Vietnam: Next China?
Art Van exec: 'Everybody is going there'
By Larry Thomas -- Furniture Today, April 27, 2008
Fort Lauderdale, Fla. — Although China is clearly the leading resource for U.S. furniture producers and retailers, a top retail executive said he believes the furniture industry will be "insignificant" in China within a few years.
Jeff Sears, international logistics manager for Warren, Mich.-based Art Van Furniture, said Chinese-owned furniture companies are opening factories in Vietnam at a rapid pace, and he believes that country will soon be the primary manufacturing point for furniture.
"If I were to give advice, it would be learn Vietnamese, not Chinese," Sears told the annual conference of the International Furniture Transportation and Logistics Council here. "Everybody is going to Vietnam."
In a presentation to about 100 transportation and logistics professionals, Sears said rising labor rates in China and the elimination of some government tax rebates for furniture production are causing furniture manufacturers to move production outside the country.
Because of stricter enforcement of overtime pay provisions and other work rules, Sears said the average Chinese factory worker now makes the equivalent of $130 a month — $10 to $20 higher than it was a year ago.
On the surface, the increase doesn't appear noteworthy, but Sears said it's very significant because the average wage in a Vietnamese factory is about $45 a month.
"In five or six years, I think the furniture industry will be insignificant in China," he told the group. "What I'm seeing are more and more companies shifting (production) to Vietnam."
Sears, who moved with his family to the port city of Shekou, China, last year, said that Vietnam must, however, upgrade its infrastructure. The road system is particularly poor, and the country only has one deep-water port, he said.
Plus, labor shortages are a chronic problem, and workers go on strike frequently to try to settle disputes with factory owners.
"But there's no question that furniture is gaining speed in the country," he said of Vietnam. "They have a very stable currency and low-cost labor."
Sears said Art Van has about 30 suppliers in Vietnam — all within 50 miles of Ho Chi Minh City — and he said he travels to the country about once a month.
Another 42 of Art Van's suppliers are in China — mostly in the Dongguan area — and the retailer also has a handful of resources in Malaysia and Indonesia, he said.
Separately, Sears urged the group to make sure their companies have obtained certification in C-TPAT, the Customs-Trade Partnership Against Terrorism.
The certification, which verifies security arrangements from the Asian factory to the U.S. port where it lands, will ensure an uninterrupted flow of imported goods in the event of another terrorist attack.
"It's like a business insurance policy. You need to have it," Sears said. "Without it, your import program will come to a halt if (a terrorist attack) happens."
He said C-TPAT certification can be difficult for retailers to obtain because their vendors are reluctant to disclose the exact name and location of the factory where the product was made. But a retailer must have that information, and more, to become certified, and he urged retailers in the audience to keep pressuring vendors to disclose the needed information.
"If you want to do business with Art Van, you have to tell us where it's coming from," said Sears. "We have to know exactly where it's being made. If there's a security problem, whose butt is on the line? It's not the manufacturer."
Sears said he believes Art Van is one of only a handful of retailers who have a full-time employee in China, noting that most hire agents.
He said he has to approve every shipment of Asian goods headed to Art Van, and makes regular visits to the retailer's Asian suppliers to oversee quality control and inspect product samples.
In addition, he said he handles some product development functions, which reduces the amount of time the company's buyers have to spend in Asia.
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