Ho Chi Minh City, Vietnam — Ho Chi Minh City, Vietnam— Vietnam has a lot to offer in case goods, but as a relatively new supplier it has yet to achieve the comfort level with U.S. buyers enjoyed by longtime source countries such as China.
Americans are familiar with the management at some Vietnamese factories run by foreigners from other furniture-producing countries like Taiwan and China.
As many of those plants scramble to take care of existing customers, factories managed by homegrown Vietnamese talent are emerging as a key to the country's long-term success as an exporter. Vietnamese-run plants are working to improve in several areas, including communication with customers, development of midlevel managers, and quality control.
Such issues are particularly important among makers of outdoor furniture who want to take their experience in solid wood into the indoor category.
Rob Parrish, managing director of SGS, a product testing and certification company working here, said, "Buyers are going to need to work with factories quite closely to define what they're asking for, but once they get it set, (the factories) can deliver."
Chris Freund, managing director of Mekong Capital, an investment firm backing a couple of plant expansions targeting the U.S. market, has identified around 20 Vietnamese plants doing at least $5 million in sales that have strong potential in the U.S. furniture market.
"There's a big disparity among plants in terms of product, management systems and inventory management, and some are more proactive than others," he said. "The main thing we look for in selecting a company is their willingness to commit to continuous improvement."
Needed: Skilled managers
While attention to detail by workers is as high or higher than China or any Asian source country, he said, China has a far deeper pool of skilled managers. But that situation is improving in Vietnam.
"Some are more committed than others to things like team-leader training," Freund said. "That's the biggest disadvantage — team leaders and line management. The situation's improving but they're starting from farther behind here."
Theodore Alexander, which has been manufacturing here since 1996, says it has successfully developed Vietnamese line management, building from a core group of people it brought from the Philippines. The manager of the huge veneer room in the company's Saigon Fine Furniture plant, for instance, is Vietnamese.
"People shouldn't be afraid of encouraging local management," said Randy Austin, Theodore Alexander group president. "It's been a question of time, experience and willingness on our part to develop that."
While more Vietnamese are studying English, the language barrier here remains high.
"You still have Vietnamese manufacturers who want to do business in America that don't have a Web site in English," noted Jeff Dilley, president of Exsero Group, a sourcing agent and consultant to Vietnam's Ministry of Trade.
Vietnam also needs to establish more sources for alternative materials, said Brendon Xu, China operations manager for Accent Furniture, a U.S. importer of midpriced furniture.
"There are certain factories that are possible for us, but compared to China, the industry isn't as far along," he said. "We're doing a lot more mixed media — leather, woven elements, metal — and we can't seem to get that as much here.... They do have good equipment here, and nice new factories."
As demand builds, suppliers of alternative materials are likely to emerge, the same way veneer and coatings companies have come to Vietnam to serve the demand for wood case goods in the wake of massive plant expansions.
Manufacturers here must pay particular attention to moisture control, since the climate is very humid. Many plants are making progress, with kiln driers and "dry" rooms where product is kept during manufacturing.
Infrastructure improving
The national government also is making progress with another issue, major improvements in roads and ports.
"The government infrastructure is catering to what's going on in manufacturing," said Jason Reid, product development supervisor for U.S. importer Sarreid. "Everywhere I go I see new roads built for tractor-trailers and container trucks."
The U.S. government's imposition of preliminary antidumping duties on wood bedroom from China has put pressure on Vietnam to develop as a source country for the U.S. market, said Roger Scott, managing director of Asia Pacific wood coatings for Valspar.
Valspar expects to have 20 to 25 customers around Ho Chi Minh City by 2005, and Scott expects about 10 Vietnamese manufacturers to achieve enough volume to be of interest to the coatings supplier.
"The country is under pressure to provide the same quality China has," he said. "For now, plants in Vietnam will have to bring in outside expertise to ensure that. It took a long time to build that line management in China, but Vietnam doesn't have that much time."
