Vietnam: the rising star

Reading through the history of Vietnam gives one enormous respect for its people’s resilience. 

The recent decades of peace and prosperity have brought out another one of their great qualities: business acumen, as XAct Solutions principal Byron Patching writes.

When Vietnamese Party General Secretary Nguyen Van Linh triggered the policy of doi moi, or renovation, in 1986, it signalled an opening of Vietnam’s commercial future. As recognition of the openness of the new policy, US President Bill Clinton lifted the US trade embargo in 1994 and Vietnam entered the global marketplace.

The transformation brought out in the Vietnamese people, apart from their diligent and conscientious work ethic, astounding technical ability and astute business acumen, resulting in spectacular economic growth.

From a low base of just over $40 billion in 2004, the GDP in 2017 was over $220 billion. GDP in Vietnam expanded by 7.08 per cent in 2018, up from 6.81 per cent in the previous year. According to the World Bank, it is expected to moderate to 6.6 per cent in 2019 and 6.5 per cent in 2020.

This phenomenal growth led former Goldman Sachs chief economist Jim O’Neill to nominate Vietnam amongst the Next Eleven countries: eleven nations, along with the BRICS countries that O’Neill coined, which have a high potential of becoming the world’s largest economies in the 21st century.

Vietnam’s successful and ongoing transition from a ­centrally-controlled economy with a fragmented transport and distribution network to an emerging market economy with a connected and competitive ­supply chain has many obvious benefits, and a number of less obvious ones as well. These cover all aspects of modern Vietnamese society, from the economy to society, education, healthcare, and the environment.

Consumer demand for value-added goods is most definitely on the rise, but this demand, coupled with Vietnam’s challenging topography, is driving the need for a world-class supply chain.

Due to rapid ­retail expansion in Vietnam, suppliers that once delivered to two or three stores now need to deliver to hundreds of stores, with more and more large-format stores opening every year.

The system increasingly needs to move from store delivery to distribution centre delivery. For an everyday example, take toothpaste: in developed countries, businesses have evolved over many decades from selling such products from the suppliers direct to the stores, to selling it via centralised distribution centres.

In other words, businesses in developed countries have refined their network design through years of maturation to a system that now affords significant gains over potential competitors and creates substantial cost-savings and revenue opportunities.

There is an exciting opportunity in Vietnam to learn from these evolutionary steps to quickly move to a centralised system of supply chain and to do so very efficiently. These efficiencies improve profitability and reduce inventory – creating savings that can be passed on to customers and promote competition.

World-class networks mean greater access to goods throughout the country, rather than focusing on Vietnam’s major centres. This takes growth pressure off bigger cities, creating greater economic opportunities in regional areas.

Vietnam has an opportunity to leapfrog developed markets’ supply chain evolution and head directly to world’s best practice.

vietnam the rising star

Retail is booming but tread carefully

Propelled by favourable domestic and external factors, Vietnam’s economy posted its strongest first-quarter growth in 10 years. GDP expanded by 6.79 per cent on-year during the first quarter of 2019.

The expansion was led by strong processing and manufacturing growth of 12.35 per cent, reflecting strong external demand that lifted ­electronics and other manufacturing exports.

 

With the rapidly-growing middle class and resulting increase in overall incomes, retail trade has been growing unfailingly at over 8 per cent every year, whilst Australia and most of the developed world is struggling to get over one single per cent. The resulting demand for an efficient supply chain is not difficult to appreciate, but there is a warning: tread carefully.

The success of any supply chain strategy in Vietnam depends on achieving a deep understanding of local nuances, commercial strategies, and governmental policy-setting objectives.

An interesting example of such cultural nuances is the Tet Festival, a “moveable feast” marking the Lunar New Year. In the lead-up to Tet, suppliers are under critical pressure to supply culturally-specific products to the right place at the right time, requiring extensive supply planning and first-class supply chain execution.

