Business Insights/Leads

It's a bit too soon to write off Vietnam as a garment exporting hub, after all it is the third largest exporter behind China and Bangladesh with revenues of over $12billion. There are 3500 + active garment factories here so don't expect it to go away anytime soon.

Sure inflation is high, wages are going up but these are challenges every country is facing. It's good to see factory owners here are looking at technology to increase productivity and keep costs down and also moving manufacturing units interior to make use of the vast labor pool. We also must remember the industry didn't start in the 90's. it started way before than that, even in the 80's Vietnam was exporting to the U.S although they had the disadvantage of being hit by a twice the duty, so yes there have been tougher times.

There are cheaper alternatives across the border like Cambodia but Vietnam still has a phenomenally skilled work force in apparel and scale which few countries can match and whatever people make of the political establishment it's one of the least volatile to do business in. Bangladesh for eg: has so many strikes planning production etc can be challenging.

So no, i personally expect things to pick up especially if the trade agreement is ratified with the states.

Good luck with finding your niche, i hope you find something soon!

Hi Sir Alex Is All That,

Thanks for the well wishes and the optimistic views on the Vietnamese garment industry.

I totally agree with you on the productivity of the Vietnamese lablor force, its enormous potentials and the stable political environment.  But, let me add these to the discussion:

Without quota, Vietnam used to out-competed everyone, including Cambodia and Bangladesh.  The resources, the infrastructures were there.  However, with quotas, especially when they were being sold like commodities, it was hard to argue against taking your production to the fore-mentioned countries, or even China.  Not only that such corrupt pracitces added more to the overall production costs.  But, most important of all, it placed crippling delays to production plans. 

Then, there is the current cash crunch.  It has brought Vietnam's interest rate to an all time high, 21+% APR, as I last checked.  I don't know exactly what they are in other countries, but that is unheard of.  Unless the industry gets a shot in the arm from the involving governments soon, I simply can not see Vietnam competing with the likes.  Perhaps, you or someone here might be able to shine some lights onto this topic, along with the cost of utilities because that has just gone up 18%.

I remember vividly how I used to advance payments to my contractors here, just so that they could make ends meet.  I also remember how many of them used to work the machines that I had provided them with.  Term Payments were unheard of in those days.

They later discovered L/Cs.  FOB became more popular.  But, unlike contractors in other countries, many of them went to the local banks and advanced their L/Cs, much like the way smaller companies utilized Factors in the States.  How are they going to survive amid the sky-high interest rate of today? 

As for political stablity, most definitely, the system is very well set up.  But, stability, as we all know, often breeds complacency.  Change then would take a long time to come about; and policies, often poorly crafted, become ineffective.  Is that what we are seeing now?  What do you think?

Regards,
Howie

Yo Wild1,

All valid points but there a few areas that i have a different opinion on.China is slowly but surely losing market in apparel production due to high labor cost (over $200) and the migration to electronics production with higher wages as opposed to garments. In-fact a lot of the brands are moving to Vietnam/Bangladesh, it is happening, slowly maybe but surely.

Although you mention FOB easily over 50% of the factories still run CMPT so revenues are under stated and off shore buying offices continue to finance most of the operations.

Yes borrowing is a challenge but LC's have made that less of a challenge and most buyers these days advance TT payments so not too bad. Inflation is to be expected considering the high growth rates Vietnam has had over the last decade although doesn't make it any easier!

Political system - yes and no, you have to be careful what you wish for, although change is the only constant it is not necessarily the best thing always. There's no guarantee it will be run any better. I come from Sri Lanka and we have had a war for thirty years that crippled growth not to mention the loss of innocent human lives. The war ended two years ago and in-fact the apparel exports are worse off than they were during the war.

When things get tougher, people become creative and industries innovate. That is where we are at now.

One of the things i would like to see is a switch to ABC costing for manufacturing where cost is based on standard minute based on GSD values instead of an abritary CM price. This is honestly the biggest challenge, factories routinely over and under quote as there is no science to how this is worked out right now.

Hi Sir Alex Is All That?

China, really?  Despite the Three Rivers Damp and their enormous efforts to develope the western part of the country? 

When I was in the industry, despite the Chinese relatively higher costs in production, many of my associates still kept the bulk of their productions there because of greater capability and punctuallity.  As a matter of fact, some even went as far as sending only about 10% of their productions to Southeast Asia, mostly those greater turn-around times.

