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Vietnam’s weak supply chains hinder efficiency

The main disadvantages of the Vietnamese supply chain are its backwardness and lack of consistency. Most Vietnamese enterprises, especially garment and textile firms, participate in secondary supply chains with low added-value. This adds to their logistics expenses. At present, only 21 per cent of small- and medium-sized enterprises are part of the global supply chain, while the figure is 30 per cent in Thailand and 46 per cent in Malaysia.

Expanded costs on logistics have hugely affected garment and textile, footwear, and electronics companies that employ a large number of laborers. They are hugely dependent on input, and produce low added value. Logistics costs in Vietnam account for one-third of selling prices. Investing in logistics and applying lean management can help them optimise the supply chain, solve issues related to warehousing operations and save costs and increase competitive capacity.

Applying technologies to the supply chain can save five per cent of a firm’s costs, narrow expenses to zero per cent, and reduce personnel by 25 to 30 per cent. Garment and textile companies in Vietnam rarely invest in their management systems and only focus on buyers. As of now, 15 per cent of garment and textile firms apply lean management models in their operations.