Vietnam Remains Second Only to China in Sourcing

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photo credit: Arthur Friedman

The Trans-Pacific Partnership might be dead, but Vietnam remains a strong second to China on the sourcing landscape.

Experts on Vietnam’s manufacturing capabilities, speaking on a panel at Sourcing at Magic in Las Vegas, agree they were disappointed that the U.S. pulled out of TPP and that Vietnam’s momentum was impacted, but they insisted that the country is still a major player on the global apparel and textile production scene.

Sheng Lu, assistant professor for fashion and apparel studies at the University of Delaware, presented the results of a study he conducted with the U.S. Fashion Industry Association that showed Vietnam was the second most sourced country after China, with 88 percent of respondents saying they manufactured there.

Lu said the study showed that the most popular sourcing strategy right now is “China Plus Vietnam Plus Many,” meaning that global manufacturing is becoming more diversified. The country was rated as the most competitive supplier and one of the most balanced, with a combination of price and speed to market capability, he noted.

“Regarding the next two years, Vietnam is still regarded as a rising star,” Lu said of the survey’s results. “But the percentage of respondents who planned to increase their sourcing from Vietnam is declining for the previous survey in 2014-2015. Two factors are related to this trend—one is the withdrawal of the U.S. from TPP and the other is rising labor costs in Vietnam.”

[Read more on Vietnam manufacturing: Global Factory Activity: Manufacturing Momentum in Vietnam Slows, US Starts to See Gains]

Avedis Seferian, president and chief executive officer of WRAP, said Vietnam is also the number two country for factories requesting accreditation for compliance from WRAP.

“While a lot of the investment that was made in Vietnam may have been made with the idea that TPP would have made it even more competitive, the fact is it was only made in the first place because it was competitive to begin with,” Seferian said. “I do not see Vietnam dropping out of the number two spot just because TPP isn’t going to happen.”

He said one of the reasons the country is and will remain so competitive is that the country and industry take social compliance seriously and with the realization that companies want to avoid risk. Vietnam’s society, Serefian emphasized, understands areas such as rule of law and has a legal framework for compliance to exist and flourish.

Also, Vietnam understands the need for infrastructure, and investment in ports, roads, and electricity, Serefian noted.

“All of these things stand Vietnam in very good stead and make it a great sourcing destination, and one that I think will remain competitive for quite some time,” he added.

Steve DiBlasi, vice president of global sourcing for Lanier Clothing, said Vietnam’s government has made a “huge investment” in the apparel and textile industry, which has helped put it in a strong global position.

“Despite the loss of TPP, it’s still cheaper to make synthetics like polyester in Vietnam than it is in China,” DiBlasi said for example.

He agreed that Vietnam’s industry recognizes the importance of compliance on a social and business level, and “they treat their workers pretty well. As their labor costs increase, these costs are going to be offset by efficiency gains as they invest in technology.”

DiBlasi said, “Vietnam has made a commitment to the apparel and textile industry and getting in and out of Vietnam is quite easy,” citing several key ports in key locations.

There are “reasons to be careful,” however, including competition for workers, especially with the electronics sector, increasing labor costs and competition for factories with European firms, since Vietnam does have a free trade agreement with the European Union.

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