Thanks for all these discussions Sir Alex.  You are making me feel more and more like the me before my hiatus.  You sound to be heavily involved with the Vietnamese apparel industry.  Which market are you serving, if I may ask?  Which part of Vietnam are you operating out of?

I used to serve the US market, and I operated all over south Vietnam, but my main areas were Thu Duc and Tan Binh.  But, back then, the infrastructures were not as good as they are now. Kien Giang used to take me a whole day.  But you are right in your previous post, it is much easier and cheaper to reach the rest of Vietnam's labor force now.

As for the payment methods, before I left, I did take a group of Vietnamese contractors and showed them how the American garment industry worked in Los Angeles.  Afterward, we had a very detail discussion about becoming more competitive by cutting down costs and improving the services:  we talked about joining forces (cutting, sewing, srceen-printing and embroidery, all in one), and we talked about LDP quotings and the possibitities of Term Payments.  They were very optimistic then.   I guess that was because their interest rates were no where near where they are now.

Presently, do you know of any complete service company in Vietnam?  Nowaday, that is well within the reach of these guys.  Oh yeah, do you work with Vinatex at all? 

I used to work with them for a little while before I left.  They were state-owned, so they were the hardest group to work with.  It wasn't until they ventured into the US market, introduced to me in southern California by my customers, that they began to take notes.  I wonder what they are up to these days?

Another problem that I had just realized, and you mentioned it in your reference to the Chinese labor force, was retention.  I recently called up my #1 contractor here, only to learn that he had sold his prestigious phone number and moved on to tourism.  My heart sank at the news. 

This was the most knowledable guy, his company was better situated, he had the best trained staff, the most up-to-date machines ...  In short, he was the only Vietnamese contractor that I knew, who had successfully quoted and performed a Net 30 contract to an American client.

That is a hugh lost to the industry here.  Do you see that happening here and now?  As for my #1 contractor, I am going to track him down and get to the bottom of this.


Have yourself a great weekend,
Howie

Howie, yes it's becoming a big problem for Chinese manufacturers. Too expensive for apparel, which is of course good news for the rest of us. I mus stress that is only in apparel manufacturing, in terms of fabric China is and will be the number one source for years to come. They will out quote and out deliver anyone because of the sheer scale of the big companies.

We ship 100% to the U.S at the moment and we are looking at Cambodia for Europe as it's duty free. We have three of our own factories and have just built a GREEN factory in Than Phu and we also have our own commercial laundry.

I see, you seem to have done your best. I can imagine how hard it would have been then.

It's a dog eat dog race now and It's on like donkey kong!

You too man.

Cheers.

And nope we don't work with Vina at the moment, we work with a privately held group in Hanoi and Binh Dinh, rest are all in/off Saigon.

Ha Noi and Binh Dinh huh?  My hat is off to you, Sir Alex.  You don't even speak Vietnamese, do you? 

Back in '03, I went up to Binh Dinh a couple of times with some very trusted people, but it was too rural then.  Furthermore, the factories were virtually owned by the state.  So, I ended up staying south of Bien Hoa.

Labor should be cheaper up north, right?  Are their equipments as up-to-date as their southern counterparts?  What about skill level, does it tail off as you go further north? 

Wow, Sri lankan are pretty much fresh off of a war?  That is very unfortunate.  I personally took part in the '91 Gulf War, earned a few medals then, but never liked it.  To me, war is a total break-down in negotiation, relects rather poorly on both involving parties.

I am getting ready to head up to Saigon.  I should be there this afternoon until tomorrow.  If you are free, give me a ring.  We will have coffee or a couple of beers or something.  My number is 01222112203.

Other than that, have a great weekend.

Regards,
Howie

Hi Sir Alex,

I love the way you sum up the industry: "It's a dog eat dog race." Yet, it is the thrill of the chase that gets you up every morning, right?

Nonetheless, you seem to have things pretty well under control here: you have your own facilities, even a green one.  Kudos to you guys on that!  All you need to do now is get to know your troops here, on a personal basis, learn a little Vietnamese and you are set.

For me, a couple of drinks and a few trips to a local karaoke bar helped tremendously.  Their approaches toward me changed a lot, they became much more consistent afterward.  I learned that there are far more variables to work with here than elsewhere: if the local ward decide to host a party, businesses inside that ward must "contribute."  But, once you are on the right side of the locals, when they are willing to go to war with you, then things become much more consistent.

I totally agree with you on the Chinese being a global fabrics supplier.  But, prior to leaving, I learned that Vietnamese denims and khakis were getting close.  The quality was there.  It was just the prices that were a little off; the Vietnamese prices were about 10% higher than their Chinese competitors.