“It is particularly challenging to service the retail industry during the Tet period, everyone is very busy and logistics infrastructure is under intense pressure at this time,” said Bui Quang Vinh, logistics director of Saigon Co.op, one of Vietnam’s largest supermarket networks.

Another example of the difference that local knowledge can make to effective distribution network design is that in Ho Chi Minh City, curfews are in operation at certain times to limit truck shipments on the city’s famously congested roads; a key factor in determining optimal delivery times.

Other local knowledge ­examples include understanding the nuances and capacities of Vietnamese distribution ­centres and trucks, and loading and unloading practices.

A world-class understanding of every aspect of supply chain design and optimisation is ­critical and must be coupled with a deep understanding of local nuances, commercial strategies, and governmental policy-setting objectives.

The engagement of local professionals in a supply chain has been made easier by the availability of trained and experienced supply chain leaders.

The government and leading businesses have determined to develop supply chain expertise by training up Vietnamese practitioners to run all food, fuel, and other essential ­merchandise distribution.

vietnam the rising star

The future is bright

The robust economic growth of the past decades rightly gives the Vietnamese people enduring hope for the future of their country.

Thousands of emigrants are moving back to Vietnam to live and work. Professionals young and old are moving to Vietnam to do business, invest in property, and resettle. John Pennington, writing in A Brain Drain in Reverse for ASEAN Today, said, “[Emigrant] talent and money is propelling the Vietnamese startup scene. They head up more than half of the startups funded by venture capital firm 500 Startups Vietnam. Additionally, as many as 3,000 projects have received investment from Vietnamese living abroad.”

“Those who are coming into the country fall into three groups,” the article continues. “Some act as bridges between Western companies and Vietnam, helping overseas businesses expand into new Vietnamese markets. Others are entrepreneurs building from the ground up, and then there are those who are qualified professionals taking on key positions in local businesses.”

Minh Nhat Ngo was born in Vietnam, educated in the UK, and has now returned to work as an analyst in XAct Solutions’ Hanoi office. “Vietnam is now growing so fast and I simply don’t want to miss out on what is happening,” said Minh.

When you combine the ­returning emigres with the ­ambitious, increasingly well-educated and talented locals, the booming economy and strongly growing retail trade, it is easy to see Vietnam’s ­attraction in business. VIR

Byron Patching

 
 

Other News

.
Expat brings people together while keeping a distance
Expat brings people together while keeping a distance
FEATUREicon  16/04/2020 

As social distancing continues to take its toll on residents obliging by the rules, one expat English teacher has decided to use the time to good effect.

Coronavirus pandemic: Tracking the global outbreak
Coronavirus pandemic: Tracking the global outbreak
FEATUREicon  16/04/2020 

Key maps and charts explaining how the respiratory virus has spread around the world and how it is being dealt with.

Architect graduate looks small to go big
Architect graduate looks small to go big
FEATUREicon  16/04/2020 

While studying at university to become an architect, Ha An, owner and chief creative figure of the Hanoi-based Veene Studio, probably dreamed of designing grand houses and epic constructions.

Organic mushroom grower finding stable customers
Organic mushroom grower finding stable customers
FEATUREicon  14/04/2020 

Nguyen Anh Vo, CEO of Nấm Xanh (Green Mushroom) Farm, has applied his school knowledge to find a stable consumption market. 

Service providers in Vietnam quickly adapt to COVID-19 pandemic
Service providers in Vietnam quickly adapt to COVID-19 pandemic
FEATUREicon  14/04/2020 

Virtual kitchen, tech fitness at home and others are among the business models going online during the stay-at-home period.

Shifting to medical face masks not very fruitful on long term
Shifting to medical face masks not very fruitful on long term
FEATUREicon  14/04/2020 

Switching to face mask production may not yield long-term benefits as the COVID-19 pandemic should last no more than two years based on previous epidemics.

