textile and garment industry in vietnam

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Textile&Garment IndustryinVietnam

ResearchonGarmentProducersinVietnam InternationalBusinessResearchVietnam2008 Ms.L.Buisman Ms.G.J.Wielenga Groningen August15th,2008 UniversityofGroningen,FacultyofEconomicsandBusiness

InternationalBusinessResearchVietnam2008 Bandolera 1

ExecutiveSummary Vietnamisknowntohaveanimpressiveandquicklydevelopingtextileandgarmentindustryandlow laborcosts.ThesefactorsmakeitapossibleinterestingandattractivemarketforDutchgarmentand fashionbrandssuchasBandolera.BandoleraisaDutchfashionbrandforwomenof2560years.Her collectionsaredesignedwithspecialcare,madeoutofhighqualityfabricsandusemanydetailsand accessoriestoprovidewomenwithtrendyclothing.ForherproductionsheisalreadysettledinChina andIndiaandnowlookingforextrasourcingpossibilitiesinVietnam.Thegoalofthisreportistogive ananswertothemainquestionwhetheritisinterestingforBandoleratoproducetheirgarmentin Vietnam. From February till August 2008, the International Business Research Project of the University of GroningencontainedmarketresearchinVietnambyorderofBandolera.Theresearchwasexecuted by 2 selected business students of the Faculty of Economics and Business and supported by two assistantprofessors. To get detailed information on all important aspects, both desk and field researchwasexecuted,ofwhichthelatertookplaceinVietnam(MayJune2008). TodecidewhetheritisinterestingforBandoleratolettheirgarmentbeproducedinVietnam,three requirements are of main importance. First of all, the fabrics Bandolera wants to use should be availableinVietnamandofgoodquality.Secondly,thelocalgarmentproducershavetobecapableof producingfashionablegarmentwithmanydetails,forloworderquantitiesrangingfrom3003.000 pieces and deliver everything within 90 days in the depot in The Netherlands. Third and last of all, Vietnameselegislationsshouldnotrestraintheexportofgarmentandgoodlogisticservicesofshould wellrepresentedforbothshipmentandairmail. ThefabricsavailableinVietnamaremainlycotton,followedbypolyesterandsilk.Thegarmentsector needs up to 200.000 tonnes of cotton for its export plans. The current production does not meet morethan2%ofthisdemand.Despitebiginvestmentsbythegovernment,theproductionofcotton isdecreasinginthelastcoupleofyearsduetoloweconomicefficiency.Theproductionofpolyester onlymeets4%ofthenationaldemand.Recently,biginvestmentshavebeenmadeinthepolyester plantswhichshouldbeableprovidein50%ofthenationaldemandby2012.Thesilkproductionin Vietnamissmallandstillinatraditionalway.ComparedtoJapanesesilkthequalityislow.Itturnsout that Vietnam does not have the machinery and capacity to produce silk for the industry to export. Overall,differentsourcesconfirmthattheVietnameseproductionoffabricsisinsufficienttoprovide inthesectorsdemand,makingitdependentonimport.Intermsofquality,Vietnamcanprovidein lowtomidlevelquality,buthighqualityfabricsstillneedtobeimportedfromChina,Taiwan,etc.It hastobenotedthatVietnamisheavilyinvestinginitsfabricproductioncapacity,butthefocusisfirst ofallonquantitiesandtheseplansalsocopewithmanydifficulties. Ingeneral,mostgarmentcompanies(70%)arelocatedinthesouthofVietnam,neartheharborand airport of Ho Chi Minh City. In total we visited 17 garment companies in Vietnam. These company visitsclarifiedthatthefocusofthesectorisonmassivequantitiesoflowtomidlevelquality.These massive quantities are needed because the main reason for customers to go to Vietnam for productionofgarmentisitslowpricing.Therearealotofbigquantitiesordersoflowqualityfabrics availableforlowprices,whichhastheinterestofhugecorporationsmostlyfromtheUS.Althoughthe machineryinVietnamesefactoriesisnewandadvanced,thereislittlemarketfortheproductionof small,fashionableorders.OftenVietnamesegarmentproducerswillnotacceptloworderquantities, becausetheyneedtokeeptheirmachinesrunninganddonothavethetimetoinstructthesewerson differentproductionlineshowtocreatemanydetails.Theyrealizehighturnoversbyproducinglarge, simple orders for low prices. None of the companies we visited could meet all requirements of Bandolera. TheVietnamesegovernmentispromotingtheexportofgarmentandthereforethereisnorestriction ontheexportofgarmentandverylittlelegislationinfluencesthedeliverytimesofgarmentorders. Next to that, logistic services in Vietnam are well represented and accommodated. However, there

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aresomesetbacksconcerningthepricingmethods.BandolerapreferspricingonCost&Freight(C&F), inwhichtheproducertakescareofalllogisticmattersuntilthedeliveryinthecustomersdepot.One stepdownispricingonFreightonBoard(FOB),inwhichtheproducertakescareofthegoodsuntil they are on board of the ship. Pricing on FOB is becoming more common in Vietnam, but is still consideredasariskybusiness.WehavenotfoundanyproducerwillingtodeliverordersonC&Fbase. Other barriers exist in the more informal aspects such as language and communication problems. These barriers make it necessary for a company such as Bandolera to, when producing in Vietnam, keepacloseeyeontheproductiontopreventmistakesandmisunderstandings. BasedontherequirementsofBandoleraitisdifficulttofindafittinggarmentproducerinVietnam. Vietnamesefabricplantsarenotabletoproducemiddletohighqualityfabrics,andoftenthequality is not stable. Next to supplying fabrics from other foreign countries buttons, sewing threads, interlining,shoulderpads,andotherembroideryareimportedaswell.Duetothefactthatmostmust besourcedfromotherAsiancountries,thelead/deliverytimeofgarmentaswellasthecostpriceof garment increases. Furthermore, Vietnamese garment companies are not specialized in the production of detailed, fashionable garment and also do not prefer this kind of orders. At this moment there is much competition in the textile and garment industry and there are many big quantityordersavailable,guaranteeingsalaryandemployment.Becauseofthebadfitontwoofthe threeinvestigatedaspects,wecananswerourmainquestionnegatively.Alltogether,Vietnamdoes notappearasaninterestingmarketforBandoleratoinvesthertimeandenergyin.

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Preface Thereisnodoubtaboutit,Vietnamisbooming.Sincetheadoptionofthedoimoi(renewal)policy in the late 1980s, Vietnams economy has shown remarkable growth. Numerous economic progressionshavetransformedthecentrallyplannedeconomyintoamarketbasedone.Overthelast fiveyearsVietnamreachedasteadyaverageeconomicgrowthof8percent.WhenVietnamjoinedthe WorldTradeOrganizationin2007,theinternationalborderswereofficiallyopenedandinthatsame yeartheamountofforeigninvestmentsdoubledto7.8billionUSdollars. Vietnam has become a great potential for foreign investors because of its crude oil production, its richness in natural gas reserves and its hardworking workforce with low labor costs. All together, Vietnam has become one of Asias best economic performers and is often described as the new China.ThismakesitaninterestingbusinessopportunityforDutchcompanies. From February till August 2008, the International Business Research Project of the University of GroningencontainedmarketresearchinVietnamfor11Dutchcompanies.Thereportinfrontofyou is the result of the research for one of those companies: Bandolera, a Dutch fashionable garment brand for women. The research was executed by 2 selected business students of the Faculty of EconomicsandBusinessandsupportedbytwoassistantprofessors. Goal of this report is to give an answer to the question whether it is interesting for Bandolera to producetheirgarmentinVietnam.Todothis,welookedatthreeaspects:(1)theavailabilityoffabrics inVietnam,(2)visitingandevaluatinglocalgarmentproducersoncapability,and(3)theinfluenceof legislations and the availability of logistic services. Toget detailed information on all three aspects, both desk and field research was executed, of which the later took place in Vietnam (May June 2008). During our stay in Vietnam we visited both stateowned and private companies and held interviews with different experts and agents. The results of our research are represented in this report. Forallthehelpwereceivedduringtheresearchandthewritingofthereport,wewouldliketothank our assistantprofessors Mr. dr. K.J. Alsem and Mr. dr. T.W. de Boer. They have guided us through manydifficultiesduringourresearchandsupporteduswiththewritingofthereport.InVietnamwe hadmanyhelpwhencommunicatingwithVietnamesecompaniesfromourinterpreters,Ms.Nguyen ThuyVyandMs.NguyenHongChinh.Manythanksforalltheirhelp,withoutthemwecouldnothave gathered as much information as we have. Finally we would like to thank Mrs. Nghiem Lien Huong andMr.JosLangensfortheirhelpandhospitalityduringourstayinHCMC.Fromthemwereceived manyimportantadditionalinformation,weotherwisewouldnothavebeenabletofind. Alastwordtoallreadersofthisreport;wehaveputmucheffortinwritingthisreportasclearand pleasantaspossible.Wehopeyouwillfindtheinformationyouarelookingfor.Enjoy! August2008,Groningen. LisetteBuismanandGerdaWielenga

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ContentExecutiveSummary............................................................................................................................... 2 Preface Content Chapter1 1.1 1.2 1.3 1.4 Chapter2 2.1 2.2 2.3 Chapter3 3.1 3.2 3.3 Chapter4 4.1 4.2 4.3 4.4 4.5 Chapter5 5.1 5.2 5.3 5.4 5.5 5.6 Chapter6 6.1 6.2 6.3 6.4 4 5 Introduction..................................................................................................................... 7 Bandolera............................................................................................................................. 7 Purposeofresearchandresearchquestions........................................................................ 8 ConceptualModel................................................................................................................ 9 Reportsetup ..................................................................................................................... 10 Methodology ................................................................................................................. 11 Generalmethodology ........................................................................................................ 11 Criteriaforselectionofnewgarmentproducers................................................................ 11 DecisionTree ..................................................................................................................... 14 TheVietnameseFabricMarket ...................................................................................... 16 CurrentsituationandtrendsintheVietnamesefabricmarket .......................................... 16 Overviewmaindomesticproductionoffabrics.................................................................. 17 Conclusion ......................................................................................................................... 18 TheVietnameseGarmentIndustry ................................................................................ 20 Economy ............................................................................................................................ 20 Exportoftextileandgarment ............................................................................................ 21 Overviewofcompanies...................................................................................................... 21 TheVietnamTextileandApparelAssociation .................................................................... 22 Futureplans ...................................................................................................................... 22 EvaluationofGarmentProducers .................................................................................. 24 Descriptionofvisitedgarmentcompaniesandfactories.................................................... 24 Finalevaluationofgarmentproducers............................................................................... 32 ComparisonstocurrentproducersofBandolera................................................................ 35 Excludedgarmentproducers ............................................................................................. 35 Expertsandagents............................................................................................................. 36 Conclusion ......................................................................................................................... 37 LogisticsandLegislation............................................................................................... 391 LegislationandrulesaboutexportinggarmenttotheEU ................................................ 391 Pricingandpayment ........................................................................................................ 391 LogisticservicecompaniesVietnamTheNetherlands ..................................................... 40 InformaltradebarriersintheVietnamesegarmentindustry ............................................. 41

