Vietnam Contract Manufacturing

Unveiling Vietnam’s Potential: A Vibrant Hub for Contract Manufacturing and Global Supply Chains

Tran Duy TrungWritten By
Tran Duy Trung

Vietnam’s Contract Manufacturing: The Perks!

Have you ever considered Vietnam as the next go-to destination for contract manufacturing (CM)? Well, it’s time to give this hidden gem a second look! Vietnam is making waves alongside other Southeast Asian countries and Mexico, as a dynamic and competitive alternative for outsourcing manufacturing needs. European and American companies are catching on, recognizing Vietnam as a fantastic location to expand and diversify their offshore supply chains. As our global demand for manufacturing grows, let’s dive into the exciting benefits of Vietnam’s blossoming CM landscape and explore strategies to overcome potential challenges to make the most out of this opportunity.

  • Strategic Geographical Proximity: Location, location, location: Vietnam’s geographical proximity to China makes it an ideal choice for businesses looking to expand and diversify their CM presence. Reduced transportation costs, faster production times, and shorter delivery times? Yes, please!
  • Tax Incentives: and Government Support Tax breaks and a helping hand: Who doesn’t love tax incentives and government support? Companies investing in Vietnam can enjoy these perks, thanks to the country’s participation in numerous trade agreements like EVFTA and CPTPP for example, with nations across Asia, Europe, America, Australia, and beyond. Hello savings!
  • Tech Giants Leading the Way: Tech giants lead the way: Several renowned global technology companies are already operating in Vietnam, encouraging the local government and businesses to develop high-quality supply chain solutions. This trend is creating a vibrant ecosystem that benefits everyone involved.

The Potential Challenges of Contract Manufacturing in Vietnam

While Vietnam’s manufacturing and supply chain management options continue to develop, it’s essential to be aware of potential challenges when considering a move or diversification into the region:    

  • Demand for Skilled Resources: Skilled resources are in high demand: With an expanding manufacturing sector, the need for skilled labor is steadily increasing and we expect this trend to continue in the coming years.
  • Concentration on Electronics Manufacturing: Electronics manufacturing is concentrated: Most operations are in the northern part of the country, such as Hanoi, Bac Ninh, Bac Giang, Thai Nguyen, Ha nam, and Vinh Phuc Province, resulting in a higher demand for skilled engineers and supply chain leaders in this region.
  • Room for Growth with Local Suppliers Vietnam’s local supporting industry and suppliers have ample opportunities to expand their capabilities and services, as most currently cater to foreign direct investment (FDI) companies with limited offerings.

 These challenges can be managed and mitigated with some strategic thinking:

Training and management systems: Companies new to Vietnam should develop targeted training plans for junior staff and implement robust processes and management systems to ensure they meet their production goals.
Cooperation with local suppliers: Foreign entities that collaborate with and support local suppliers in improving their technology can create mutually beneficial relationships, fostering growth and better service for both parties.
Thinking outside the box: Engaging smaller manufacturers and bringing in the right expertise for optimization can be a winning formula for those willing to explore unconventional solutions.

Success Stories and Expert Support

Over the past several years, SCRG Vietnam has been supporting US and EU customers by helping them navigate these challenges and optimize their production and supply chains within Vietnam. Through our expertise in Project Management, NPI, Quality Control, DFM, MPM, TE, STM & Supplier Optimization, and we’ve seen incredible success stories unfold that focus on creating wins for our customers.

For example, SCRG assisted an EU customer seeking a new supplier in Vietnam to complement their existing suppliers in China. They faced a significant challenge with their low target price for a complex product that many large local suppliers were unwilling to take on. However, SCRG recommending they consider smaller suppliers with a proven track record in handling similar products, coupled with top-notch technical talent and robust engineering teams. The result? Not only did the customer successfully find a supplier, but they also outperformed their existing one by producing a product with over double the expected life cycle! Our dedicated SCRG team stepped in to address the smaller manufacturer’s gaps, such as refining their management system. We also shared our expertise in optimizing the use of older equipment, implementing process improvements, and ensuring top-quality control. That’s what we call a win-win situation!

Vietnam presents a world of opportunities for investors and local suppliers to collaborate and succeed. By keeping an open mind, embracing unconventional solutions, and leveraging experienced support, the sky’s the limit for the future of the global supply chain in Vietnam.

Have you or your company thought about expanding or relocating your production and supply chain? What role should the Vietnamese government play in fostering a supportive environment for investors and suppliers? Share your thoughts in the comments below!