Other than that, the Vietnamese political culture and its educational system has a way to go before it could adaquately support its garment industry in the ultra-competitive global economy.  Up until a little over 10 years ago, macro-management were limited to only a handful of higher-up Party members.  At the lower levels, financial abuses and neglects were rampant. 

The deans of the local business schools have less experience than either one of us Sir Alex.  Most, if not all, of them earned their tripes in a state-owned system, and you know how grand that must have been.  Therefore, the executives and the managers that you are dealing with now are often at a lost with your ideas and/or concepts.

That is my take.  Hope that you or someone else on here will add more.

Regards,
Howie

Sorry i didn't see this message sooner, next time you're up for a coffee give us a shout. 985-508-181. Cheers

Hello Howie,

I am looking to find a few people in Vietnam, as I am with a company that is Pre-Launching already there, and is opening up here this month. Let me know if you are looking to make it back or if you could help me.

Frank A. Nagorski

E-mail:  [email protected]

Hi Frank,

Thank you for the kind offer.  But, I will not budge on the ground of kindness.  For me to put my silly name next to anything, there must me specifics:  "Pre-Launching already there," what is Pre-Launching, is this the name of the company, does it mean that it has yet to be launched, where is it launching from/to, "already" when and where (country, city, province, district)???  I am not even going to go into why a company that is already in Vietnam and is seeking managerial helps, because to me "already" means set, over and done with.

I wish you and yours the very best.

Regards,
Howie

Frank,

Don't get me wrong.  I have gone to war for fellow Americans before, literally, and will continue to do so, as long as my sanity is intact.  It is just that I had seen so many of us failed because we came into here under-estimating the locals and unable or unwilling to adjust ourselves to the existing conditions (ala Bank of America).  It boils my blood everytime I think about those failed ventures.

The movers and shakers here are not the same as those we see in the west or Japan.  They dance to an entirely different beat.  And, this is their turf; these are their rules.  As outsiders, it is suicide to take these guys lightly.

Feel free to introduce yourself and your ideas on here Frank.  There are some amazingly good and capable people here.  We will be more than willing to assist or provide you with leads that will make your job much easier.

As for me, of course I will help.  How much will I be able to help depends on what you do and how prepared you are for what you intend to do here.  So, let's roll.

Regards,
Howie

Hi guys,

I am looking to buy some premium cloth napkins (white) or the fabrics (linen or the likes) to make them.  Do any of you have some or know where I can get them?

I would really appreciate any help/lead.  Thanks.

Sorry Howie, we don't make anything in Linen. I personally dislike Linen and stay away from it!

[Moderated: please communicate by PM]

Hi Sir Alex,

It is good to hear from you again.  How is Vietnam treating you?

I was never fond of linen myself.  The Middle East seemed to have the best, especially Egypt.  But, it was too volatile of a place to find out.

It was why I was dumb-founded when a family friend approached me about napkins for her hotel and resort.  I did a little research, but most turned out to be made of linen or monie.  I didn't even know what that was or if that was the correct spelling of it.

But, thanks for the vote of confidence though.  I thought that I was on an island on this.

Are you still down on coffee?  I will definitely give you a holler the next time I go to HCMC.  Hope that you will be free then.

I remember how I used to go all over the places, checking and showing contractors how to do things the right way.  You really made me feel good about the progress that these guys made in the industry.  Keep it up Sir Alex.

Warm wishes,
Howie

To the clown who ommitted Budman's comment,

What happened?  Isn't this censorship??  What is freedom of speech to you??? 

I can understand if his language was offensive or he was advertising something.  But, just like many other expats on here, he was trying to help out another expat. 

Think about it you people...  I thought that you would know much better than that...

Regards,
Howie

Howie, all is well thanks. Sure, give us a call but i will be in and out of Hanoi over the next few weeks so let me know. Yes, i didn't see why that comment had to be moderated. Was pretty harmless.

The problems with the mods on this site are that none of them are in Vietnam. Don't have a clue what's going on here, plus not being in the same time zone tend to act or react to posts not very consistently. Sorry Julian just M2CW, remember I offered to mod for free a few months ago and well?? My post to Wild-1, all though direct to him was also to let other members know that I was searching for a source in the possibility they maybe also had a requirement. Buying more of a product normally means less of a cost per item. I wasn't advertising anything nor selling anything. Should it have been a PM to him? That appears to have been a mods call. Which I reiterate is not consistence on this website. Case in point, there's a thread here a little far down now that has over 250 posts on it. Some body by the name of henry started it and it's mostly if not all conversations between only a few people. Was it deleted? Guess not, different standards, different mods.

