the execution of one or more tasks including receipt of goods, transportation, warehousing, storage, customs clearance, other related documentation procedures, customer consulting, packaging, labeling, delivery, or other services related to goods in accordance with agreements with customers, in return for remuneration.”

In simpler terms, logistics is the process of planning, implementing, and controlling the efficient flow and storage of goods and related information – from raw materials (inputs) to finished products (outputs) – from the point of origin to the point of consumption.

The Role of Logistics for Businesses

Enhancing Management Efficiency, Reducing Production Costs, and Improving Competitiveness

According to statistics from logistics research organizations and the American Logistics Research Institute, logistics costs account for approximately 10-13% of GDP in developed countries, while in developing countries, this figure is higher – around 15–20%. Research also indicates that the logistics market in China has grown at an average annual rate of 33%, while Brazil has recorded growth of 20% per year, highlighting the substantial scale of logistics-related costs.

Therefore, the establishment and development of logistics services help businesses and the economy as a whole reduce costs, streamline production and business processes, and improve operational efficiency, thereby enhancing competitiveness in the marketplace. In recent years, logistics costs in many European countries have declined significantly and are expected to continue decreasing in the coming years.

Reducing Costs and Time in Distribution and Circulation Activities

The market price of goods is essentially the production cost plus circulation costs. Among these, circulation costs, particularly transportation expenses, constitute a significant portion of overall pricing. In international trade, transportation costs account for a considerable share; according to UNCTAD, maritime transport costs represent an average of 10–15% of FOB value or 8–9% of CIF value.

As transportation is the most critical component of the logistics system, the continuous improvement and modernization of logistics services help reduce transportation expenses and other costs incurred throughout the circulation process.

Experience from developed countries shows that by utilizing integrated logistics services, manufacturers can shorten order-to-delivery lead times from five to six months down to just two months.

Increasing Business Value for Freight Forwarding and Transportation Companies

Logistics services are far more comprehensive and complex than traditional freight forwarding and transportation activities. In the past, transport providers typically offered only basic, standalone services. Today, with the expansion of production and trade, components of a single product may be sourced from multiple countries, while finished products may be distributed across numerous international markets.

As a result, customer demand for transportation and forwarding services has become increasingly diverse and sophisticated. Transport operators have expanded their service offerings to meet these evolving needs, transitioning into full-service logistics providers. Clearly, logistics services play a vital role in enhancing the overall business value of transportation and freight forwarding companies.

Contributing to Market Expansion

Since production ultimately serves consumption, market access and expansion are always central concerns for manufacturers and businesses. To penetrate and grow new markets, companies require strong support from logistics services.

Logistics acts as a vital bridge, enabling goods to move along new routes into new markets while meeting strict requirements for delivery time and location. The development of logistics services significantly enhances businesses’ ability to explore, access, and expand their target markets.

Reducing Costs and Standardizing Documentation in International Trade

In practice, international trade transactions often involve extensive paperwork and documentation. According to United Nations estimates, the global cost of trade-related documentation exceeds USD 420 billion annually. Experts calculate that cumbersome paperwork alone accounts for more than 10% of total international trade value, creating substantial barriers to global commerce.

Integrated logistics services help significantly reduce documentation-related costs in international trade. Furthermore, the development of electronic logistics (e-logistics) is driving a transformative shift in transportation and logistics services – minimizing paperwork costs, improving service quality, and reducing spatial and time-related barriers in the flow of materials and goods. As a result, countries are becoming more closely connected in production and distribution activities.

To fully realize these outstanding benefits, businesses should partner with a reliable and professional logistics service provider.

With 17 years of continuous growth, Nhat Long Logistics has affirmed its pioneering position in Vietnam’s logistics industry, serving as a strategic partner to numerous businesses both domestically and internationally. The trust placed in us by world-leading electronics and home appliance corporations such as Panasonic, Sony, Mitsubishi, Aqua, Midea, etc. stands as a vivid testament to our brand reputation and our exceptional capability to meet the most rigorous transportation standards.

With a fleet of over 130 modern, fully certified vehicles (ranging from 1.25-ton trucks to 45-foot containers), integrated with comprehensive operational monitoring and smart dispatch systems, Nhat Long Logistics delivers an industry-leading on-time performance rate of up to 99.8% while ensuring outstanding safety and accuracy. Powered by a team of highly experienced dispatchers and drivers – proficient in technology and dedicated to service excellence – we are ready to handle every requirement – from individual shipments to large-scale transportation projects.

Nhat Long Logistics is where businesses find the perfect harmony of speed, safety and reliability – turning each delivery into not just a logistics service, but a lasting commitment of value.

Contact us today:

📞 +84 923 739 888

📩 info@nhatlongtrans.vn