Vietnam B2B Direct states Sourcing in Vietnam is an “art” not a “science” yet … but progressing rapidly

Vietnam …ahhh, the “buzz word” in international trade today! Millions of foreign investment dollars flowing into this 90 million South-East Asian country daily… entrepreneurs racing to the scene … the likes of Microsoft and Intel laying roots along with other world movers and shakers … tourism growing at 30% a year … a complete Country rebuild at a record breaking pace etc. The statistics are admirable and staggering!

Yes, headlines on Vietnam’s remarkable economic recovery, ascension to the World Trade Organization and a consistent ++ + GDP annual growth rate have captured the interest of companies and entrepreneurial thinking people from all over the world.

Currently Vietnam B2B Direct operates a Supply Chain Management Company for over 8 years in Vietnam with offices in USA and Canada. We have researched numerous sourcing projects for very different worldwide product companies which have resulted in subsequent factory visitations, manufacturing agreements, and product regularly crossing the ocean. Thus we would like to offer some of our observations, insights and personal opinions.

Vietnam has changed from a “central planned economy” in 1995 to a “market economy” today. This has fired up countless private entrepreneurial manufacturing operations and the subsequent changeover of the previous manufacturer – dominated State – run companies into joint ventures with foreign manufacturers and investors. Vietnam is still in its early days of development for its “new” manufacturing sector but growing at break neck speeds. Big companies comparable to those in China and the USA have not developed yet in volume. Vietnam is still young in its development. Basically Vietnam for years had been the labor camp for many of the other Asian countries due to its lowest labor rate in the region currently averaging $120 to $200 USD per employee per month in the manufacturing sector today. With new found wealth, huge Foreign Development Investment, membership in the WTO, and a market economy, Vietnam is now open for business and is actively seeking business output contracts with North America and other foreign countries.

But how does the small-medium size North American business capitalize on building relationships with this booming, friendly Asian player? Does it make sense to be an early player? Are you better off to go to China for product sourcing and manufacturing? Can you get your manufactured goods in Vietnam made hassle free? Is the Vietnam manufacturer interested in building a long term quality relationship? Furthermore, are there Vietnamese manufacturers out there that can even make your widget and if so make it for a better price with good quality and ship it seamlessly, on-time every time?

Well in many ways only you and your company can decide if your business plan or the time or the need is right to source globally today. Perhaps you are already sourcing internationally or for many years you have been manufacturing in China. Thus you know the costs, the ups and the downs, and the commitments you must make to ensure that your new supply chain works when you go abroad. But one thing is for sure, it is our opinion that if you do not investigate the abilities and resources of this “little Tiger” Vietnam, your competitor will and most likely it will be sooner rather than later that you will see your competitor’s “Made in Vietnam” products on your country’s soil.

Product/Manufacturer sourcing in Vietnam starts with research. It’s hard to “Google” Vietnam for manufacturers as many companies are extremely underdeveloped in “self-promotion.” Many factories do not have a website and in many cases the company may have only one or two computers on premise. Vietnam has just moved to a “market economy” and thus their businesses in the past acted as domestic suppliers and had not needed to promote worldwide for foreign exports. They are just starting to teach marketing and branding in universities and therefore there is a considerable amount of training required for companies to catch up with their competitive neighbours to obtain world export contracts. Furthermore, websites and directories of company listings from Associations etc. are sparse and incomplete. Many factories that are large and extremely successful have not felt the need to advertise thus making it difficult to locate them.

It’s just plain difficult for foreign companies to complete any type of accurate research on products and manufacturers in Vietnam while offshore. Even if they send their company Global Representative to Vietnam there are challenges. First of all the cost. The price of an airline ticket, food, accommodation, transportation, translators etc. really adds up for even a short stay. And still the Company Rep has no understanding of the Vietnamese business culture or where the potential factories are. Secondly, speaking to any Vietnamese manufacturer on whether they produce your widget or not usually results in “Yes, we do,” only to discover later on a field trip they don’t or a new suggestion is presented that they have a friend that can produce for you. We have witnessed many speculative company visitors go home empty handed with only a bare 1 or 2 meetings with Vietnam manufacturers.

Our recommendation is to spend your research sourcing dollars wisely. Enlist the aid of local experts who can deliver results and build a list of pre-screened Vietnamese companies that match your search criteria. This will not only save you money but ensure that you have a more complete picture of who the key players are and their capabilities to produce as to your specific requirements. Our company uses a number of resources to prepare Sourcing Reports. Some of these initiatives include the internet, yellow pages, association lists, government officials, wholesale suppliers, industry experts, trade journals, trade fairs, centers of influence, friends of friends, and even trips to the retail marketplace. Our experience also tells us that Vietnamese people speaking to Vietnamese people far surpass the results of us foreigners trying to dig out information whether inside or outside the country. Worldwide companies who have already invested heavily into setting up manufacturing arrangements in China over the years understand quite clearly the need to use a Vietnamese supply chain company initially as Vietnam is a different country, with a different language, with different laws and a different business culture. Running solo may appear to save money but more important the right intelligence can position your company ultimately with the right results.

They say that the “devil is in the details.” With “Sourcing” this is 100% correct. In finding an appropriate Vietnam manufacturer there are many questions needed to be asked. What is the factory’s output capacity? Do they have an export license? Have they exported before and where? Do they have the necessary equipment? Can they expand as you grow? Would you be a priority customer? Are they close to the port and to a major airport? Who speaks English in the company? Is there a quality assurance program in place? What are the financial terms? The list goes on. This is important information to know at the onset so that your company can transact with a reliable manufacturer that can meet your current and future needs!

The Vietnamese business environment is quite friendly and eager to obtain North American and worldwide business contracts. Many of our trade inquiries come from USA CEOs, Global Directors and Business Owners who are concerned about China’s political relations, rising foreign currency, rising labor rates, labor job hopping, quality control and reliability. Vietnam is a good alternative choice and maybe the best choice for your company as it offers some advantages with respect to lower labor rates; a young, capable and competitive labor force; English being taught in schools as a second language and purely their hunger to succeed and grow and have you as a customer.

Manufacturer and Product Sourcing is only the first step in the Supply Chain process of selecting a suitable trade partnership and placing a purchase order with a Vietnamese company. But it is a key first step that requires time, patience and commitment to the process in order to achieve desired results. Upon sourcing different companies I would strongly suggest that you actually visit the Vietnam manufacturing facilities and build an immediate first relationship before placing a Purchase Order unless using a local foreign representative agency. Secondly, “Ask Questions” … make sure you and the Vietnamese company come to the same understanding on how the relationship works along with the terms and conditions of your agreements!

Opportunities abound in Vietnam. We do hope you will put Vietnam on your radar screen … it is worth the investigation and certainly worth spending your sourcing dollars wisely there.

For information on sourcing, manufacturing and business 2 business activity in Vietnam, please contact Bill Gadd at billgadd(at)VietnamB2BDirect.com