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Home Supply Chain

Vietnam Supply Chain: The Future of Manufacturing?

by Team Logistics Asia
October 21, 2021
in Supply Chain, Sustainability
Vietnam Supply Chain: The Future of Manufacturing?
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Manufacturing is a key driver of economic growth in Vietnam. As the world’s third-largest producer of shoes and textiles, Vietnam’s industrial output has grown rapidly in recent years.

However, there are many risks to this growth such as natural disasters and political instability. In addition, the country faces intense competition from other low-cost manufacturing countries like China and Bangladesh. Although there are challenges, there are also opportunities for success that can be found through innovation and new technologies.

Manufacturing and logistics have played a significant role in the economy of Vietnam since the country achieved full independence from the U.S. in 1975. In fact, the most commonly used export product is footwear. It is estimated that 35% of Vietnam’s exports are footwear.

Today, Vietnam is a leader in shoe production, importing more than 3 million pairs of shoes every month. Vietnam is also a leader in textiles, with an estimated 55% of the global market share for woven and knitted fabrics. The country also produces more than 10 million units of garments, with a wide variety of garments available.

While the footwear industry has been the country’s most popular export product for decades, Vietnam has been making great strides in other manufacturing sectors as well.

There are two broad types of manufacturing in Vietnam: First, and less developed, are simple tasks such as making of leather goods, shoes and garments. Second, the bulk of Vietnam’s manufacturing activities is in the electronics sector.

Under the category of simple manufacturing, Vietnam has emerged as a regional leader in leather goods. Vietnam exported more than US$18.3 billion worth of shoes to more than 75 countries in 2019 and accounted for over 10% of the global shoe market.

Vietnam is now the third largest exporter of shoes. Its global export share of shoes has increased over the past several years and is expected to increase further as Vietnam has a solid industrial infrastructure for clothing and footwear and is ready for large-scale investment in manufacturing. This represents an attractive opportunity for global brands.

However, one of the key challenges is the lack of a pool of well-educated talent, especially for information technology and engineering positions. In an effort to attract students for careers in industrial engineering, Ho Chi Minh City has built over 100 new higher education institutions. The largest of these is the Construction Institute of Science and Technology, a national program with 49 institutes across Vietnam that uses an industry-based approach to teaching.

These programs should be expected to further Vietnam’s productivity. However, they will likely also further urbanization, to the detriment of local ecology.

Another problem is the low level of global competitiveness. Vietnam ranks 126th out of 190 countries in terms of productivity.

Rapid economic growth in Vietnam has been powered by growth in manufacturing. After expanding by a factor of ten between 1990 and 2005, manufacturing accounts for 25% of the country’s GDP and has fueled impressive export growth.

However, Vietnam still lags behind in terms of manufacturing output per capita and value added per capita. Vietnam needs to keep this growth going for the long term if it is to become a regional leader.

In spite of this, there are significant opportunities in the country. There is room to expand into new sectors, such as electronics. This can be done while investing in new technologies and improving skill levels. The country has a long history in textiles and clothing, and the potential to increase value added in these products.

Vietnam has many opportunities for economic growth. A prominent challenge will be managing the complexity of an economy that is rapidly expanding at a time when environmental hazards and economic disruption are common.

With its strong manufacturing industry and free trade agreements with other important economies, Vietnam is well positioned to seize on these opportunities and continue to make significant progress.

Managing the complexity of Vietnam’s economy will be key to the country’s success and as we have seen with other countries, successful management of its economy requires collaboration and cooperation from multiple partners.

Innovations in manufacturing technologies and technologies related to globalization will play a large role in developing a more prosperous Vietnam.

Tags: LogisticsManufacturersSoutheast AsiaTechnologyTradeVietnam

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