Vietnam sourcing – is it viable?

Low-cost-country sourcing
Vietnam sourcing is becoming increasingly attractive as an alternative to China, Indonesia and Thailand for low cost consumer products, particularly garments and furniture, and to India for I.T. and other outsourced services. Vietnam offers a talented and willing work force and is a relatively politically stable environment.

Overview of the country : Vietnam
The World Bank estimated the population in 2009 to be 88.6 million, the second most populous country in SE Asia. It has a high adult literacy rate of 90.3 percent although it has only an average rating of the ease of doing business due to its bureaucracy.

Major activity is in the south around the greater Ho Chi Minh City, an area which produces 75% of all exports and where 25% of the population lives.

Why Vietnam sourcing?
Vietnam’s GDP growth in 2009 outpaced other regional economies with the exception of China and India and the growth rate in 2010 is expected to be around 7%.

Vietnam is one of the leading supply centers of competitively priced footwear in the world and supplies the Nike, Adidas, Puma and Reebok companies. Worldwide it is the fifth-largest exporter of shoes and sandals.

Advantages of buying from Vietnam

It is generally accepted that Vietnam sourcing benefits from a strong work ethic of the Vietnamese and their commitment to quality. The workforce is highly literate, willing to learn and trainable despite a poor education. It has been shown that they are definitely better in protecting intellectual property such as patents and trademarks than some other low cost countries.

The disadvantages of Vietnam Sourcing

Vietnam is a growing economy but suffers from an inadequate infrastructure in banking, communications and transport. Access to financing and reliable legal advice is difficult as knowledge and skills of international trade are limited. Inflation is also a factor to consider when entering into contracts with long lead times.

What can Vietnam provide competitively?
Vietnam is a very good choice for clothing of all kinds, wooden furniture and corporate gifts. It has a growing industry in electronic parts, components, assemblies and plastics. Vietnam sourcing ranks third after China and India for outsourcing IT and software services to Japan and recently activity is evident in the outsourcing of HR services.

What to look out for
As for all emerging markets there are challenges in language, culture and business norms. Preparation and research is key. It may be prudent to use a third party, an experienced agent in Vietnam sourcing, to give advice on localized customs, shipping, government requirements and legal issues.

 

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