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6.5 Chapter7 7.1 7.2

Conclusion ......................................................................................................................... 42 ConclusionandRecommendation ................................................................................. 43 Conclusion ......................................................................................................................... 43 Recommendation............................................................................................................... 44

References ...................................................................................................................................... 46 OverviewofAppendixes ..................................................................................................................... 47 Appendix1 AbbreviationList............................................................................................................ 48 Appendix2 ProcessofFabricProduction.......................................................................................... 49 Appendix3 ProcessofGarmentProduction ..................................................................................... 51 Appendix4 MapsofVietnam ......................................................................................................... 526 Appendix4.1......................................................................................................ProvincesofVietnam 52 Appendix4.2........................................................................................... IndustrialzonesofVietnam 53 Appendix5 AgendainVietnamandContactDetails......................................................................... 54 Appendix5.1........................................................................................................ AgendainVietnam 54 Appendix5.2.............................................................................................................. ContactDetails 55 Appendix6 ListofRejectedGarmentCompanies ............................................................................. 59 Appendix7 Checklist ........................................................................................................................ 62

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Chapter1 Introduction BandoleraisaDutchfashionbrandforwomenof2560years.Thecompanyissearchingfornew attractivesourcingplacestoimproveherproductionprocess,possiblyinVietnam.Inthisfirstchapter we will give more information about the company and what she is precisely looking for. We will continue with clarifying the purpose of the research and its research questions. This is further illustrated with a conceptual model. We conclude the chapter with an outline of the set up of the report. 1.1 BandoleraBandolera was established in 1985 as an original wholesaler. Over the last 20 years, Bandolera has growntoaninternationalladiesfashionbrand.TheirmainmarketliesinEurope,butBandoleraalso hassellingpointsintheUnitedStates(US)andCanada.Thebrand Bandoleraissoldin40different countriesandNotTheSame(NTS;anindependentcoordinatedcasuallineofBandolera)isavailable in 30 countries. With 40%, the Netherlands still takes care of the biggest part of the turnover, followedbyBelgiumandNorway. Bandolerasellsover1.5milliongarmentsannually,representingayearlyturnoverover50million (year 2007). Worldwide Bandolera has more than 2,400 points of sale, including several Bandolera standalone or franchised shops and several shops incorporated within department stores. In total, Bandolera has 51 monobrand Bandolera stores and NTS shops. The company started with establishingitsownstoresthreeyearsago.Ofthetotalturnoverof2007,morethan60%isexported to25countries.Over2007,theturnoverrategrowthwas30%. Qualitymanagementisveryimportantforthecompany.Thedesigning,buyingofmaterials,makingof patterns,planningandsupervisionofproductionalltakesplaceattheheadofficeinRotterdam,The Netherlands. All materials are tested for quality, shrinkage and wear ability. To keep the ability of bringingout16collectionsperyear,theneedforprecisedeliverydatesandquicksupplyreordersis very high. Bandolera therefore needs to retain control over the whole process from designing to 1 logistics . Philosophyandmarketpositioning Bandolerafocusesontheyoungdynamicwomanwholeadsanactivelife.Bandolerascollectionaims to create a distinctive image which is trend following, while offering the possibility of multiple combinations,butstillprovidinganelegantandfemininefeeling. Tokeepclosetrackonfashiontrends,Bandolerahasitsowntrendwatcherswhoarefollowingthe international fashion scene. Next to that, Bandolera offers 16 collections a year, which is a flexible way for the styling department to keep close track of the trends and share them with Bandoleras customers.Inshort,Bandoleratriestocombinehighqualityandservicewithastrong,trendfollowing image. Sourcing:suppliersinTurkey,IndiaandChina Bandolera is already working with garment producers in Turkey, China and India. They have the longestandstrongestrelationshipwiththefactoryinnlu,Turkey.Bandolerahasworkedwiththem since they started. Of the whole Bandolera collection, 50% is produced in Turkey. Bandolera is co ownerofthisfactory,20%oftheproductionofthisfactoryisforBandolera.Therelationshipwiththis factoryisstrong;theydonotjustproducethegarment,butalsotakecareofsmallproblemsatthe scene when these occur (for instance local logistic problems). The factory in nlu (Turkey) has 800 sewers.ForBandoleratheymainlyproducesuits(blazers,pants,confection).Theproductionofthese is still cheaper and better in Turkey then in Asia. Bandoleras head of purchase (Mrs. P. Punt Oldenhof) visits this factory together with a stylist every two weeks. This is mainly to check the processesandtofitthefittingsamples. FortheNTSbrand,allgarmentsareproducedinAsia.BandoleraiscooperatingwithIndiaandChina forabout3years.Inrelationshiptermsthisisstillshort.Oneofthedifficultieswithfindinganew1

www.bandolera.com,4March2008

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garmentproducerinAsiancountriesisthedifferenceinlanguageandculture.TheAsianwayofdoing business is not always as straight forward as the Western way of doing business. Samples that are shownbyproducers,forexample,couldbemodelsthattheydonotmakeanymore,orevenhavenot produced in their own factory. It has taken Bandolera 2 years to establish a real open, trustful relationshipwiththeircurrentproducersinChinaandIndia.TheyvisitthecompaniesinChina2to3 timesperyear.FirstBandoleravisitsthefactory,afterthatthefactorywillsendthesamplestothe Netherlandswheretheywillbecheckedonfitsize.ThefactoriesinChinaareinHongzou,ShangHai, BeijngandHongKong.Theyhavethefastestdeliverytimesandhavethemostandnewestmaterials. ThefactoriesinChinaandIndiausuallyhaveabout50/100sewers.Alotofjacketsareproducedin Asia. For the fitting of the garment from Asia, the samples are flown in by air. Fitting ladies in the Netherlandswillcheckifthesizesarecorrect.Afterthatthesamplesaresentbacktothefactory.The usualprocessisthatsamplesfromAsiaaresentforthandbackbyair,whiletherealproductionorder isshippedoversea.Thisisnecessarytocatchthedeadlineoftotaldeliverytimeof90days,butalso resultsin400.000500.000UPScostsperyear.Thetotaldeliverytimeof90daysisverytightand importantforBandoleratobeabletobringout16collectionsperyear.These16collectionsperyear meanthattheyofferanewcollectionevery2/3weeks.Thereforethefirstdeliverytimeisusuallythe tightestandissometimessendbyair. Ingeneral,ordersareplacedpersizeandpercolor.Sizesrangefrom3646.Theaveragequantity permodelofanorderfromBandolerais1.500pieces(withrangesbetween3003.000pieces,with pikesto200or5.000pieces).Thisordersizedoesnotdifferoverthedifferentproductgroups(pants, blouses,etc.).PatternsaredesignedbyBandoleraandsendtotheproducerdigitally. Futureplans In the first half year of 2008, 20 new mono brand stores are opened in the Netherlands, Belgium, Germany, Poland and Turkey. The brand has also announced a new start in the United States. BandolerahopesthatthedevelopmentofactivitiesintheUSwillleadtoanimportantcontributionto a quick growth of the company worldwide. In the second half of this year another 20 stores are planned to open. As every company, Bandolera is looking for new ways to improve its production process.BecauseofthegreatdevelopmentofthetextileindustryandthelowlaborcostsinVietnam, Bandoleraishopingforanewsourcingplacetosupportitsfutureplans.

1.2

Purposeofresearchandresearchquestions

ThepurposeofthisresearchistoprovideBandoleraasolidreportonbaseofwhichBandolerawill make a wellconsidered decision whether to produce garment in Vietnam. At the same time the reportwillprovidepracticalinformationaboutdoingbusinessinVietnam(i.e.governmentallawsand policywithregardtoproductionandexportofgarment),whichis relevantforBandolerawhen she decidestoentertheVietnamesefabricsandgarmentmarket. We are looking for the opportunities for Bandolera to produce middletohigh quality garment in Vietnam.MainaspectsarewhetherfabricsareavailableinVietnam(homemade),investigatingwhich producersareabletoproducetherequiredgarmentofBandolera,andalsoenquirepracticalthings which are concerned with entering the Vietnamese market. The above mentioned leads to the followingproblemstatement: IsitinterestingforBandoleratoproducetheirgarmentinVietnam? Toanswerthisquestion,wedividedthesubjectin3mainresearchquestions(RQ).Eachofthemis dividedinseveralsubquestions(SQ)whichwewilltrytoanswerinthisinvestigation.Theresearch questionsarealsosummarizedinaconceptualmodelattheendofthisparagraph. RQ1 WhatistheavailabilityoffabricsinVietnam? This research question provides insight in the different kinds of fabrics (yarns, fabrics, accessory, embroidery) used for production of garment products of Bandolera. Bandolera has provided the researchtimeinformationaboutthecharacteristicsofthedifferentkindsofyarnsandfabricswhich areusedintheirproduction/fashionline.Alsoanoverviewisgivenaboutthefabricsthatareavailable inVietnam,whichofthesearehomemadeandwhichoftheseareimported.

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SQ1.1 WhatkindoffabricsdoesBandoleraingeneralusefortheproductionofhercollections? SQ1.2 WhatkindsoffabricsareavailableinVietnam(dividedbyhomemadefabricsandimported fabrics)? SQ1.3 Whatisthedeliverytimeofthehomemadeandimportedfabrics? SQ1.4 How can fabrics in Vietnam be characterized in terms of quality compared to surrounding exportingAsiancountries? RQ2 CanVietnamesegarmentproducersmeettheselectioncriteriaprovidedbyBandolera? ThisresearchquestionprovidesinsightintheVietnamesemarketoffabricsandgarmentproducers. AnextensivelistofVietnamesetextileandgarmentproducerswillbeputtogether.Achecklistisused to evaluate each producer whether it is an interesting company for Bandolera to do business with. This checklist uses grades to assess for example the capacity, quality, references and the level of Englishofthelocalproducer.ThecompanieswiththemostpotentialarevisitedinVietnamandagain evaluated with a checklist of criteria. Contact information of the visited companies is included in Appendix5.2ofthisreport. SQ2.1 Whichlocalproducersareadvisedtousbyourcontactpersons? SQ2.2 DoVietnamesegarmentproducershavethecapacity,machinery,experienceandcertificates toproduceforBandolera? SQ2.3 AreVietnamesegarmentproducersabletoproducefashionablegarmentproductssimilarto thecurrentBandoleracollection? SQ2.4 Areadditionalitemsandaccessories(suchasbuttonsandYKKzippers)availableinVietnam? SQ2.5 Whatistheproductiontimeandestimatedpriceofcounterandfittingsamples? SQ2.6 With which lead times and payment terms for complete orders do Vietnamese garment producersingeneralwork? RQ3 Which Vietnameselegislationsand logistic services influencethe export of garment toThe Netherlands? This research question provides insight into thepractical executionof the researchin the case that BandolerawantstodobusinesswithaVietnameseproducer. SQ3.1 WhatdoVietnameselegislationsspecifyabouttheexportofdifferent kindsofVietnamese garmentproductstotheEU? SQ3.2 Which local producers are available to facilitate in matters of logistics? For example, are WesterncompaniessuchasUPS/DHLrepresentedinVietnam? SQ3.4 WhatarethecostsanddeliverytimesoflogisticservicesfromVietnamtotheNetherlands? (Airmailandshipping?)

