The international sourcing industry is full of challenges and opportunities. Depending on the industry, the costs of products, materials, and transportation are constantly fluctuating. On the other side, demand and value are also changing. Over the past couple of decades, the sector of consumer goods has witnessed a robust cost and margin challenges. Motivated by the requirement to purchase smarter and better across all functions, sourcing often plays a valuable part in influencing the company’s overall financial expansion.
China has long enjoyed unprecedented success as the manufacturing capital of the world. From electronics goods to furniture, toys to garment the choice of products available in China is simply enormous. But the minimum wages in China continue to grow apace and other factors ( IP and trademark infringement) prompted the US and European business owners to look for a cheaper and efficient alternative to China. Along with these factors, the ongoing trade war between Washington and Beijing made it important to search the answer of the question would it be possible to seek lower costs and more opportunities from other Asian countries?
Vietnam and tag of “Next China”
Vietnam is perhaps one of the most prominent destinations that can offer great sourcing possibilities. Renowned global footwear brands manufacture their products in Vietnam and this country has become the primary supplier for Nike. This Asian country is becoming increasingly attractive due to their significantly lower wages. Many news outlets have touted Vietnam as the “next China”. In Vietnam, labor rates are roughly one-third of the market labor rate in China. As a result, Vietnam has become an appealing and ideal place for companies to source from when it comes to lowering the financial aspect of sourcing.
Comparing China and Vietnam–
In order to become the “Nex China”, there is still a long way to go. This country is good for producing labor-incentive products, but this type of products only have a small percentage in the entire global supply chain. When it comes to talent, infrastructure, ease of manufacturing and sourcing possibilities, China is light years ahead of Vietnam and any other country in the world. Things are changing fast in Vietnam, but the supply chain is still behind that of China. Enforcing contracts remains a particular concern where Vietnam lags far behind China in the time and fees required for resolving disputes in court. (Read more on this…)
Undoubtedly Vietnam has the potential to become a good manufacturing destination but when it comes to high-end manufacturing and the use of modern technologies is the weakest nation among MITI-V or Mighty Five countries consist of Malaysia, India, Thailand, Indonesia and Vietnam. Low-cost labor is certainly a key factor, however, it cannot be the only factor. The acceptance of a country as a favorable manufacturing and sourcing spot depends on numerous other factors. China is undoubtedly the undisputed winner in each and every category.