Relocating Supply Chain to Vietnam

 

Hello all, my name is Vikas S Menon and I am a 2^nd year MBA student at Amrita school of business. Hope all are doing well. I hope you have read my previous blog. If you haven’t read, type #SCM in the search bar and you will find me.

So let’s begin,

As the pandemic has spread across the countries, this has affected the global supply chain, trading, and slow growth. The factory of the world, which is China has shutdown factories and production lines for a short time has costed huge business losses due to the unavailability of finished products and raw material. As Us - China trade war is rising to a new height made the foreign countries to think about relocating to a different country which able to attract capital inflow. There are countries where foreign companies are looking upon and in this context, Vietnam was able to attract investors due to several factors including control over the pandemic, reopened economy, etc.

Vietnam's GDP is growing 6 to 7 percent every year sing 2016 and steady growth in the past. It is closer to other Asia countries and is connected to the global supply chain. The middle and upper-class population segment is expected to reach 95 million by 2030 with an average GDP per capita of US$7000 by 2035 and the participation rate of the female is accelerating than developed countries. The 13 free trade agreements make Vietnam one of the most open economies. Other reasons like ensuring safety to businesses during the pandemic, issuing incentives and tax breaks, the quick reopening of the economy during the pandemic.

 

The country is large and diverse with several industries. Agriculture is one of the important sectors in the country but they are moving to other services and manufacturing industries because of the support from investors and the government. The industries suited for such supply chain shifts are garment and textiles, automotive, Electronic, and food & processing sectors. The below figures show garment and textiles, automotive, Electronic, and food & processing sectors segment divisions respectively.

The 3 common models regarding distribution in Vietnam are primary, secondary, and last-mile distribution. In Primary distribution, the allocation of finished goods from vendor to distribution centers or distributors.

Secondary distribution is the movement of goods shipped from main distributors to smaller distribution centers, stores, dealers, or consumers. Often this concept is equivalent to the last-mile distribution if the delivery points are the final buyers.

Last-mile delivery is the final part in which the finished goods are delivered to the customer or to the company that ordered and bought them. This stage involves logistics delivery operations from stores or small fulfillment centers to customers.

Though many companies thinking about shifting to Vietnam, it won’t be easier. Do you think Vietnam can be the next manufacturing hub other than China and contribution better to the global supply chain? Let me know your view and you can know more about Vietnam through the list of sources.

Information collected sources:

 

1)  https://www.vietnam-briefing.com/news/qa-relocating-supply-chain-vietnam.html/

 

2) https://www.nordeatrade.com/en/explore-new-market/vietnam/distribution 

 

3)  https://english.vietnamnet.vn/fms/business/194267/the-rise-of-convenience-stores--minimart-chains.html

 

4) https://www.supplychainbrief.com/supply-chain/vietnam/?open-article-id=9553982&article-title=distribution-models-in-vietnam--primary--secondary--and-last-mile-distribution&blog-domain=abivin.com&blog-title=abivin 

 

5)  https://www.vietnam-briefing.com/news/china1-new-face-manufacturing-vietnam.html/