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All You Need to Know about Manufacturing & Sourcing in Vietnam

Wednesday - 13/11/2019 14:14
The small nation to the south of China is rising in the manufacturing industry and quickly becoming one of the largest exporters of garments and textiles in the world. It’s considered a developing nation, but Vietnam is capable of high quality manufacturing while providing lower production costs at the same time.
All You Need to Know about Manufacturing & Sourcing in Vietnam
Bordering the manufacturing giant that is China, Vietnam benefits from the manufacturing expertise that continues to spill over as existing factories in China become more and more overcrowded. Chinese manufacturers have been moving their factories to Vietnam since the early 2000s because sourcing from Vietnam offers refuge from the brutal competition of Chinese businesses. This is turning a large portion of Vietnam’s manufacturing industry into an extension of China’s industry.

Whether a factory in Vietnam is run by a Chinese or Vietnamese owner, the factory still benefits from Vietnam’s prime location. Not only can it quickly outsource production materials and equipment from China, but it can also ship finished goods from one of the country’s many international trade ports. Shipping by ocean can be 6 times less expensive than by air so manufacturing in a country with several trade ports is a huge cost advantage. If you haven’t considered sourcing in Vietnam, our page will give you insight into the relevant costs and manufacturing dynamics that are special to Vietnam.

Country Specializations

The government has placed strict environmental regulations and protection laws on the manufacturing industry. Since the industry is still growing, it has the potential to move in a sustainable direction with the help of outside investors and international brands.
Specializations Vietnam

“Vietnam has the potential to lead the way to greener practices in Asia.” The DBW factory was a green project completed in 2016 in the province south of Ho Chi Minh City. It is the first factory in Vietnam equipped with solar panels to provide up to 20 percent of the energy required for operations during dry seasons. It’s also one of the only factories in Vietnam providing air conditioning throughout its premises.
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Get Started. For now, this is one of few factories pursuing green initiatives, but sustainable manufacturing practices have the potential to take off as infrastructure continues to upgrade. eCommerce businesses looking for eco-friendly production should consider sourcing options in Vietnam.

Production Capabilities

Since the manufacturing industry is still growing, Vietnamese manufacturers are more willing to accept smaller order quantities than those in China. At best, factories are willing to produce an MOQ at 250-300 pcs compared to a Chinese factory that generally requires 1000 pcs. This is great for smaller businesses or eCommerce startups requesting smaller production runs.

In the garment and textile industry, factories produce goods such as jackets, pants, coats, towel products, and a wide range of sewn items due to advancing sewing capabilities. Sewing, quality control, and packaging are all done in-house, but many of the raw materials like cotton have to be outsourced.

Fabric production only meets 15-16 percent of domestic demand due to lack of domestic cotton suppliers. Every year, garment factories import 80-90 percent of total cotton demand. Any time a factory has to import materials to produce your products, you’ll end up paying more per product unit.

Most apparel and home textile factories employ anywhere from 500-2,500 workers. A smaller factory with 500 workers has an annual capacity of about 300,000 pieces. A larger factory with a few thousand workers produces millions of garments each year. The factory capacity is important to consider when you’re searching for a manufacturer because a small capacity won’t allow you to grow. You may receive better quotes from a smaller factory, but it isn’t going to benefit you longterm when you’re ready to scale production.

The infrastructure in Vietnam is standard for a country in its stage of development, ranking 79th out of 138 in overall quality of infrastructure. The government is taking steps in the right direction to improve factory structure standards and realizing the positive impact of manufacturing on the economy.

The real benefit to manufacturing in Vietnam is the shipping advantage. The country has two international airports, several major ports, reliable power, and easy access to the internet and cellular networks. Since the country is small, most suppliers are located close to an airport or major port. All major freight forwarders and air couriers such as DHL and FedEx have facilities in Vietnam.

The one big thing to consider is the fast trade growth against the slow infrastructure improvements. A major railway connecting Hanoi and Ho Chi Minh City, where the major international airport is located, hasn’t been upgraded in decades.

There is also the threat that ports will reach maximum capacity in the face of increased trade volume. A third reality is that only 20% of national roads are paved. When the means of transporting your finished goods from the factory to a distribution center become unreliable, you add risk into your supply chain.

The one aspect of manufacturing that can’t be negotiated or changed easily is the skill of labor. The manufacturing industry in Vietnam continues to grow and strengthen for many reasons but mainly due to the abundance of highly skilled workers. The Vietnamese are skilled at hand assembly work and the quality of hand assembly work is very competitive.

The workmanship standards are high so low-quality products are rare. Consistent high quality production is an advantage but can turn into a disadvantage if turnaround times are slower. As long as the factory has efficient infrastructure and organization, the high quality production adds value to your product or branding.

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