Manufacturing in China and Vietnam
A Perspective by Scott Ellyson, CEO, East West Manufacturing
Those of us who work in China have seen numerous changes in just the past decadeas the country evolves from an agrarian society to an industrial one. The speed of thetransformation has been astonishing, and the process is far from complete. Now Vietnamis emerging as a player in the global manufacturing market, although there are still anumber of challenges to be met when working in this country.
Ten years ago, Jeff Sweeney and I co-founded East West Manufacturing(www.ewmfg.com) in Atlanta to bring U.S.-based companies both the cost-savings andspeed to market offered by Asian manufacturing, along with the quality control Westerncompanies demand. We began by forging partnerships with a number of manufacturingfacilities in China, Thailand, Vietnam, Taiwan and India, and later, we purchasedfactories for our team to operate in Changzhou, China and Ho Chi Minh City, Vietnam.
Looking back over a decade, it’s interesting to compare the China of the mid1990’sto the China of today. Back then, China’s laborers had a well-deserved reputation fortheir strong work ethic, and the costs of manufacturing were among the lowest in theworld. However, the country’s poor infrastructure, low-tech suppliers and inexperiencewith quality control posed difficult challenges. Companies could manufacture productsquickly and cheaply in China, but distribution was difficult and product quality wasalmost never up to U.S. standards.
Fast forward to 2011. In a remarkably short time, China has built modern freeways,high-speed trains, subway systems and five-star hotels to host business travelers fromaround the globe. There are high-tech suppliers in place who actively promote theircapabilities internationally. While the laborers still work extremely hard, there is a newemphasis on work/life balance along with a new focus on product quality. The trade-off?The cost-savings of manufacturing in China versus domestic manufacturing have beencut in half.
Chinese leaders must continue to address the country’s population size, incomedisparity, inflation and corruption. However, the Chinese can be proud of their country’smomentum, adaptability and far-sighted government. It’s important to note theinnovation coming out of China where the average lead time to obtain a patent is 2-3years, versus the 8-9 year timeframe in the U.S.
As for Vietnam, the country is still in the early stages of its industrial evolution. Whilelabor costs are very low – approximately one-fourth what they are in China – the country suffers from poor infrastructure and supplier base, a lack of talented managementand engineers and an abundance of red tape. However, Vietnam can be a successfullocation for some manufacturing as long as companies import their own management andtechnical expertise.
Moving forward Asian countries will develop special areas of manufacturing expertise, asChina is already doing with high tech equipment. Vietnam will follow the example of itsneighbor to the north and continue to develop the infrastructure and capabilities neededto compete, probably at the expense of some of the labor cost savings. As for the U.S.,our government must incentivize investment and reduce corporate taxes so our businessescan compete successfully worldwide.
Years ago, offshore manufacturing was only feasible for the largest of firms, but nowsmaller companies are finding value in manufacturing all or part of their products in Asiawithout sacrificing quality. For U.S. based companies, the cost-savings allow products tobe more competitively priced, resulting in greater market share. As China and Vietnam,along with other Asian countries, continue to develop manufacturing expertise, theirefforts can spur us to revitalize America’s entrepreneurial leadership so we can maintainour historic role as the pace setter in the new global manufacturing market.
About East West ManufacturingFounded in Atlanta in 2001, East West Manufacturing is a recognized, respected expertin the planning, design and implementation of offshore product manufacturing fororiginal equipment manufacturers and distributors. The company’s transparent supplychain, on-site quality control and logistics systems reduce the risks and complexities ofoffshore manufacturing. Working primarily in China and Vietnam, EW draws on itsexpertise to act as a customer advocate throughout the manufacturing and supply chainprocess, including negotiating contracts, providing translation services and navigatingcultural differences. Proven systems give East West Manufacturing customers thespeed to market, quality and cost advantages essential to succeed in today’s competitivemarkets. For more information, visit www.ewmfg.com.