1.3

ConceptualModel

To mark the boundaries of our research, we created a conceptual model (see figure 1.1 below) in whichwesimplifytheVietnamesetextileandgarmentmarket.Theconceptualmodelrepresentsthe main concepts and their relationships which are of significance to Bandolera and about which we collectedinformation.Themodelcanbereadfromlefttoright,dividedinthreeparts.Startingatthe left side of the model, we begin our research with the availability of fabrics, yarn and accessories (RQ1). The second column focuses on the Vietnamese production lines (RQ2). The third column represents the subject of RQ3 where the influence of legislations and the availability of logistic servicesareattended.

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Figure1.1 Fabric Yarn Accessories

Conceptualmodel

Sample(s) Production lines Order

Airmail Bandolera Shipment

Legislation

Government

1.4

Reportsetup

The report is divided in 7 chapters, of which the first gives an introduction of the purpose of the research. In chapter 2 the general methodology and the specific manner of data collection is described. The 3rd chapter describes the availability and quality of fabrics and fabric production in Vietnam.Inchapter4wegiveadescriptionofthegeneralVietnamesegarmentindustrywithcurrent statisticsandfutureplans.Chapter5givesanoverviewoftherelevantcompanyvisits,comparedwith Bandolerascurrentsuppliersandsomemainconclusionsabouttheavailabilityofpotentialgarment producers in Vietnam. In the 6th chapter we give more information about logistics and legislation concerning the export of garment from Vietnam to The Netherlands. We end the report with conclusionsandrecommendationsforBandolerainchapter7.

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Chapter2 Methodology

2.1

Generalmethodology

The research was conducted in two phases; the desk research in the Netherlands and the field researchinVietnam.ThedeskresearchwasexecutedfromFebruary2008tillMay2008.Inthispartof the research information about the Vietnamese textile and garment industry was collected on the internet. A first selection of garment producers was made through the use of 5 different lists2 of garmentproducers.Theseproducerswereemailedandifnoresponsewasreceived,atelephonecall wasmadetogetincontactwiththecompanies.Throughthiswaywereachedoutto80companies,of which20respondedand17appointmentsweremade.Adifferentwaytogetmoreknowledgeabout the Vietnamese textile andgarment industry was tobuild relationships with useful contact persons andexperts.IntheNetherlands,wereceivedinformationfromMr.WestlandandMr.Vrieswijkabout theirexperiencewithexportandlogisticmattersfromVietnamtoTheNetherlands.Wealsoreceived information from Mr. Marsman about his experience with importing garment from Vietnam. Furthermorewefoundtwotheses,thoughwhichwereachedtwooldPhDstudents,oneinHCMCand oneinHanoi.WithbothcontactpersonswemadeappointmentsinVietnam.Wealsogotincontact withtheUniversityofHCMCandaDutchgarmentproducerthathasbeenactiveintheVietnamese garmentindustrysince1986.Indeskresearchphaseoftheresearchwewereabletogetintouchwith 5contactpersonsandexpertsinVietnamand3inTheNetherlands. Fromthe5thofMay2008tillthe06thofJune2008fieldresearchwasexecutedinHoChiMinhCity(3 weeks)andHanoi(2weeks).Inthispartoftheresearchdatawascollectedthroughinterviewswith garment producers and experts, and through company and factory visits of selected garment producers.Thefocuswasontheareasinornearbythecentersofbothcities,atleastwithin2hours driving. InHCMC this contains the provincesHo Chi Minh, Binh Duong(and Long An).In Hanoi this containedtheprovinceHanoiandsomesurroundingprovinces. Intotalwewereabletobuildrelationshipswith11contactpersonsandexpertswholeadusto17 possiblyinterestingcompanies.Ofthesewewereabletocontact11companies.Intotalwevisited17 companiesandinterviewed7contactpersonsorexperts.

2.2

Criteriaforselectionofnewgarmentproducers

Bandoleraprovidedtheresearchteamwithcriteriaselectionstosearchforpotentialsuppliers.These criteria are demands Bandolera sets for all her producers and which producers should be able to fulfill.Generalcriteriasuchasthecapacity,machinery,exportexperienceandcertificates(ISO)ofthe companywillgivedetailsaboutthecompanysbusiness.Theseareusuallydisplayedinthecompanys profile. Based on the information in these profiles, companies were selected for a company and factory visit. During these visits the criteria discussed below were checked. Below, the criteria and howtheseareevaluatedduringacompanyvisitarediscussed. Companyprofile Capacity:Themaximumcapacityofaproducerisnotveryimportant,itismoreimportantwhether theycanmake10.000piecespermonth(minimumrequirement).BecausethequantityofBandolera ordersliewithintherangeof3003.000pieces,itisimportantthatproducersareabletoproduce these small orders. The average per model is 1.500 pieces, which can be used to make price comparisons. Datacollection:Duringtheinterviewquestionsareaskedaboutthecapacitypermodel,thecapacity permonthoryearofthefactories,thesizeofcurrentorders,thenumberofworkersinthefactories andthenumberofproductionlines. Machinery:Thekindofmachinerythatisusedinthefactoryshowswhatskillsthecompanyhasinside and which kind of activities they have to outsource. For example, the presence of spinning lines, weaving looms, knitting machines, dyeing machines, sewing machines and embroidery machines showwhichkindoffabricandgarmentcanbemade.2

SeereferencesChapter8

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Datacollection:Whenvisitingthefactory,machinesarecheckedwhethertheyarefullyusedandif not, what explanation this has. It is a bad signal if there is, for example, a layer of dust on the machinery. Next to that it is important to check what kind of machinery they have and use. The brandsofthesemachinesarewrittendown. Export experience: The experience of Vietnamese companies with exporting to western countries (preferablytheyexporttotheEU,butifnottheyshouldatleastexporttotheUS).Producersthatdo notalreadyexportarenotpotential,becausethentheyarenotfamiliarwiththeprocessofexporting anddealingwithEnglishspeakingcustomers. Datacollection:Intheinterview,questionsareaskedforwhichcustomerstheyproduceandtowhich countriestheyexport.Whilewalkingaroundinthefactoryandlookingatsamplesintheshowroom, labels of garment are checked for familiar brands. The ability to work with foreign countries also becomesclearinhowwellthecommunicationisgoingduringtheinterview.Wecheckthisbyjudging thegradeofEnglishofthecontactpersonandwhetherornotitisnecessarytousealinguist ISOnorms:TheISO9001certificateisastandardtochecktheorganizationofthecompany,butthe use of it should not be overestimated. ISO 9001 is one of the standards in the ISO 9000 family of standardsforqualitymanagementsystems.ISO9000ismaintainedbytheInternationalOrganization for Standardization and is administered by accreditation and certification bodies. Some of the requirementsinISO9001include(1)asetofproceduresthatcoverallkeyprocessesinthebusiness, (2) monitoring processes to ensure they are effective, (3) keeping adequate records, (4) checking output for defects, with appropriate and corrective action where necessary, (5) regularly reviewing individual processes and the quality system itself for effectiveness, and (6) facilitating continual improvement. ISO 9001 certification does not guarantee that the company delivers products of superior(orevendecent)quality.Itjustcertifiesthatthecompanyengagesinternallyinpaperwork prescribedbythestandard.SomecompaniesusetheISO9001certificationasamarketingtool. Datacollection:Duringtheinterview,questionsareaskedaboutthepresenceofISO9000,ISO9001 andSA8000certificates.UsuallycertificateslikeISOarepubliclydisplayed. Fabrics Intheresearchwesearchforall kindoffabricsandgarment.Strongrequirementis thatproducers work with middletohigh quality fabrics and can supply these fabrics. The focus thus lies on good quality fabrics, not cheap ones. The processing of good fabrics is more complex. To have short deliverytimes,fabricsshouldbeproducedinVietnamandnotimportedfromChina.Becausedelivery timesareshort,fabricsshouldbeavailableinjustafewdays.Iffabrichastobeimported,ittakesat leastafewdaystocrosstheborder.BecauseBandoleraworkswithatightschedule,theystresson precise delivery dates and quick supply reorders. Bandolera starts her process of designing a new collectionwiththefabric.Thefabricisthefirstinputandwiththisfabrictheydesignanewmodel. ThereforeBandoleraissearchingforspecialfabricsofgoodto,preferably,highquality.Nexttothat,it isalsoveryimportantthatthequalityofthefabricsisstable.ThequalityBandoleraislookingforis middlepricelevel,notatthebudgetendandalsonotatthehighendpricelevel.Theproducershave tobeabletoshowwithwhatkindoffabrictheyareworkingwithandcanfind.Theyalmostnever havefabricsinstock.Bandoleramostlyusesitsowncolors,thereforefabricshavetobedyedspecially forBandolerasproduction. Datacollection:Whenvisitingthecompanies,questionswillbeaskedaboutwhichkindoffabricsthe companiesworkwithandwheretheygettherefabricsfrom.Whenaskingaboutthedeliverytimesof thefabrics,thefocusliesonfabricfromscratch(beforethedyeingtakesplace),becauseBandolera oftenusesherowndyeingcolors.Anotherimportantaspectoffabricsisthequality,thisisdifficultto check. Therefore we ask questions, take pieces of fabric and we also ask if quality of the fabrics is stable.Inalaterstadium,thesefabricscanberecheckedforqualitybyBandolera. Garment Bandoleraislookingfortheproductionofallkindsofproductgroups;tshirts,jeans,blouses,etc.The only garment product group Bandolera is not interested in is underwear. Every factory is usually specializedin oneproductgroup,forexampletheyareonlyspecializedinmakingjeans.Butifthey can make blazers, they usually also are able to produce blouses. If factories make many different productgroups,thenthesewillbeseparatedivisionswithadifferentmanageryouhavetodealwith.

