"U.S Importers will Have Different View on Vietnamese Exporters"

Vietnam’s exports to the US have continued to enjoy significant growth, accelerated by Vietnam’s WTO admission and the US granting Permanent Normal Trading Relations (PNTR) Status for Vietnam. Global sourcing service, a rather new field in Vietnam, promises a future with high potential. We interviewed Ms Phan Dinh Tram Anh, Managing Director of Thanh Dat Trading Company, a local sourcing service provider, on sourcing potential in Vietnam.

 

As you know, Vietnam’s economy has been driven by manufacturing, where fast and sustainable economic growth will further boost construction of the country’s competitive manufacturing capacity. It makes Vietnam an attractive sourcing destination. This is in line with a global trend of skyrocketing imports from low cost countries.

 

Currently, Vietnam’s export products to the US are still basic. The six main export products to the US market are crude oil, textile and garments, footwear, seafood, wood products and coffee. However, in the natural course of economic development, I think Vietnam will eventually be capable of developing a more sophisticated supplier base to meet growing demand from US importers.

 

In general, global supply chain management skills are critical for successful global sourcing strategies. US importers, like importers all over the world, face the same global supply chain risks; for example, the availability of low cost, well trained labour, the reliability of suppliers and the manufacturing capacity. While Vietnamese workers score high on skills, the main concerns of foreign importers appear to be quality consistency and on-time delivery. To some extent, the lack of standardized production processes and quality control systems account for these problems. Opportunities will inevitably depend on the ability to source the “right” suppliers.   

 

Sophisticated buyers such as Nike are well-known in Vietnam for imposing extremely high standards on their Vietnamese subcontractors. In order to be qualified as a Nike subcontractor, Vietnamese garment manufacturers must go through extensive and continuing evaluation, the “Quarterly Performance Report,” where Nike evaluates the subcontractors on numerous criteria, including sample making, production planning, on-time delivery and defect rate, on a quarterly basis.

 

For other importers who do not have a local presence like Nike, an alternative way to mitigate global supply chain risks is to leverage the expertise of local sourcing services providers to coordinate the placement, manufacturing and movement of their goods.

 

From my experience of running a sourcing service firm, I look at the three-party relationship, between the importer, sourcing service provider and supplier, as a win-win relationship. In this kind of relationship, each party contributes their distinct expertise to ensure a smooth, cost effective flow of products across countries.

 

The ability to build efficient supplier networks in low cost countries will undoubtedly increase US importers’ revenues and profit margins. Vietnam’s e-commerce platform is still largely underdeveloped, with a large number of suppliers without their own websites. For those who do have websites, the information provided is often either inadequate or out-dated. Thus, establishing a local presence will play a vital role in building supply networks to meet diversified demand from importers. 

 

Local presence, which in turn can be translated into local knowledge and developed over the time, will ensure easy, accurate and time-critical data about suppliers. This can provide details on quality, supplies on hand and manufacturing, which may not be readily or publicly available on an up-dated basis. It is not uncommon for Vietnamese manufacturers to exaggerate their actual manufacturing capacity on marketing materials. This is easy to understand from the producer’s point of view.

 

As a starting point, every supplier will need to develop the capability to supply importers with cost effective products and at the same time, meet quality requirements. For example, garments are one key export product to the US. This type of product is, by nature, subject to unpredictable demand, marked by rapid changes and short life cycle. Design and demand are both driven by consumers. Because of this, garment manufacturers and suppliers have to rise to the challenge by excelling in production planning and development of appropriate manufacturing capacity.