Impactt welcomed some 30 sustainability, ethical trade and responsible investment professionals to a seminar on sourcing in Vietnam on 13th October 2016. We discussed the challenges and opportunities of Vietnam as a sourcing location and introduced the two newest members of our global team: productivity and quality specialist Manoj Singh, our Business Development Director for Asia, and social compliance expert Jini Le, our Vietnam Country Manager.
Here, we share an overview of the key factors to consider when launching or expanding sourcing operations in Vietnam:
Opportunities
- Trade relations with the West are improving -There is growing interest in sourcing in Vietnam in the wake of Free Trade Agreements established with the US, the European Union and Korea.
- Political stability – Added to that, Vietnam is quite stable politically, with no high risk of terrorism or civil unrest.
- Strategic location – Vietnam is geographically close to other major sourcing countries (in particular China) and global supply chains, and is therefore well placed to both receive raw materials and other inputs, and forward on finished goods.
- Young, capable workforce – Some 60% of Vietnam’s 90m population are young people, making for a promising manufacturing labour force. With a 94% literacy rate, workers have a significant potential to learn multiple skills as well as productivity improvement techniques.
- Competitive labour costs – The country’s national minimum wages increased by 12.4% in January 2016 to $155 per month, which is competitive compared to China (where the minimum wage stands at $327).
Challenges
- Working hours – Overtime often prevails as a means of meeting meet buyers’ expectations, while workers tend to accept the additional hours in order to earn more money. The legal limit for overtime is currently four hours a day and the Vietnamese government has plans to lower it.
- Lack of transparency – In the race to fulfil ever-more frequent orders with shorter lead times, buyers may also turn to sub-contracting. With bureaucracy and corruption an issue among local authorities, preventing or detecting illegal subcontracting or unethical practices can be challenging.
- Skills gaps – Factories can struggle with inefficiency due to a lack of both technical and managerial skills, and comparatively few multi-skilled workers. Few suppliers can deliver goods ‘free on board’ (FOB).
- Labour turnover – Worker loyalty to factories is low, with workers often moving between factories in search of a better deal. Workers are unlikely to discuss their lack of job satisfaction with outsiders, preferring to simply leave or even engage in strike action.
- Strengthening our global team
Our newest Impactt team members will strengthen our efforts to help factories raise productivity, quality and efficiency in a way that helps improve worker livelihoods and boosts profitability.
Jini Le – “Vietnam is the next big sourcing location”
With some 16 years’ experience in ethical trade and social compliance, Jini has previously worked at adidas, Gap Inc and children’s clothing retailer The Children’s Place. In her role as Vietnam Country Manager, she will take responsibility for developing the company’s business in Vietnam. She will also advise factories on recruiting and managing workers, and help brands partner with key suppliers to build capacity on key issues such as health and safety, working hours, grievance mechanisms and social dialogue.
Speaking at the Impactt ‘Sourcing in Vietnam’ seminar, Jini explored what Vietnam has to offer as a sourcing location and advised attendees on issues to consider when buying from Vietnamese suppliers.
“We’re increasingly hearing from clients that a focus on expanding sourcing in Vietnam is on the cards. As buyers gear up for their next sourcing challenge, we are ready to provide comprehensive advice on how to raise performance in Vietnamese factories and optimise relationships with suppliers.”
Manoj Singh – “Middle managers can be enablers of productivity”
With more than 14 years’ experience in the global garment industry, Manoj is an expert in productivity and quality improvement, and holds a ‘Six Sigma Black Belt’ in lean management techniques. He has first-hand experience of managing busy factory floors and previously ran his own consultancy advising factories across Asia and the Middle East on best practice in boosting productivity. Manoj will lead Impactt’s business development activities in Asia and act as a valued advisor on productivity and quality training. He will also work with the team to further integrate this thinking within human resource systems.
Manoj encouraged attendees at the Impactt seminar not to forget the enabling quality of middle managers.
“Middle managers can be key enablers in raising productivity. It’s vital that they are happy with the quality of their jobs and understand the value of improving worker satisfaction. By shifting their mindsets, fostering greater collaboration and sharing effective managerial techniques, Impactt’s training helps people to create a positive environment where workers thrive and builds the business case for delivering high quality jobs.”