EVFTA remains guiding light in mitigating trade depletion
EVFTA remains guiding light in mitigating trade depletion
FEATUREicon  13/04/2020 

The European Union entry ban on its wide borders comes in a crucial year for Vietnamese exporters to the EU, leading to the EU-Vietnam Free Trade Agreement to become ever more important for both sides in the year to come.    

World watches as China moves ahead on economic chessboard
World watches as China moves ahead on economic chessboard
FEATUREicon  13/04/2020 

China is beginning to offer a glimpse into the near future for some countries, as the economic superpower tries to pick itself back up slowly following major lockdowns in the wake of the coronavirus crisis.

Grounds for new hope to unfreeze FDI process
Grounds for new hope to unfreeze FDI process
FEATUREicon  14/04/2020 

Vietnam’s foreign investment picture in the first quarter of 2020 showed the hardest downtrend in over a decade since the 2003 SARS pandemic, as the current coronavirus continues to thrash manufacturing, real estate, retail, services, and tourism.

Vietnam stands to win as “China+1” gains traction
Vietnam stands to win as “China+1” gains traction
FEATUREicon  14/04/2020 

Changes in the global supply chain are taking place due to the virus outbreak, prompting a mounting number of foreign manufacturers to speed up their relocation from China to neighbouring countries including Vietnam.

Invigorating investors with PPP draft
Invigorating investors with PPP draft
FEATUREicon  14/04/2020 

The Ministry of Planning and Investment has released the latest draft Law on Public-Private Partnerships in a move to make a fresh shift towards a specific and consolidated framework for bankable projects.

One-legged professional martial artist inspires students
One-legged professional martial artist inspires students
FEATUREicon  12/04/2020 

If you spend the morning exercising in Tao Dan Park in the centre of HCM City, you may come across an unusual yet inspiring sight: a fit Vietnamese man with one leg practising martial arts. 

Women can realise the dream to fly
Women can realise the dream to fly
FEATUREicon  13/04/2020 

Meeting Ha Thu Huong, very few people would think the pretty woman with a gentle voice is the co-pilot on a Vietnam Airlines Airbus A321. Her energetic style and friendly manner both add to the equation.

Women with strong wills
Women with strong wills
FEATUREicon  14/04/2020 

They are beautiful, emotional and vulnerable like other women. Yet their strong determination and bravery have made them special, and given the assets they need to fulfill heavy tasks usually associated with men.

Pre-teen novelist fires up Vietnam's literature scene
Pre-teen novelist fires up Vietnam's literature scene
FEATUREicon  15/04/2020 

The local literature scene has become more vibrant now that an 11-year-old student has published his fictional novel Người Sao Chổi (Comet Man).

Thu Nhi to become Vietnam’s first world boxing champion
Thu Nhi to become Vietnam’s first world boxing champion
FEATUREicon  11/04/2020 

Nguyen Thi Thu Nhi bounces back and forth, landing punches at will. She bobs and weaves to avoid her opponent, and then finishes up with running and skipping.

V.League 1's top strikers over last 20 years
V.League 1's top strikers over last 20 years
FEATUREicon  11/04/2020 

During its 20-year history, some top strikers have graced the V.League 1 with their talents, with many going on to win the Golden Boot.

Six moments of genius from football star Quang Hai
Six moments of genius from football star Quang Hai
FEATUREicon  08/04/2020 

With the COVID-19 pandemic taking football off our screens, what better time for a reminder of some of his best pieces of genius?

Artist brightens sick kids' days with paintings
Artist brightens sick kids' days with paintings
FEATUREicon  11/04/2020 

Many people in the central province of Quang Tri may know Truong Dinh Dung as a charitable man, but they may not know he's also an accomplished artist.

Tech retailers manage to survive COVID-19 pandemic
Tech retailers manage to survive COVID-19 pandemic
FEATUREicon  08/04/2020 

Many retailers in phone and electronics segments focus on developing online channels to survive the coronavirus pandemic.

 
 
 
Leave your comment on an article

OR QUICK LOGIN