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Bandolera collections are not simple, but mainly have detailed and complex designs. Some embroidery has to be done by hand. Therefore the products are very labor intense. Interesting is whetherVietnamesegarmentproducersarespecializedinonespecificgarmentgroupandifthisfits with the Bandolera style. Producers have to already be familiar with the kind of garment products thatBandoleraislookingfor,theyshouldnothavetodevelopit. Datacollection:Asmentionedmostcompaniesspecializeinonekindofproductgroup.Importantis whatkindofgarmentthecompanyisspecializedin,whichtheycanproduceandwhichtheyproduce at the moment. Furthermore questions are asked about which brands of yarn, interlining and shoulderpadstheyworkwith.AgoodbrandforyarnisCOATS.Agoodtooltojudgeacompanyisto check whether they understand the product specifications of Bandolera, if they have their own laundryandalsoiftheyareabletoprintdigitallysentpatterns.Whenvisitingthefactoryandjudging samplesfromtheshowroomabetterinsightcanbegivenofthequalityoflining,shoulderpadsand workmanship. Accessories Notonlythefabricsshouldbeavailable,butalsothezippersandthebuttons.Itisapriorrequirement that they work with YKK zippers. These are the only zippers which can be guaranteed to work correctly.ThebuttonsBandoleraisworkingwithvarieswiththeseason. Datacollection:Duringtheinterviewquestionsareaskedwithwhatkindofaccessoriesthecompany isworking.ZippershavetobefromthebrandYKK.Furthermoreitisimportanttoaskforasample bookofthebuttonsthecompanyisworkingwith.Usuallyeveryproducerhasitsownbrandandthere isnowellknownbrandofbuttons.Bestwouldbetogetasamplebookofbuttons,butthiscanalso becopied.Withblazersitisimportanttoaskwhatkindofshoulderpadstheyuse.Producersshould beabletoshowwhatkindofbuttons,shoulderpadsinterliningtheyworkwith.Forembroideryand printsweaskwhetherthecompanycanmakethemintheirownfactoriesoriftheyhavetooutsource them. During the visiting of the factory, we check with what kind of machines the embroidery and printsaremade. Samples For fitting of the garment from Asia, the samples are delivered/send by air. The experience of Bandolera with Asian suppliers is that they usually do not charge costs for the first sample. The making of the first sample (prototype) usually takes 21 days. Before a whole order is placed, Bandoleraasksfor50salesroomsamples.Afterthistheprotosalestakeplaceinabout2months. Datacollection:Whenvisitingthefactory,itshouldbepossibletoaskwhetheraBchoice(arejected product)canbegiventous.Themakingofthefirstsample(theprototype)usuallytakesabout21 days. This sample should be without costs. Before a whole order is placed, Bandolera asks for 50 salesroomsamples.Usuallythecostsofthesesamplesshouldbeabout150%oftheproductionprice. Furthermore we ask if they have a separate sample room and if yes, what is the capacity and the numberofemployeesworkingthere.Whenlookingatsamplesintheshowroomitisimportanttoask whethertheymadeaproductionorderofthesesamplesandifthistookplacerecently.Thesamples ofBandolerawillbedemonstratedattheendoftheinterview.Wewillusethesetoaskthemifthey canmakesimilargarmentandifyes,wealsoaskforanestimationoftheproductionprice. Deliverytimes TheleadtimeofBandolerasproductionorderhasamaximumof90days,withinwhichthegarment shouldbedeliveredinstockinRotterdam.Onaverageittakes2weeks(14days)toproducethefabric and4weeks(28days)toshipthegarment.Thatleaves48daystofinishthegarment.Ifthedelivery timecannotbehandled,theproductscanbeflowninbyairbutthequestionisifthisisaffordable. There are different prices in which deals and contracts can be made. Pricing on CMPT base only includes the price of total product, inclusive fabric, sewing thread, buttons and sewing of the garment.PricingonFOBbasemeansfreeonboard,thismeansthattheproducerwilldeliveruntilthe Vietnamese border. Bandolera requires C&F pricing, this includes freight until Bandoleras stock in Rotterdam. Therefore all logistics from producer until the Netherlands should be arranged by the supplier. In the Netherlands, Bandolera works with the logistics company Unique Logistics. They arrangealldistributionwithintheNetherlands.Datacollection:Differentquestionsareaskedabout thedeliverytimesduringtheinterview.Importantdeliverytimesarethedeliverytimesofthefabric,

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oftheprototypeandalsothatofthetotalproductionorder.Furthermoreweaskquestionsaboutthe manneroflogistics,pricingandexporting.TheseusuallyareexpressedinCMPT,FOBandC&Fprices.

2.3

DecisionTree

To give an answer to the main question whether it is interesting for Bandolera to produce their garment in Vietnam, we created a decision tree (see below). The tree is divided in 3 hierarchies, depictedwith3differentcolors.Togiveapositiveansweronthemainquestion,allquestionsinthe pink boxes below should be answered with a yes. From left to right these pink boxes relatively represent the research questions 13. The answers given on these questions depend on the informationfoundaboutthequestionsinthegreenboxesinthelowestlevelofthetree.

InternationalBusinessResearchVietnam2008 Bandolera 14

Figure2.1

DecisiontreeresearchBandoleraIsitinterestingforBandoleratoproducetheirgarmentinVietnam?

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Chapter3 TheVietnameseFabricMarket Asmentionedinchapter1,Bandoleraislookingforallkindsofhighqualityfabrics.Inthischapterwe giveinsightintheavailabilityoffabricsinVietnam.Inparagraph3.1westartwithanoverviewofthe current situation and trends in the Vietnamese fabric market. In paragraph 3.2 we will discuss the fabricproductionofthreemainfabricsinVietnam.Weendthechapterwithaconclusioninwhichwe giveanswertoresearchquestion1.

3.1

CurrentsituationandtrendsintheVietnamesefabricmarket

TheVietnamesetextileandgarmentindustryhaslongtimebeenunderinfluenceofthecommunistic system. Its current situation and the trends in the industry are influenced by their relatively late international start. As explained more clearly by Mr. Toan (owner of Yen Bien Company in Hanoi), Vietnamdidnotexportgarmentuntiltherewasanopenpolicyin1986.Thereforetheproductionof fabricsatthebeginningwaspoor.Aftertheopenpolicy,theproductionstartedtoincreasebitbybit. But the production is mainly for massive quantities, which are needed because the main reason for customerstogotoVietnamforproductionofgarmentisitslowpricing.Thesemassivequantitiesand theeconomicgrowthingeneralhavehelpedtheVietnamesegarmentindustrytoexpand(andkeep expanding)rapidly. CurrentlyVietnamstillreliesonsubstantialimportsoffibers,yarns,fabricsandgarmentaccessories. In2004thevalueofimportsoffibers,yarns,fabricsandgarmentaccessoriesreached4,601million U.S.dollars(USD),whichismorethandoublethe2,284millionUSDworthoftheseimportsin2000. Comparedtothe1,089millionUSDworthofimportsin2000,theimportsofcotton,yarnandfabrics tripledto3,722millionUSDin2006.Themostimportantimportitemisfabric,uponwhichVietnam's garment industry is heavily dependent. In 2006 fabric imports were worth 2.954 million USD, comparedwithonly761,3millionUSDin2000.Fabricimportsroseinvalueby288percentoverthe sixyear period. The Vietnamese government has a clear strategy of increasing the supply of domesticallyproducedinputssuchasrawcotton,yarns,fabricsandgarmentaccessories.Vietnams 3 overallaimistoreducetheimportcontenttolessthan25percentby2010 . Table3.1Importvalueperyear(USdollarsx1.000) Import/Year 2000 2004 2006 Fibers,Yarn,Fabricandaccessories 2.284 4.601 Cotton,yarnandfabrics 1.089 3.722 Fabrics 761.300 2.954.000 MachineryinvestmentsInvestmentinmodernmachineryhasincreasedinrecentyears.During2006 the industry added 171.720 new spindles and 5.840 openend rotors. This followed an extended period of expansion during the tenyear period of 19972006, when 840.132 spindles and 19.784 openend rotors were obtained. In the weaving sector the industry added 6.012 shuttle less looms during19972006,ofwhich1.357alonewereaddedtotheindustry'scapacityin2006followingthe additionof476loomsin2005.Thesefiguresaresummarizedintable3.2whichshowsthatVietnamis movingtowardsmoremodernmanufacturingtechnology. Table3.2Machineryinvestmentsperyear(USdollars) Investments/Year 19972006 2005 2006 Spindles 840.132 171.720 OpenendRotors 19.784 5.840 ShuttlelessLooms 6.012 476 1.357 The textile and clothing industry has also managed to attract a substantial amount of foreign investment. The largest foreign investor in the Vietnamese textile and clothing industry is Taiwan, followedbySouthKoreaandHongKong.However,lookingatthetotalforeigndirectinvestment(FDI)3

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in Vietnam, the textile and clothing industry only gets a very small piece of it. Most of the foreign investmentsaremadeinVietnamscrudeoilfieldsandtheVietnamesefinanceandbankingindustry4.

3.2

Overviewmaindomesticproductionoffabrics

The Vietnamese export of textiles and garment continues to grow. The Trade Information Center estimatesa1.7billionU.S.dollarsexportofVietnamesetextileandgarmentduringthefirst4months of2008.Thisisayearonyearriseofalmost39percent5.Inthemeantime,thegarmentsectorcopes withachronicshortageofmaterialsforitsproduction.Garmentexpertssaythattoearn7.7billion U.S.dollarsfromexportsin2007,thesectorspent5.3billionU.S.dollarsimportingrawmaterials6. OnthequestionwheretofindfabricsinVietnam,wereceivedtheanswerfromMr.Manning,owner ofapparelagency/supplierIndoPrideInternationalinHCMC.Heinformedusthatallfabricscanbe foundwithin2hoursdrivefromHCMC.Atmacroscale,mostfabricistobefoundinSouthVietnam. Differentsourceshaveindependentlyinformed usthat thefabricsavailableinVietnamaremainly cotton,followedbypolyesterandsilk(Mr.Toan,ownerofYenBienCompanyinHanoi). Belowwe willdiscusstheproductionandavailabilityofthesethreetypesoffabricsinVietnamseparately. Cotton Threeoutofthefouragentsandexpertsweinterviewed,informedusthatcottonisthemainfabric availableinVietnam.DuetotherapiddevelopmentoftheVietnamesegarmentsector,thedemand forcottonhasincreaseddrastically.However,accordingtothereportoftheVoiceofVietnam(VOV), Vietnamscottonacreagehasbeenreducedin2008to6,000haandonlyproduces2,600tonnes7.The garmentsectorsdemandisabout160,000tonnesofcottonandneedsupto200.000tonnesforits export plans. The current production of 2,600 tonnes therefore doesnt even meet more than 2 percentofthegarmentsectorsdemand.The20012010cottondevelopmentprogramhasbeenset uptoexpandthecottonacreageto150,000ha,whichshouldproduceapproximately80,000tonnes. Theseplanshavegreatdifficultyreachingtheirgoal.Thecottonacreagehasbeenshrinkingyearon year.TheDakLakprovinceforexample,hasalargeacreageundercottoncultivation intheCentral Highlands.However,theacreagehasdownsizedfrom16.000hain2002to9.000hain2003,4.000ha in 2004 and still decreased after 2004. The main cause of the continuing shrinkage in the cotton acreage is its low economic efficiency. Farmers are selecting other shortterm cash crops of higher economicvaluestogrow,suchasmaizeandsoybeansratherthancotton.Onaverage,cottongrowers need3.54millionVietnameseDong(VND)toinvestin1haofcottontoyieldatonofseedsandearn just3millionVND.Meanwhile,whentheygrowmaize,whichyields5tonnes/ha,theycanearnupto 10 million VND. In 2004 the Vietnam Cotton Company even proposed that the government should stop cultivating cotton in the floodprone Mekong River delta and adjust the cotton acreage from 80.000hato50.000haby2010.Despitethesedifficulties,theVietnameseTextileandGarmentGroup (VINATEX) set its mind to create 45.00050.000 new hectares of cotton growing area by 2010. To realizethisgoal,theydevelopedcottonplantationsinNinhThuan,BinhThuan,DakLak,QuangNgai andDongNaiprovinces8. Polyester/syntheticfibers According to different news articles, the polyester production in Vietnam is increasing and big investmentsaremade.Atpresent(2008),thesupplyofpolyesterfiberproducedbyforeigninvested and private factories nationwide only meets around 4 percent of the Vietnamese demand. The VINATEX and the Vietnam National Oil and Gas Group (PetroVietnam) recently have jointly poured over 125 million USD into the development of facilities for producing polyester fiber from petrochemical products at the Hai Phongbased Dinh Vu Industrial Park. They plan to meet 1520 percentofthenationaldemandforpolyesterfiberby2009and50percentby2012.TheVINATEXand4 5