Hello!

Some of you are off-topic.

Could you please concentrate on the initial topic which is 'Business Insights/Leads'.

If you encounter any problems, please contact the team.

Thank you,
Harmonie.

I rest my case:-)

Hi Harmonie,

With all due respects, Budman was trying to provide me with a lead.  That was until one of your guys ommitted it.  He and I were more than capable of exchanging personal infos and communicate privately.  As a matter of fact, we already did on certain matters.

But, on the issue of premium cloth napkins.  I decided to put it on here simply because that I felt other expats might want to know the same thing that I was looking to find out.  These items don't exist here, yet they are quite common household items to most of us.

I had worked in the garment industry for over 20 years, with all sorts of contacts in Vietnam; yet, I had to put that question on here.  Anyone with any common sense would automatically know the difficulties involved.

The reason that we went off track was because one of you de-railed us.

Sir Alex,

My friend had already set up a meeting with the Vinatex brass, that I had told you about elsewhere.  Such gathering is not easy to arrange here.  But, they agreed to it because some of them are families to my friend and I had personally hosted a few of them at Magic, some 7 years ago.  According to my friend's briefing, they had tried to contact me before, but to no avail.  So, they are very interested in what I have to tell them in regard to organization, operation, location and negotiation.

My friend had told me that these guys are willing to go as far as putting up a manufacturing plant from the ground up, based on my specifications, human resources included.  What do you think?  How should it be?

I was thinking about a plant in that Nam Dinh area because of my people's connections there and its large labor force and close proximity to the Hai Phong port.  I was also thinking about cotton...  Remember that quality T-shirt thing?  I want to make my own now.  And, I was thinking about emulating those Chinese plants, where they can do it all in one spot (knitting, sewing, washing, dyeing...).

I will probably head there in a couple of weeks, still trying to juggle my schedule.  Give me some more ideas, Sir Alex?  It has really been awhile since I last talked garment, let alone setting up a manufacturing plant.  Hey, if I get this done, I can really hook you up with what you are doing.

Regards,
Howie

Hi Howie,

Sorry for the late response but i needed some time to think this over. Reading your post my honest humble opinion is you're putting the cart before the horse. Don't start a factory no matter how small to start with without a customer. Simply because your set up costs are high and you will bleed on the variable overheads every day you don't make money. Orders or no orders you will need to pay your workers and the fixed over heads.

1.When we set a factory up we normally have a School uniform buyer place us orders. These are very very low price points and you can barely break even. But we do it this way so the new workers have time to get used to basic bulk production and sewing technique. Uniforms are basic garments with minimal quality requirements.

2. We also never start a factory with more than 3-5 lines. We scale up gradually. However the factory and warehouse are built to cover the planned line allotment - normally 35 lines.

3. Don't get too hung up on making quality tee's. Garment industry unfortunately does not work like the technology business where for eg: Apple's philosophy is not to give what customers want but what Apple thinks they need. We are heavily reliant on what customers need although if you have in-house design there are certain buyers who will use it.

4.Washing and sewing makes sense but knitting does not. Fabric is still very much higher in most cases (except synthetic) compared to China. Besides it's only 5 days sailing from China so China is still the best bet. Having said that Pacific textiles is building a huge factory for fabric and should be up and running by 2013. They are one of the largest and reliable mills in China and we have worked with them for over 15 years. We will for eg: move all of our knit orders once they are up and running to Vietnam from China. The laundry makes sense and we in-fact have ours running for a year and find it easier to manage than out sourcing.

We have the license for Lee , VF for School uniforms so if you need a test order to get the factory running we can help place.I can actually give you anything between 20,000 pcs to 1million a season.

All of this sounds great - but just be careful as if you don't have orders you will lose your shirt in a month. I suggest you do an evaluation and see what the capital cost of the project is and then check the Break even point and ROI or the investors might push you for sooner. Be very clear up front and i personally feel if they build what they say they want to build you wont make any money for the 1st one and a half years. That is normal because of the extensive cost of machinery, low efficiency at the beginning but make it clear to them.

Good luck and keep me posted.

Ashard

Hello Ashard,

Thanks for the inputs. 

