Vietnam-based garment-makers should embrace technology-driven automation to address the new realities of accelerating wage growth and the global shift towards placing smaller orders.
Vietnam has been among the leaders in Asia in terms of wage growth, with real wages expected to grow 4.7% this year, according to a recent annual survey conducted by human resources company Korn Ferry.
At the same time, smaller quantity orders, targeted on multiple seasons and hence many deliveries are generating demand for ever-shrinking lead times and low costs.
“The economy in Vietnam is growing fast, putting pressure on conventionally low wage industries like apparel manufacturing to increase the wages as well,” said Saurav Ujjain, business head (south-east Asia) at India-based technology company ThreadSol.
Speaking to just-style, he added: “The trend to smaller orders is putting additional strain on the manufacturer bottom-lines, and the only way out of this is to shift towards technology-driven automation to lessen the workload while ensuring repetitive and quality output.”
ThreadSol claims its software solutions can help manufacturers boost their profit margins by up to 50%, with Hong Kong-based Luen Thai’s Ocean Sky, northern Vietnam’s Duc Hanh Garment JSC, Fashion Garments (near Ho Chi Minh City), and Saitex (from the same region), already on the list of Vietnam-based clients.
The company’s IntelloCut software, for example, generates an optimised cutplan from millions of possible combinations by grouping similar widths, shades and shrinkages, to boost quality and profitability.
According to Ujjain, technology and automation adoption in Vietnamese-owned and managed clothing factories lag behind their foreign-owned and managed counterparts – which he attributes to a comparatively longer hierarchy and conservative approach to large-scale changes.
This delay could prevent Vietnamese manufacturers from making the most of the upcoming Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP), of which Vietnam is member, and which follows Hanoi’s striking of a free trade deal with the European Union.
For instance, while the CPTPP will open the Australian market more for Vietnamese garments through reduced tariffs, growth in orders could be hindered as Australian consumers’ preference for online orders clashes with Vietnam’s inability to swiftly produce small quantity orders amid technological constraints.
Australian brands and retailers often score many sales online, so they usually order in small quantities to avoid a large inventory, according to Tr?n Van Quy?n, a representative of Woolmark Company of Australia in Vietnam, as quoted by newspaper Vietnam News.
By Jens Kastner