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PetroVietnam have called for foreign investors to build three polyester fiber factories in southern DongNaiandBinhDuongprovinces. WereceivedmoreinformationabouttheproductionofpolyesterfromMr.Toan,ownerofYenBien Company in Hanoi. He told us that Taiwanese and Malaysian manufacturers produce polyester in Vietnambutonlyforreasonofexport.ThaiTuanisawellknownfabricproducerinVietnam(mainly for polyester), but their fabric is expensive in local terms. We visited the Thai Tuan Textile and GarmentCorporationatthe9thofMay2008.InVietnamthecompanyiswellknownforitsproduction ofpolyesterfabrics.Theyspecializeinproducingjacquard,plainfrompolyester,spandexandviscose, usingtechnologiestransferredfromJapanandtheEU.ThaiTuansuppliesavarietyoffabrics,ofwhich most is exported to surrounding Asian countries. Their capacity is15 million meters fabric per year with1.500workersemployed.Thedeliverytimeoftheirfabricsis5060daysbyship.Inhighpeaksin thebusinessthedeliverycantakeabout70days.WetookdifferentsampleswithustogiveBandolera insightintheVietnameselevelofquality. Silk TheVietnamesesilkproductionhasalonghistoryinwhichVietnamesesilkwasproducedlocallyfor royalfamiliesorpeopleofrank.VietnamsprovinceHaTay,wasknownasthebiggestandoldestsilk productioncentreinVietnam.ThemostpopularandbiggestvillagewasandstillisVanPhuc,10km southofthecentreofHanoi.VanPhucVillage,nowhas730householdswith1.600peopleearninga living by weaving silk. The village stocks a wide variety of silk products, and ships goods all over Vietnam, as well as exported overseas. Fabric made of 50% silk, 75% silk or 100% silk is priced depending on the quality of pattern and fabric thickness. Statistics show that 785 of all 1.343 householdsinVanPhuccommunetakepartinthecraft.Silksalesgenerateabout1.6millionUSDand make up 63% of the commune's economy each year. Given that each powerloom generates one weavingjob,thecraftvillagecancreatemorethan1.000jobseachyear9. WevisitedVanPhuconthe3rdofJune.Inthevillagewevisited2homeswherewewereshowedthe process of making silk and the silk market. Many shops sell garment, ties, and other accessories. Whiteyarn/silkcostsabout150.000VND(9USD)permeter.Theirproductcapacityisnothigh,they can i.e. make 4,5 meters (is 9 roles of yarn) per day. This concerns the thicker silk, which is more expensivebecausemorecocoonsandmorelaborareneededforproduction.Plusitsmoredifficultto putonarole.SilkfromtheVanPhucvillageisnotexportedforcommercialends.Cocoonsaresourced fromtheHaDongprovince:DanPhuong(HoaiDuc).ThereisasmallsilkproductioninVietnam,but stillinatraditionalwayandoflowquality.Japanesesilkhashigherqualitybecausetheyhavethinner yarnandbettermachines.Vietnamdoesnothavethemachineryandcapacitytoproducesilkforthe industrytoexport.Thesefindingswereinlinewithwhatwealreadyheardduringourinterviewwith Mr.Manning(ownerofapparelagency/supplierIndoPrideInternationalinHCMC).Hetoldusthat,in Vietnamyoucanfindsomesilk,butthismarketisverynarrow.TheaverageVietnamesedoesnot buysilk(toexpensive)andthesilkisnotasfineasthatfromJapanorevenasthatfromchina.

3.3

Conclusion

ThefirstresearchquestionconsiderstheavailabilityoffabricsinVietnam.Inthisconclusionwetryto answerthisquestionanditssubquestions.Subquestion1.1(WhatkindoffabricsdoesBandolerain generalusefortheproductionofhercollections?)hasbeendiscussedinchapter2.Bandoleradesign process starts with special fabrics of preferably high quality. Furthermore, it is important that the qualityofthefabricsisstable. The sub question1.2 discussed theavailability of fabrics in Vietnam.The question isWhat kind of fabricsareavailableinVietnam?Whichareproduceddomesticallyandwhichhavetobeimported? Concluding from the information as described in this chapter we can conclude that most common fabric found in Vietnam is cotton. There is some production of polyester and silk, but there is not much andthe quality is worse thanthat of competing, surrounding Asian countries.All fabrics that cant be bought from the local market are imported. This certainly counts for high quality fabrics9

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whichstillneedtobeimportedfromcountrieslikeThailand,Taiwan,etc.Althoughthegovernment planstoexpandtheproductionoffabricswithincentivestheproductionofcottonisdecreasingdue toloweconomicefficiency.Furthermore, thedemandforlowquality,highquantity fabricsismuch biggerthantherequestforspecialfabricsofgoodquality. Subquestion 1.3discussed thedeliverytimesofthefabrics.Informationaboutdeliverytimeswere receivedduringcompanyvisits.IngeneralthedeliverytimeoffabricsimportedfromChina,Taiwan, Korea,etcis410daysifthefabricisavailable.Whencompaniesalsoproducetheirownfabrics,the timetoproducethemisonaverage2128days.Wehavelittleinformationaboutthedeliverytimeof domesticallyproducedfabric,butthebestestimationisabout25daysifthefabricisavailable.The lastsubquestionfocusesonthecomparisonofthequalityoffabricsproducedinVietnam,compared to the surrounding exporting Asian countries. The information we conducted during our literature study as well as the information we received in Vietnam self points to a lowtomid level quality fabrics.ComparedtosurroundingAsiancountries,Vietnamesefabricsareoflesserquality.Intermsof quality,VietnamcannotcompetewithcountriessuchasChina,TaiwanorJapan.AlthoughVietnamis heavilyinvestinginitsfabricproductioncapacity,thesestillfacemanydifficultiesandthemarketis unstable.

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Chapter4 TheVietnameseGarmentIndustry With a good insight in the Vietnamese fabrics industry, this chapter focuses on the Vietnamese garment industry.In 4.1 wegive a general overview of the Vietnamese economy.This paragraph is followedbyafocusontheexportofthetextileandgarmentindustryin4.2.Inparagraph4.3wegive a rough overview of the textile and garment enterprises settled in Vietnam. Many enterprises are member of the VITAS: a nongovernmental umbrella association working in the field of textile and garmentindustryinVietnam.Theirrolesandfutureplanswillbedescribedinparagraphs4.4and4.5. In4.6ashortconclusionwillbegivenabouttheVietnamesegarmentindustry.

4.1

Economy

Overthelastmanyyears,Vietnamtextileandgarmentindustryhaswitnessedstrongdevelopment. Products made in Vietnam have penetrated to the world market, thus it was contributing to the economicdevelopmentofthecountry.Theexportvaluesincreasedrapidly,andthissectorisoneof the industries thatis for many consecutive years ranked veryhigh interms of key export products. Theindustrycountsnear2.000companieswhohaveintotalmorethan2millionworkers.Overmany years,theindustrycontinuouslyinvestedandchangedequipmentandtechnologytomeetthemarket demandandtoimproveitscompetiveness. IngeneraltherearetwomajorfactorswhichcontributetoVietnamsremarkableperformance.The firstisthetransitionofcentralplanningtoanopenmarketsystemandthesecondistheincreasing integration between regions and countries by becoming a member of the Association of Southeast Asian Nations (ASEAN), ASEAN Free Trade Area (AFTA) and the World Trade Organization (WTO). These2factorsarestronglyrelatedtoeachother.TheVietnamesetextileandgarmentindustrymade significant achievements, thanks to the above mentioned factors and the political stability. The industry employs a large labor force, with low labor cost. Thanks to the open door policy, the government of Vietnam took bold reform measures to promote the economic development of the country. In1995,VietnambecameamemberoftheAssociationofSoutheastAsianNations(ASEAN).Vietnam activelyparticipatedinallactivitiesofthisorganizationandstepbystepintegratedintotheregional andglobaleconomyforthebenefitofthecountry(andregion).On1January1996Vietnamofficially joined the Commonly Effective Preferential Tariff (CEPT) and implemented the AFTA with the roadmapoftenyears(19962006).Inthatperiodalltariffontextileandgarmentproductsisdown to05%only. Giventhecurrenttrendofeconomicglobalizationandintegrationofcountriesaroundtheworld,the competition is hard in gaining market share. Vietnam (and other developing countries) has to cope with many difficulties: it is currently less developed in terms of machinery and equipment, technology,andlaborskills.Otherdifficultyisthehighinflation(2007:16%10)andeconomicgrowth (2007:8,5%11).Besidesthis,laborcostsarebecomingmorecompetitive.Therearemanyworkersin this sector, so companies compete with each other to get (the best) workers. On the other side, it couldbepossiblethatinfuturelaborcostsaregettinglessimportantwhenthereismoredemandfor technicalskills.However,nowadayseconomiesofscaleplayanimportantroleinalloftheseactivities. VietnamsaccessiontotheWTOon11January2007bringssignificantopportunitiestothegarment exporters.Theyarenotrestrictedanymorebyexportquotas(quantityrestriction).HowevertheWTO brings opportunities to enter markets of all countries, and therefore competition among the exportersisbecomingtougher.

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4.2

Exportoftextileandgarment

In short, the textile and garment sector has made a remarkable contribution to the economic development of Vietnam. With nearly 2 million people involved, the industry contributes 8,2% to Vietnams industrial value, 5 billion USD or 16,5% to the countrys export turnover for the year of 2006.Intable4.1anoverviewofthetotaltextileandgarmentexportofVietnamisgiven. Table4.1TotalTextileandGarmentExport1997200612 Value(USDmillion) Growthrate(%) 1997 1.349 17,3 1998 1.351 0,1 1999 1.747 29,3 2000 1.892 8,3 2001 1.962 3,7 2002 2.752 40,3 2003 3.654 32,8 2004 4.386 20,0 2005 4.838 10,3 2006 5.834 20,6

Export growth since 2001 has been steep. It was particularly strong in 2003 at 33% and in 2002 at 40%,butgrowthslowedin2005tojust10%.Thiswasduemainlytothefactthatquotasrestricting importsfromotherAsiancountrieswereeliminatedatthebeginningoftheyear,butimportsfrom VietnamintotheUSAVietnam'slargestexportmarketwerestillsubjecttoquotas.USretailbuyers thereforeturnedtocountriessuchasChinaandIndiafortheirclothing.In2006,however,theUSA implementedsafeguardquotasonseveralcategoriesofChinesetextilesandclothing,withtheresult that buyers returned to Vietnam. As a result, Vietnamese exports soared by 20,6% to USD 5.834 million. AsmentionedbeforeVietnamjoinedtheWTOin2007,andtheUSAwasobligedtoremoveallquotas on textile and clothing imports from the country. The removal of quotas boosted US demand for Vietnameseclothing,especiallyforlowerendproducts. In Table 4.2 an overview is given of the export divided to several markets: EU, US, Japan, or other countries. Table4.2TextileandGarmentExport(bymarket)13 2006 2005 2004 2003 2002 EU 21% 16% 18% 18% US 52% 56% 57% 55% Japan 11% 13% 13% 14% Others 16% 15% 12% 13% TotalUSD(million) 5.834 4.838 4.836 3.654 2.752

VietnamplanstodoublethevalueofitstextileandgarmentexportsfromUSD4.8billionin2005to USD10billion,accordingtoanewreportbyTextilesIntelligence.Atthesametimeithopestodouble thenumberofpeopleworkingintheindustryfrom2millionto4millionworkers.Vietnamstextile andgarmentindustryplanstoachievethesetargetsbystreamliningproductionandtherebyreducing unitcoststo boostinternationalcompetitiveness.Onthe waytowardsachievingits2010objective, theindustryhassetanexporttargetfor2007ofUSD7billion14.

