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Sourcing Products in Vietnam

By Christopher Runckel, President of Runckel & Associates, Inc



Our company has been sourcing products in Vietnam for nearly ten years now.  We were one of the first companies to work helping a wide range of Vietnam-based companies to connect with overseas companies.  We have worked with some of the largest companies in Vietnam (usually state-owned or foreign-invested) and also with small medium enterprises (SMEs) that often have 100 or less employees.  In the process we have learned a lot about both sourcing and Vietnam although I had already spent many years in Vietnam as first a soldier and later a diplomat, spoke the language and knew much about the country and its culture.  Here is the product of some of that learning which maybe useful to you.

First, Vietnam is not yet in 2009 a country that has as wide a range of products as China where we also work.  It does have many good companies, however, and in certain areas is more reliable and very competitive with China which largely now is the manufacturer to the world for most products.  Here are some of the products that we have been involved in sourcing from Vietnam and where we think Vietnam is a very good choice - clothing of all kinds, woolens, sweaters, jackets, coats, textiles,  shoes, wooden furniture, cut or stamped metal items, jewelry, crafts, bags and purses, plastic bags - clear and printed, pens, award and recognition items made of cut plastic and other materials, brass and bronze items, molded plastic items, some toys, some chemicals and plastic raw materials. knit wear from Vietnam
Picture above: Knit wear and garment export is also shilfting from China to Vietnam

Second, despite the fact that China produces much more electronic parts, components, and assemblies, that is not to say that there are not good companies producing electronics in Vietnam.  Companies like Sparktronics in Binh Duong province is an example of a good company in Vietnam which was recently visited by the U.S. Consul General Ken Fairfax in conjunction with the Trade and Investment Conference on Binh Duong co-sponsored by the province and the U.S. Consulate General on September 22, 2009.  Binh Duong province which is right outside of Ho Chi Minh City itself has over 10,000 companies with over 2,000 of these being foreign invested companies.  These companies often provide items for export and are constantly improving quality and the range of products produced. 

Third, in general Vietnam workers earn lower salaries than their counterparts in Guangzhou, Shanghai or other areas of Eastern China but are even more diligent, willing to learn and improve their skills and productivity.  Vietnamese companies are often better on quality control than their competitor Chinese companies and also are definitely better in protecting intellectual property (IP - patents, trademark, etc.)

With this said, everything in Vietnam is possible but not everything is easy.  Sourcing requires much work and much of it needs to occur in your company before you contact us or a company in Vietnam.  Clear specifications on your product, clear criteria on price and what you are looking for in a supplier, knowledge on shipping costs and any U.S., EEU or other duties and clear contracts for proposing to suppliers are all things that you need to work on in advance.  Some of these we are happy to assist on but the bottom line is do your homework first and you will save you company time, fees and complications later.


How to work with the Vietnamese Suppliers

One question you will immediately want to ask yourself is whether you want to try to go direct or to try to work with someone to link up with a supplier.  Our experience is that at least at first it is better to work with someone on the ground in Vietnam who can follow-up with potential suppliers and give you advice on local business customs, shipping, Vietnam government practices, etc.  Asians in general and the Vietnamese in particular can be less quick to reply to initial e-mails until a relationship is established.  They also tend to not reply if they have questions; need to deliver information that they think won’t be appreciated and if it discloses broken English or to settle a misunderstanding.  In these cases, oftentimes the supplier will just go silent and this can be disconcerting.    Foreign invested companies are somewhat better but having a contact in Vietnam that can follow-up and telephone, e-mail in Vietnamese and talk out questions is a big help and will vastly speed your project.

Where to go in Vietnam

Another question is where to go in Vietnam.  The three major areas in the country are the North (primarily around Hanoi and Haiphong), the Central area (around Danang) and then the South (the so-called Southern Key Economic Zone -SKEZ - which includes Ho Chi Minh City (Saigon) and the surrounding provinces of which in particularly Binh Duong but also to a lesser extent Dong Ngai, Long An and Ba Ria-Vung Tau are most of interest to companies looking for suppliers although the area actually includes several other provinces which are further and much earlier in their development process.  This area (the Southern Key Economic Zone - SKEZ) produces over 40% of the total country of Vietnam’s Economic product (GDP) and over 75% of its exports.  This is generally the area we as a company look first for a supplier although the area around Hanoi can also provide suppliers in many cases.  The Southern area is also growing at a rate of 1.2% faster than the country as a whole so the importance of this area is growing not reducing.

Click here to see a presentation we gave in Vietnam in September 2009 on this area and its potential


Sourcing support in Vietnam

At this time, our team in Vietnam is probably the strongest that it has been in the ten year plus history of our company.  It is strong because of the following reasons:
  •  The current team is led by both very capable Vietnamese and Korean leadership.
  •  The staff most responsible for sourcing work is fluent in English, young and active, highly willing to learn and very thorough and observant.
  •  The company team on the ground in Vietnam is well-versed in business practice in Vietnam and internationally and highly professional and active.  E-mails are answered quickly and responsively.
  •  The team has a very strong background in shipping and freight forwarding particularly with respect to shipment to the U.S. and to neighboring markets.
  • Team leadership has key links with Korean and other foreign invested companies which often provide higher quality control and have greater ability to produce in volume at lower prices.
  • Shipping frequency to the U.S. is increasing and direct service is now available from the Southern area to the U.S. West Coast. (California)   

Vietnam will not work for every project. It is however improving rapidly in terms of the range of products and their competitiveness vis-a-vis other regional manufacturers.  Now is a good time to be sourcing in Vietnam and we encourage you to consider areas like Binh Duong and others for producing for your company.






About the Author:  

Christopher W. Runckel, a former senior US diplomat who served in many counties in Asia, is a graduate of the University of Oregon and Lewis and Clark Law School. He served as Deputy General Counsel of President Gerald Ford’s Presidential Clemency Board. Mr. Runckel is the principal and founder of Runckel & Associates, a Portland, Oregon based consulting company that assists businesses expand business opportunities in Asia. (www.business-in-asia.com)

Until April of 1999, Mr. Runckel was Minister-Counselor of the US Embassy in Beijing, China. Mr. Runckel lived and worked in Thailand for over six years. He was the first permanently assigned U.S. diplomat to return to Vietnam after the Vietnam War. In 1997, he was awarded the U.S. Department of States highest award for service, the Distinguished Honor Award, for his contribution to improving U.S.-Vietnam relations. Mr. Runckel is one of only two non-Ambassadors to receive this award in the 200-year history of the U.S. diplomatic service.


 
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