However, I think you misunderstood me.  I have always wanted to do business with Vinatex, they have been and will continue to be the biggest garment manufacturer in Vietnam.  Being a state-owned entity, they have the most resources available to them.  But, as you very well know, such entities have never been known for efficiency in practice and effectiveness in competition.

Some 10 years ago, I approached Vinatex about cooperating to set up a plant to manufacture my products.  I even took a group from them to my facilities in southern California and showed them how things should be set up and run.  However, I--being a Vietnamese-American with deep ties in the old government of South Vietnam and they--being high-level North Vietnamese socialist bureaucrats, could not see eye-to-eye.  Despite my well intentions, I was given the cold shoulders.

This time around, I think a few of them have come into grips with what I had said in the past and others have reasons to believe that I was now in the "family".  They extended themselves to me, asking me to help them be more competitive here and abroad, I didn't come to them. 

What they really wanted was my cooperation.  The new plant, built from the ground up, was their way of telling me that they are now committed to becoming a major player in the market.  Having worked here for so long, you should know that such state-owned entities have always been sideshows to their private-owned counterparts.

Personally, I think they have enormous potentials.  Who in the Vietnamese garment industry have more political and economic clouts than them?  It is just that their manufacturing philosophies and financial principles are a little bit off; that is all.  But, if committed, they can be easily changed.

Currently, I am only concerned about the competitiveness of the Vietnamese garment industry in the global market place.  I want them to gain more shares of the pie by being effective and efficient, not by killing off one another.

I remember I used to have fabrics come from China, my washes sent to Hong Kong, and my printings performed back in the US.  It was too exhausting logging all those miles and dealing with all those different individuals.  I spent a lot of time thinking about what could and should have been (one straight shot from my contractor plant to my customer)...  That was what drove me to approach Vinatex.

Even in your case, wouldn't it be better if you don't have to manage your own sewing, printing and washing plants.  Wouldn't you be better off spending your times on your orders and customer cares?  Wouldn't your shares of the market be doubled if you didn't have to finance such undertakings? 

Perhaps, I am a little too optimistic.  But, I think the Vietnamese are capable of meeting our needs on their owns; and that means without increasing our costs.  Just let me sit down with these guys and see what the terms are.  If the terms are right, hell no, I don't need to build anything from the ground up.  I can easily take a few of their existing plants and put them all together in a more strategic locale.  I will keep you posted on this.

I still have your number.  It just that I have not had a chance to visit HCMC at all.  But, before I go to Hanoi this time, I will probably give you a buzz because I will need to have a few things done at the US Consulate in HCMC.  Are you still down for some coffee?

Regards,
Howie

Hi Howie,

I see, this is an altogether different ball game. They want you to consult for them? sure there are different ways of doing things based on your expertise and your customer base and your bank balance i guess. We have an embroidery unit but not printing, actually we had a print plant several years ago but was not making any money so we sold it. Now we outsource, fabric is something we have no bloody clue how to manufacture so we don't want to take that route.

Sure, give me a call if you get here and will be up for a coffee. Please text me / call me a day ahead if possible as if i am at the factory need to get my ass back to HCM for coffee. Cheers and good luck.

Ashard,

I will definitely give you a ring in advance.  But, since I will need some official business done at the Consulate, it will have to be on a weekday.  Hopefully, I will catch you at a good time.

As for my works, I will have to wait until I actually sit down with them before I can determine my actual involvements or the levels thereof.  It is why I have been looking up and studying the issues that the industry is facing here.  But, I really like the prospects.

Can you imagine if these guys get their acts together?  They own and operate over 40 plants nationwide.  Many of them are major power brokers here also...  Considering the significant of this meeting, I am really trying to stretch my window of opportunity here.  I don't really want to go in there unprepared or leaving something important out at its conclusion.  At the same time, considering the type of people these guys are, I don't really want to take too long and make them feel like I am taking them lightly.  It a real tough act.

But silkcreen printing, and you had to sell it?  My friends and I were struggling to find a plant with greater color capabilities.  But, we could not find one here and were unable to convince one of my best friends to bring part of his business here, because of politics; so we had to ship everything back to southern California.  Later on, because of the increased in labor cost there, we had to drop that line.  Man, if only I had run into earlier...

What about washes, Ashard?  When I was doing garments here, the wash houses in Thu Duc were quite competitive.  They were limited in their capacity of course.  But, on the more basic washes, they were good.  Shortly after I left, when that custom denim look was in, I heard they were booming because of their cheap labor force.  How is that sector doing now?  Are they advancing or regressing?

Howie

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