4.3

Overviewofcompanies

Asmentionedbeforethereareonaverage2.000textileandgarmentcompaniesinVietnam.Intable 4.3anoverviewisgivenofthecompaniessplitupbylocationsorbyproductcategories.Especiallyin the South of Vietnam (near HCMC) most enterprises (70%) are established. In the North are (near Hanoi) 10% of the companies located, and in the rest and Central Vietnam the other 20% are established.InAppendix4a mapoftheprovincesofVietnamisattached.InVietnamare50state owned companies, the others are limited liability companies, joint stock companies, and private companies(onaverage1.500).Theremainingenterprisesare(foreign)investmentprojectsandjoint ventures. VietnamTextileandApparelAssociation,Directory2006,p.9 VietnamTextileandApparelAssociation,QualityCredibility,2007 14 th th www.juststyle.com,4 June2008(articleof8 August2007)12 13

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Table4.3Numberofenterprises(updated2006)15 Bylocation Byproductcategories HoChiMinhCity 1090 Materialsandspinning 96 HanoiCity 157 Woven 382 DongNaiprovince 142 Nonwoven 6 BinhDuongprovince 116 Garment 1446 LongAnprovince 27 Accessories 35 DaNangcityandsurroundings 55 Services 265 Others 364 Themaindifferencebetweenstateownedcompaniesandprivatecompaniesisthedecisionmaking processandthesizeofthecompany.Instateownedcompaniesthedecisionmakingisratherslow. Thisisbecausethesecompaniesarereallybig,andthatthereismuchmorehierarchythaninprivate companies. In these enterprises there is more decentralization, like less hierarchy, faster decision makingprocess,andhavingthepossibilitytodecideonyourown. Many garment factories cooperate with another factory. They have subcontracts. Most factories cannot do every activity to finish a garment product. That is a main reason why companies have subcontractsandwhytheyaremoredependentofeachother.

4.4

TheVietnamTextileandApparelAssociation

The Vietnam Textile and Apparel Association (VITAS) is a nongovernmental umbrella association workinginthefieldoftextileandgarmentindustryinVietnam.Theyhave15branchesinVietnamand intotal635members.Thesemembersaccountfor70%ofthetotalcapacityoftheindustry. The role of VITAS is to promote business and investment cooperation as well as exchanging informationamongmembers,betweenmembers,andtheoutside.Furthermore,VITASrepresentsits members and consults the State and Government bodies that are relevant and comforting policies and mechanisms relating to the development of the Textile and Garment industry in Vietnam. The VITAS is representing the Vietnam textile and garment industry in international organizations and triestobeabridgeofcooperationbetweenthedomesticindustryandtheoutsideworld.TheVITAS alsosupportsforeigncompaniesinlookingforVietnamesetextileandgarmentproducers. OneofthebiggestmembersofVITASisTheVietnamTextileandGarmentGroup(VINATEX),whichis thebiggestgroupofcompaniesinthefieldoftextileandgarmentinVietnam.Ithasover90member companiesinVietnamwhichtogethercoveractivitiesfromspinning,knitting,weaving,anddyeingto finishing. The total labor force of the VINATEX is nearly 100.000 employees and another 35.000 employees work in jointventures with foreign and local partners. The production capacity of the VINATEX is 100.000 tons of spun yarn, 250 million square meters of fabrics, 350 million pieces of wovengarment,80millionpiecesofknitting,200millionpiecesofgarment,and15.000tonsofraw cotton(datafrom200616). The VITAS gives advice to the government, and together with the big stakeholders they set some plansforfuturetoincreasedevelopment,competition,andexport.Inthenextparagraphthoseplans aredescribed.

4.5

Futureplans

The industry needs government support to accelerate its development to shorten the gap to other large exporters in the world. Together with the VITAS the government made investment plans to increaseexports.Toachievethosegoalsthegovernmentcameupwithtwomainpolicyobjectives:(1) shift the focus in garment manufacturing from CMT (cut, make and trim) to FOB(free on board) production, and (2) increase the domestic content of garment production by investing in cotton production, and in spinning and weaving facilities. The government has also identified three other aimsfortheindustry:

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VietnamTextileandApparelAssociation,QualityCredibility,2007 VietnamTextileandApparelAssociation,QualityCredibility,2007

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1. 2.

3.

Theindustrymustbuildonitsexistingreputationforhighqualitybymovingfromthelower endofthemarkettothemidrangeandthehighendofthemarket. The industry must become more efficient in the sourcing of materials. This should be achievedby: increasingVietnamesefabricsproduction; implementingmoreefficientimportsourcingmethods; achievingfurtherverticalintegrationbyaddingupstreamcapacity. Thecompetencyandproductivityoftheindustrymustbeincreasedbyenhancingresearch, traininganddevelopment.

The government is planning to invest around USD 3 billion in developing the textile and garment sector during the runup to 2010. It is envisaged that USD 180 million will be spent on projects to expand raw material supplies, USD 2.27 billion on textile and dyeing projects, USD 443 million on garmentprojects,andUSD200millionontradecentersandpersonneltraining. Meanwhile,stateownedVINATEXplanstoinvestoverUSD1billionin24keyexpansionprojectsfrom 2006 to 2010. According to VINATEX, these projects aim to develop production and distribution systems,fashiondesignandinfrastructure. One sector targeted for expansion is raw cotton production. To process the additional cotton produced,VINATEXplanstoinvestUSD26,7millionintheconstructionoffivenewcottonprocessing millsduringthenexttwoyearsinabidtosatisfydemandforrawmaterialsfromthecountry'stextile producers. Further down the supply chain, VINATEX expects to produce over 400 million square metersoffabricperannumby2010,including270millionsquaremetersforexport. There are also projects of the industry with the goal to invest in upgrading the productivity. These specialprogramsareinlinewiththeindustrialstrategiesandtheWTOframework.Theseprograms include: Investmentinrawmaterialdevelopment; Investmentinfiberproduction; Investmentinclothweaving; Investmentinknittingdevelopment; Investmentindevelopingcolorprinting,dyeingandfinishing; Investmentinproducingsyntheticcloth; Investmentinproducingindustrialtextiles; Investmentinmechanicalindustryfortextileandgarment; Investmentinenvironmentprotectionandsocialresponsibility; Investmentinproducinggarmentaccessories. TheVietnamesetextileandgarmentsectorisrapidlycatchingupwithsurroundingcountriessuchas ChinaandTaiwan.Theinvestmentsofthegovernmentandthelowlaborcostsattractmanyforeign investors and customers. However, earlier investment plans of the Vietnamese government have often shown to go wrong or get mixed up at the implementation phase due to lack of funds or planning and communication problems. At the moment high inflations and economic growth are affectingtheVietnameseindustriesnegatively.AnotherproblemisthatmanyindustriesinVietnam aredevelopingfasterthantheinfrastructure,causinglogisticdifficulties.

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Chapter5 EvaluationofGarmentProducers InthischapterwewillgiveanoverviewofthevisitedgarmentproducersinVietnam.Asmentioned before we visited 17 companies both stateowned and private companies. In general stateowned companies have a very large production capacity and most of the times they only produce basic garment (with less details and embroidery). In general, small orders are more easily accepted by privatecompanieswhicharemoreflexibleinmakingdetailedgarment.Inthefirstparagraphwegive adescriptionofthevisitedcompanies.Inparagraph5.2weevaluatethecompaniespotentialitybased on 5 prior requirements. Because we did not have price estimations from all companies for all samples,wedidnottakethepricelevelinconsiderationinthisevaluation.Generalpricecomparisons are made in paragraph 5.3with Bandoleras current producers.Inparagraph 5.4 we shortly discuss theexcludedcompaniesandthereasonforrejection.Thechapterendswithageneralconclusionon theVietnamesegarmentmarket. 5.1 DescriptionofvisitedgarmentcompaniesandfactoriesOfeachgarmentproducerwegiveashortoverviewofthecompanyvisitinwhichwefirstdiscussa fewdetailsabouttheestablishmentofthecompany,theirexportexperience,thefabricstheywork with,andthekindofgarmentproductsthey(can)make.Afterthatwegiveashortsummaryofthe keydetailsofthecompany:capacity,certificates,customers,factorycapability,useofothermaterials anddeliverytimes.Weconcludeeverycompanydescriptionwiththepaymenttermsandminimum orderquantitytheyandaconclusion.Itmustbenoticedthatacoupleofcompaniesmisssomedetails onwhichtheywillbecomparedtoothers.Therearethreemainreasonswhythishappened.Firstly, there were some company visits during which the companies were not able to answer all of our questions.Anotherreasonisthatduringsomecompanyvisitstherewassimplynotimetoaskabout allcriteriaselections.Andlastofall,thereweresomeselectioncriteriaofBandolerathatwereceived afterwealreadyvisitedsomecompanies(i.e.minimumorderquantity). Complete reports of interviews/observations are on the attached DVD, including the directories of thispresentedreport. 1. AGTEX28COMPANY Agtex is a state owned company, established in 1975. In HCMC they have 6 factories, in total they have5.500employees.Ofthetotalproduction,60%isexportedtotheUS,20%totheEU,andabout 10%tootherAsiancountries. At Agtex they make fabrics and garment. Of the fabric production they have a spinning capacity of 100%cottoncombedyarn,T/Cyarn.Furthermore,theyhaveaweavingcapacitytomakehighquality wool,woolblend,T/C,T/Rand100%cottonfabric.Dyeingisdoneintheirownfabric,theydyehigh qualitywool,woolblend,T/C,T/R,100%cottonfabric.Theycanproducefinefabricsuntilaweightof 500 gram. Microfibers are imported from Thailand. 100% cotton yarn is produced in own factory, polyesterandwoolenyarnareimportedfromKorea.Thewashingofgarmentisoutsourced.Forthe garment,theyarespecializedinmakingjackets,trousers,ladysuitsandblazers. Capacity: mens shirts and ladies blouses (3 million pcs/per year), Trousers and pants (2 million pcs/peryear),Uniform(3millionsets/peryear),Mensandladiessuit(1 millionsets/peryear)andSportsuit(500.000sets/peryear Certificates: ISO9001:2000 Customers: United Colours of Beneton (pants), Alfred Dunner (jackets) and Dorthoty Perkins (jacketsforUSD$1012). Factory: spinning,weaving,dyeing,cutting,sewing,finishing Othermaterials: interlining(Korea);shoulderpads(UK);YKKandYBSzippers;buttonssourcedlocal Deliverytimes: micro fibers: 30 days; Interlining: 15 days; Shoulder pads: 20 days. Production of prototype takes 5 7 days; production of fitting sample 2 days; production lead timeis30days.

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TheymainlyworkwithFOBpricing.Minimumorderquantityis1.000pcs,minimumpercoloris1.000 metersoffabric. Conclusion:thisispossiblyapotentialcompanybecauseofthejacketsandsuitstheycanmake,but we have not seen very special fabrics or embroidery machines. Also this is a stateowned company whichusuallyguaranteesthattheyonlytakebigorders.Theyhavesentusfabricswhichwewillsend toBandoleraforfurtherjudgment. 2. CHOLIMEXGARMENTJOINTSTOCKCOMPANY Established in 1986, belongs for 50% to the government and is for 50% a joint stock company. In HCMC they have 2 factories, but they also have subcontracts with other factories. They have 500 workers in 1 factory, in total 700/800 workers. They export to Europe, (The Netherlands, France, Germany,Russia,Hungary,Bulgaria),theUS,CanadaandsomeAsiancountries. Mainfabricstheyworkwitharecottonanddenim.Theysourceitpartlylocal,andalsoimportfrom China. For high quality fabrics,the customerhasto supplythe fabric.For the garment,theymainly producepants,jeansandalsoshirts.Theyarespecializedinsewing(theyhave800sewingmachines). Capacity: 1line/400pcs/day Certificates: ISO9001:2000,SA8000 Factory: printing,weaving,sewing Othermaterials: YKKzippers Customers: Nike,Wallmart,Steve&Barrysdenim,raiderjeanco,Dickies,Adidas,Leesports, PierreCardin Deliverytimes: normally it takes 40 days to import fabric from China. Other information not available TheyusuallyworkwithCMPTprices,buttheyalsoworkwithFOBpricing.Minimumorderquantityof trousersis6.000pcs. Conclusion:thisisnotapotentialcompany,becausetheirminimumorderquantityistoohigh. 3. DONGPHUONGKNITTINGCOMPANY(DOPIMEX) DOPIMEX is a stateowned company, established in 1973. Now they have 2 factories: knitting, and dyeing&sewing.Theywillexpandthesewingfactorytohaveatotalof3factories.Currentnumberof employees is 700. They export to the US 40%; EU 30%: Germany (2 customers), England, Holland, Switzerland.Theyproducebothfabricsandgarment. Thefabricstheyproduceareofmiddlequality.MostoftheyarnsaresourcedinVietnam.Sometimes itisimportedfromKorea(higherquality).Thefabricstheyproduceareelasthan,spandex,cotton,and polyester.TheyimportMELANDYARNfromKorea. Main garment products are knitted products like tshirts, poloshirts, fleece, and uniforms. Printing, embroidery,washingareallsubcontracted.Accessoriesareboughtfromlocalmarket. Capacity: 3.000.000pcs/year(sewingcapacity) Certificates: ISO9001:2000 Customers: US:Target,JCPenney,C&L;Holland:TNT(poloshirts). Factory: cutting,dyeing,knitting,sewing Othermaterials: YKKzippers,MelandYarn Deliverytimes: MelandYarnimportfromKoreatakes20days.Makingprotosampletakes37days. First(sample)order:30days,nextorders4060daysperpart.With4colorsand6 sizesittakes90daysforthefirstpartoftheorder.Nextpartsoftheordertake60 days. Pricing is usually on FOB (80%), but can also be done on CMP (20%). They can also do on C&F/CIF (theydidthisbeforefortheUS).Minimumorderquantityis30.000pcs.Theythinkthatanorderof 5.000pcswith2or3colorsisverysmall.

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Conclusion: based on the above mentioned this is not a potential company because their minimum orderquantityistoohigh. 4. DUYTHINHCOMPANY,LTD Thiscompanyhasintotal3factoriesandabout750workers.TheheadofficeisinHCMC,buttheyalso haveofficesinShanghaiandThailand.Thiscompanysuppliesgarmenttothelocalmarketandexport it mainly to the US. They can weave the yarns to fabrics. Fabrics they use are cotton (20/40 gms), elasthanandpolyester.Theysourcethefabricslocal,butdoalsoimportthefabricsfromChinaand Thailand(higherquality).Mainproductwesawareshirts.Toplaceanordercustomershavetobook space in advance: 3 6 months before. This is because many buyers from China move their productionordertoVietnam.AtthemomenttheirfactorycapacityisoccupieduntilSeptember2008. Capacity: 500.000pcs/month(shirts) noISOnorms Certificates: Customers: mainlywarehouses,Vanity,2AmazeU Factory: weaving,cutting,sewing,finishing,printing Othermaterials: YKKzippers;buttonssourcedlocal Deliverytimes: 710 days to make counter sample.Production of completeorder depends on the quantity;306090days(fabric+CMPT+thread+button+printing+packing). Pricing is done on FOB terms. Their Payment term is T/T 30% deposit, 70% before shipment. The minimumorderquantityis3.000pcswithaminimumof1.000pcs/color. Conclusion: this company is only potential for production of simple shirts in larger quantities, we haventseenanydetailedfashionablegarment. 5. HOAMYTRADINGSERVICE&MANUFACTURECOMPANY,LTD. This company produces underwear for men and women and also underwear dresses. Main fabrics theyusefortheproductionofunderweariscottonandpolyester,andsometimessilk.Theyproduce underwear for the higher segment of the industry. The largest part of their products is sold in big warehousesinJapan.Someoftheirproductsareproducedforthelocalmarket.Theydonotexportto theUSortheEU. Thecapacityoftheirfactoryisabout20.000piecesperweek.Theyhaveabout50employeesworking in theirfactory.They alsohave their own cutting room and a design team ofabout 8 people. They mainlyimport their fabrics from Taiwan andforthe rest use some local fabric suppliers. The home madefabricsareofmoderateandnotalwaysstablequality. Conclusion:thisisnotapotentialcompany,becauseBandoleraisnotinterestedinunderwear. 6. MAILANANHGARMENTANDTRADINGCO.,LTD. Thisprivatecompanyisestablishedin1990.Theyhave2factoriesandabout700workersinfactory. Thevisitedfactoryhas5lines.Theotherhas10,ofwhich3linesarereservedforJapanandtheother 7areusedfortheUScustomer.MaiLanAnhexportstotheEU(30%),US(50%)andJapan(20%). Fabricstheyareworkingwitharedenim,whichisimportedfromChina,HongKongandsomefrom Taiwan(higherqualityandhigherprice).Theyproducemainlypantsforwomen:denimjeans.Theydo also khaki trousers. They only make garment. They can make denim jackets, but prefer pants. Embroideryandwashing/laundryisdonebysubcontractor. Capacity: 100.000pcs/month Certificates: noISOnorms Customers: C&A(Germany) Factory: cutting,sewing,spinning,knitting Othermaterials: YKK zippers; buttons imported from China; COATS; also many accessory sourced local Deliverytimes: basedon5.000pcsfabricdelivery(Taiwan/China)takes1month;iffabricinstore shipmenttakes9/10days

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PricingisonCMPT,FOBorC&F.Theminimumorderquantityis5.000pcs/model. Conclusion:thisisnotapotentialcompany,becausetheminimumorderquantityistoohigh. 7. MINHANHCORPORATION Companyestablishedin2001(renamedin2007).TheyexporttoUS(35%),Japan(20%),Taiwanand Europe (40%). In Europe they export to Spain, Paris, Italy, Belgium. They have 1 factory with 150 workersandtheyuse8workshopsoutsidetheirfactoryforextrasewingofgarment.Theprintingand embroideryisdonebysubcontractor. MostofthefabricsareboughtfromafabricsupplierinVietnam.SomeisimportedfromChinaand Taiwan.Theyonlyworkwithknittedfabric.NotfromKorea,becausedeliverytimesaretoohigh.Main usedfabricsarespandexandcotton.The(cotton)ribtheyuseis1x1and2x2.Theydonotworkwith polyesteranymore.Theymainlyproducesimple,basicgarmentlikepolosandshirts. Capacity: basicgarment200.000400.000pcs/month,nonbasicgarment100.000pcs/month Certificates: noISOnorms Customers: JCPenny,Polo,CanadaHouses Factory: cutting,sewingandfinishing Othermaterials: COATS(sourcedfromPhongPhu),Interliningsourcedlocal Deliverytimes: protosample1day;importoffabricsfromChinatakes2months;dyeingyarntakes 45days;requiredleadtimeis30days TheymostlyworkonFOBbase,buttheysaythatpricingonC&Fbaseisalsopossible. Conclusion:thisisnotapotentialcompanybecausetheydonothaveISOnormsanddonotproduce detailedclothes. 8. NHABEGARMENTJOINTSTOCKCOMPANY(NHABECO) Thejointstockcompanyisestablishedin1957.Theyhaveover12.000workersand27factories(15in HCMC,restinprovinceswhichare14hoursdrivingfromHCMC).Turnoverof2007was170million USD.TheyexporttoEU(3545%),US(4550%),Japan(15%)andlocalmarket.EUexportcountriesare Germany,FranceandUK.FabricsareimportedfromChina,Korea,Taiwan,Pakistan,Bangladeshand sometimesevenItaly.Theyalsosourcefabricslocal.However,thesearenotofhighquality,itisjust acceptable. Quality of the used fabrics is stable. Fabrics used are polyester (imported and local), polarfleece,cotton(localandimportedfromBangladesh,Pakistan)andknittedfabrics. NHA BE is mainly specialized in suits and pants for suits. They do not make small, detailed orders because they have to keep the machinery running and buy bigger quantities of fabric. They have a laundryfactory(washing)at1,5hoursdrivingfromHCMC. Capacity: 5millionpcsofshirts,jacketsandcoatsperyear;1millionsetsofladiesandmens suitperyear;5,5millionfashiongarmentperyear Certificates: ISO9001:2000,ISO9002 Customers: C&A,FifthAvenue,Zara,Tayroma,NewLook,C.K.,ColombiaSportswear,PerryEllis, Wallmart Factory: cutting,sewing,finishing,washing Othermaterials: COATS;Interlining:Kufner,Freudenberg,PicardieandPCC(localinterliningis used for simple not important parts of the garment); shoulderpads: HELSA, SANKEI (Japan)andlocal;YKK,YKKandYCCzippers;buttonsofRubyandsourcedlocalfrom manysuppliers Deliverytimes: importoffabricstakes50days;sampleleadtimeis1week;productleadtimeis30 45days. TheyonlydoFOBprices,butC&Fispossible.Minimumorderquantityis2.000pcs. Conclusion:thiscouldpossiblybeapotentialcompanyifBandoleraiswillingtodoanorderforsuitsor pantsforsuitswithouttoomanydetails.

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9. PHONGPHUCORPORATION PhongPhuCorporationisestablishedin1968.Itisastateownedcompanyandisoneofthebiggest textile companies in the industry with 5.000 workers, and nearly 80 million USD of annual sales turnover.Theyproduceyarns,towels,denimfabrics,garmentsandsewingthreadsofallkinds.They doonlycuttingandsewing. Main garment product is basic denim jeans (cotton denim, straight denim, twill, khaki, calico) with specializations in manufacturing denim with fashion values as slub, crosshatch and jacquard. They cannotdoalotofdetail,theydonotprintondenim. Since1988theyhaveajointventurewithCOATSPltofEngland.Theyalsohaveamodernspinning mill with the technologies of Muratec and Rieter. They say that the quality of fabric used is stable. Theydonotimportfabrics,deliverytimewhennotinstockis15days. Theyexportfor3040%toJapan,50%toUSand10%toothercountries.Exportingcountriesinthe EUareGermany,FranceandBelgium.Theyhaveexportexperienceof5years,buttheydonothave experiencewithexportingsmallfashionableorders.Infuturetheywanttoexpandandkeep12lines forfashionableorders. Capacity: 6millionjeans/year Certificates: ISO9001:2000,NFENISO9002:1994 Factory: spinning(3factories),weaving(2;1forfabricand1forfurrytowels),finishingand dyeing(1)andmakegarment(2).LocatedinHCMC,Hanoi,DanangandNhaTrang. Othermaterials: COATS;YKKzippers Customers: DKNY,Benneton,ENYU,OKD Deliverytimes: garment production 30 days if fabric available; 4560 days including fabric production;makingsample5days;afterapprovalittakes10daystostarttheorder whichtakes1530daystocutandsewonly;shipmenttoTheNetherlands25days ThepricingforexportisbasedonFOBandC&F.Minimumorderquantityis10.000or20.000. Conclusion: Phong Phu is a company which offers high quality products. However, their minimum orderrequirementistoohighforBandolera.Otherwiseitcouldhavebeenapotentialcompany. 10. PHUONGDONGGARMENTJOINTSTOCKCOMPANY Phuong Dong was established 10 years ago and is a member of the VINATEX. They have 4.000 workers.Intotaltheyhave8factories(3.500machines)andtheyhave1factoryforwomensfashion. Theymakepants,shirts,skirts,jacketsanddresses(smallorders).Wedidnotseethemproducingit all. Theyonlyworkwithwovenfabrics.Fabricisimported(60%)fromChina,Pakistan,Taiwan,Malaysia, Indonesia and Sweden. Fabrics which they source local (40%) is 100% cotton, 70% cotton/30% polyester,spandexandelasthan.Importedfabricsaremainlycotton,polyesterand100%nylon.They donotworkwithwoolandsilk.Aboutlinentheyarenotsure.FabricsuppliersareTungShinFabric Company, Wool Italy, and for washing (also stonewashing) they have subcontract with Do Thanh Company. Accessories and elastics are sourced local. For dyeing it is not clear, but is probably no activityofPhuongDongbecausetheyonlyproducegarment.ThelevelofEnglishspeakingwasbelow average,becausethemanagerwasnotavailable. Capacity: large Certificates; ISO9001:2000,SA8000 Factory: cutting,sewing,finishing.Printinginsideandsubcontract Othermaterials:COATS;Interlining:PCC,Kuffner,Chargeur;shoulderpads:local;YKKzippers Customers: Nike ACG, ProJob (Sweden), Columbia Sports, SJB Active, Chiros, Boys Scouts of America, Titanium, Nautica, PerryEllis, Grand Slam, Eddie Bauer, Worthington, LA Conduct(kids) Deliverytime: importing fabric from China to HCMC by sea 12 months; making proto sample 1 week,for50pcsthisis12weeks PricingisonC&M,CMT,FOBandC&F.Minimumorderquantityis3.000pcsand1.000pcs/color.

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Conclusion:thiscompanyisonlypotentialforbasicclothsorsuits 11. PROTRADEGARMENTCORPORATIONLTD. GarmentExportEnterprisesituatedintheBinhDuongProvince.Theyhavemanyfactoriesandeach hasitsownspecialization.Theyarespecializedinwovenproductsandfocusmainlyonjeans,casual pantsandshirts.Theyshowedverygoodsamples(brandnames:Marveus,Expressdesignstudio,Lei denimjeans)includingmanydetails(belt,prints,glitters). Theyhave2.500workers.Theyhaveexcellentworkconditionsandallnewemployeesgetatraining of35daysintheirowntraininginstitute. TheyexporttotheUS(30%:AMF,NFPolyester,Express,PacificSunwear).Exportingcountriesinthe EU(65%)areGermany,France,UK,andSweden.FabricsareimportedfromKorea,JapanandTaiwan. Theyonlyworkwithwovenfabricslikecotton,polyesteranddenim.Wesawbigstocksoffabric.They source a little local. Production of denim jeans (including embroidery) looks really good. Also lining and interlining are of good quality. We saw production of rib trousers (Abercrombie) and blouses (Marks&Spencer),mainlyformales.Alsoforwomen,butonlywhenitissimple/basic.Alsoshirtsare produced here. Protrade has a partnership with Alan lee Washing Company LTD. This washing companyis15minutesdrivingfromProtrade. Capacity: jeans 200.000 pcs/month; casual jeans 180.000 pcs/month; shirts 300.000 pcs/month Certificates: ISO9001:2000 Factory: cutting,sewing,finishing,designing,embroidery Othermaterials: YKKzippers,COATS Customers: Marks&Spencer,Decathlon,Tchibo,Refuge,Abercrombie,JCPenney,Kohls,Walt Disney,Sears,Haggar Deliverytimes: noinformationavailableatthemomentoftheinterview,becausetheinterviewwas partofthevisitoftheUniversityofHCMCatthiscompany PricingisbasedonFOB.TheydonothaveexperiencewithC&F,butmaybecandoinfuture.Thereis nominimumorderquantity(from100200pcsto1million).Theycanalsodosmallorders. Conclusion: this could be a potential company for Bandolera. They have good specialties in embroidery. 12. SAIGON3GARMENTJOINTSTOCKCOMPANY(GATEXIM) Saigon3isestablishedin1986.Fromthattimetheyfocusedonjacketsandsportswear,butnowtheir mainfocusisonmaking(denim)jeansand(khaki)pants.Theyhaveintotal6(sewing)factorieswith 33 sewing lines (2.600 machines). The factories are divided between different customers. Saigon 3 Garment Company has a fashion centre: they design garment for local market. They have 2.800 workersinfactory. TheyexporttoUSA40%,EU5%,Japan50%and5%toothers.ThereislessexporttoEuropebecause customersinEuropeordertoosmallandtoodetailedquantities.Theyexport10millionpcs/year.You havetoreserveproductionlinesfor6monthsoryouhavetoplaceorder6monthsinadvance. This company only makes garment, mainly jeans and pants. They only work with woven fabrics, no knittedfabrics.Theyprefertomakepantswithamaximumof5pockets.Otherwiseitistoodetailed. Theycandoembroidery,butoutside(subcontract). Fabricisimported(80%)fromJapan,HongKong,China,Taiwan(denim,khaki,canvas,poplin).Local (20%) they supply the same fabrics but with less quality. Local fabric suppliers in Vietnam are TCE, Pangnim, Choorgnaw (all Korean of origin) and Phong Phu (company we also visited). Most of the timefabricsareinstock. Capacity: 600.000pcs/month Certificates: ISO9001:2000 Factory: cutting,sewing,finishing Othermaterials: interlining:Kufner,BCC,Vilene(allimported)andsomelocal;COATS(deliveredby PhongPhu);YKKandHKKzippers;buttonssourcedfromHongKong(Kudhom,also locatedinItalyandSweden)

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Arizona,Esprit/EDC,Levis(formanyyears),DKNY,BoyFriendJeans,UniQLO,Style up, Emilio Shorts, Stockholm (Sweden), Columbia, C&A, Nike, JC Penney, Tropical Sportswear Deliverytimes: importfabricsfromChinaorTaiwantakes4daysbysea;Ifsupplierdoesnothave fabricsinstockittakesanextra2weeks;Productionleadtimefor20.000pcsis4 weeks; Making first sample 4 days (including washing subcontract); Making fittingsamples414days The pricing is only on CMP and FOB. C&F is possible in future when relationship is established. Minimum order quantity is 5.000 pcs per style/color. Smaller orders are acceptable when you also placeordersof>5.000pcs.UsuallytheordersofEuropearesmallerbecauseofthemanydetails. Conclusion: this can be a potential company for Bandolera, but only for pants without too many details.ChanceexiststhattheydontwanttoproduceforBandolera,becausetheordersaretoosmall. 13. THANHCONGTEXTILEGARMENTJSCOMPANY Thiscompanyisestablishedin1976.ThanhCongproducesfabricsandgarment.Intotaltheyhave7 factories and 5.500 workers. Their recent turnover is USD 65 million/year. They export to the US (60%),EU(15%)andJapan(25%).Theyexportmainlyshirts(likeEDC/Esprit),knitteduniforms.They alsosellatlocalmarket. Theyusemanyfabrics:combedcotton,polyester,viscose,TC/CVC,polyester/viscoseyarn,OE100% cottonyarn,andslubyarnforgivingspecialeffectsonfabrics.Theweightofthefabricstheyproduce isfrom2060gms.Thisisthefinesttheycando.Theycanmakewovenfabricsandknittedfabrics,but cannotmakewovengarmentbecausetheydonothavethemachineryforthat.Fabricstheyimport aremostlyfromCOOLMARK(Taiwan),othersaresourcedlocal.Theysaythatqualityofthefabricsis stable.AccordingtoMr.DuyThaiofHCMCUniversitythequalityoffabricsismidlevel.Theknitted fabricforEDCisimportedfromHongKong. Printingandwashingissubcontracted.Howevertheycanonlydosimpledesignprinting.Buttonsare importedanddyedintheirowncompany.Accessoriesaresourcedatthelocalmarket.Garmentthey make are mainly shirts. They cannot make jeans. They only can make garment of knitted fabrics. Cottonisthemainfabricforgarment. Capacity: large Certificates: ISO9001:2000,SA8000 Factory: spinning lines, weaving looms, knitting machines, dyeing, sewing, finishing, embroidery Othermaterials: YKKzippers;Interlining:Freudenberg,Vilene; Customers: EU: EDC, Melcosa, Marubeni, Visconti, H.T. Hughes, Canada House; US: Columbia, EddieBauer,Haggar,JCPenney Deliverytimes: iffabricnotinstockatsupplierdeliverytimeis60days;dyeingtakes3days;proto types 3 days if fabric is available (capacity sample room 300 pcs/month); product lead time 45 days till shipment (based on 1.00020.000 pcs); Shipment 30 days (costsareUSD2.500) PricingismostlyonFOB,butC&Fisalsopossible.Minimumorderquantityis1.000pcs/color. Conclusion: this company is interestingforshirts like EDC/Esprit,but we haventseen anything with manydetailsandaccordingtoourcontactpersonqualityofthefabricsismidlevel. 14. THANGLOIINTERNATIONALGARMENTJSC(VIGATEXCO) This company is established in 1959.They are