Textile & Garment
Industry in Vietnam
Research on Garment Producers in Vietnam
International Business Research Vietnam 2008
Ms. L. Buisman
Ms. G.J. Wielenga
Groningen
August 15th, 2008
University of Groningen, Faculty of Economics and Business
International Business Research Vietnam 2008 – Bandolera
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Executive Summary
Vietnam is known to have an impressive and quickly developing textile and garment industry and low
labor costs. These factors make it a possible interesting and attractive market for Dutch garment and
fashion brands such as Bandolera. Bandolera is a Dutch fashion brand for women of 25‐60 years. Her
collections are designed with special care, made out of high‐quality fabrics and use many details and
accessories to provide women with trendy clothing. For her production she is already settled in China
and India and now looking for extra sourcing possibilities in Vietnam. The goal of this report is to give
an answer to the main question whether it is interesting for Bandolera to produce their garment in
Vietnam.
From February till August 2008, the International Business Research Project of the University of
Groningen contained market research in Vietnam by order of Bandolera. The research was executed
by 2 selected business students of the Faculty of Economics and Business and supported by two
assistant‐professors. To get detailed information on all important aspects, both desk‐ and field
research was executed, of which the later took place in Vietnam (May – June 2008).
To decide whether it is interesting for Bandolera to let their garment be produced in Vietnam, three
requirements are of main importance. First of all, the fabrics Bandolera wants to use should be
available in Vietnam and of good quality. Secondly, the local garment producers have to be capable of
producing fashionable garment with many details, for low order quantities ranging from 300 – 3.000
pieces and deliver everything within 90 days in the depot in The Netherlands. Third and last of all,
Vietnamese legislations should not restrain the export of garment and good logistic services of should
well represented for both shipment and airmail.
The fabrics available in Vietnam are mainly cotton, followed by polyester and silk. The garment sector
needs up to 200.000 tonnes of cotton for its export plans. The current production does not meet
more than 2% of this demand. Despite big investments by the government, the production of cotton
is decreasing in the last couple of years due to low economic efficiency. The production of polyester
only meets 4% of the national demand. Recently, big investments have been made in the polyester
plants which should be able provide in 50% of the national demand by 2012. The silk production in
Vietnam is small and still in a traditional way. Compared to Japanese silk the quality is low. It turns out
that Vietnam does not have the machinery and capacity to produce silk for the industry to export.
Overall, different sources confirm that the Vietnamese production of fabrics is insufficient to provide
in the sector’s demand, making it dependent on import. In terms of quality, Vietnam can provide in
low‐to‐mid level quality, but high quality fabrics still need to be imported from China, Taiwan, etc. It
has to be noted that Vietnam is heavily investing in its fabric production capacity, but the focus is first
of all on quantities and these plans also cope with many difficulties.
In general, most garment companies (70%) are located in the south of Vietnam, near the harbor and
airport of Ho Chi Minh City. In total we visited 17 garment companies in Vietnam. These company
visits clarified that the focus of the sector is on massive quantities of low to mid‐level quality. These
massive quantities are needed because the main reason for customers to go to Vietnam for
production of garment is its low pricing. There are a lot of big quantities orders of low quality fabrics
available for low prices, which has the interest of huge corporations mostly from the US. Although the
machinery in Vietnamese factories is new and advanced, there is little market for the production of
small, fashionable orders. Often Vietnamese garment producers will not accept low order quantities,
because they need to keep their machines running and do not have the time to instruct the sewers on
different production lines how to create many details. They realize high turnovers by producing large,
simple orders for low prices. None of the companies we visited could meet all requirements of
Bandolera.
The Vietnamese government is promoting the export of garment and therefore there is no restriction
on the export of garment and very little legislation influences the delivery times of garment orders.
Next to that, logistic services in Vietnam are well represented and accommodated. However, there
International Business Research Vietnam 2008 – Bandolera
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are some setbacks concerning the pricing methods. Bandolera prefers pricing on Cost & Freight (C&F),
in which the producer takes care of all logistic matters until the delivery in the customers’ depot. One
step down is pricing on Freight on Board (FOB), in which the producer takes care of the goods until
they are on board of the ship. Pricing on FOB is becoming more common in Vietnam, but is still
considered as a risky business. We have not found any producer willing to deliver orders on C&F base.
Other barriers exist in the more informal aspects such as language and communication problems.
These barriers make it necessary for a company such as Bandolera to, when producing in Vietnam,
keep a close eye on the production to prevent mistakes and misunderstandings.
Based on the requirements of Bandolera it is difficult to find a fitting garment producer in Vietnam.
Vietnamese fabric plants are not able to produce middle‐to‐high quality fabrics, and often the quality
is not stable. Next to supplying fabrics from other foreign countries buttons, sewing threads,
interlining, shoulder pads, and other embroidery are imported as well. Due to the fact that most must
be sourced from other Asian countries, the lead/delivery time of garment as well as the cost price of
garment increases. Furthermore, Vietnamese garment companies are not specialized in the
production of detailed, fashionable garment and also do not prefer this kind of orders. At this
moment there is much competition in the textile and garment industry and there are many big
quantity orders available, guaranteeing salary and employment. Because of the bad fit on two of the
three investigated aspects, we can answer our main question negatively. All together, Vietnam does
not appear as an interesting market for Bandolera to invest her time and energy in.
International Business Research Vietnam 2008 – Bandolera
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Preface
There is no doubt about it, Vietnam is booming. Since the adoption of the doi moi (“renewal”) policy
in the late 1980s, Vietnam’s economy has shown remarkable growth. Numerous economic
progressions have transformed the centrally planned economy into a market‐based one. Over the last
five years Vietnam reached a steady average economic growth of 8 percent. When Vietnam joined the
World Trade Organization in 2007, the international borders were officially opened and in that same
year the amount of foreign investments doubled to 7.8 billion US dollars.
Vietnam has become a great potential for foreign investors because of its crude oil production, its
richness in natural gas reserves and its hardworking workforce with low labor costs. All together,
Vietnam has become one of Asia’s best economic performers and is often described as the “new
China.” This makes it an interesting business opportunity for Dutch companies.
From February till August 2008, the International Business Research Project of the University of
Groningen contained market research in Vietnam for 11 Dutch companies. The report in front of you
is the result of the research for one of those companies: Bandolera, a Dutch fashionable garment
brand for women. The research was executed by 2 selected business students of the Faculty of
Economics and Business and supported by two assistant‐professors.
Goal of this report is to give an answer to the question whether it is interesting for Bandolera to
produce their garment in Vietnam. To do this, we looked at three aspects: (1) the availability of fabrics
in Vietnam, (2) visiting and evaluating local garment producers on capability, and (3) the influence of
legislations and the availability of logistic services. To get detailed information on all three aspects,
both desk‐ and field research was executed, of which the later took place in Vietnam (May – June
2008). During our stay in Vietnam we visited both state‐owned and private companies and held
interviews with different experts and agents. The results of our research are represented in this
report.
For all the help we received during the research and the writing of the report, we would like to thank
our assistant‐professors Mr. dr. K.J. Alsem and Mr. dr. T.W. de Boer. They have guided us through
many difficulties during our research and supported us with the writing of the report. In Vietnam we
had many help when communicating with Vietnamese companies from our interpreters, Ms. Nguyen
Thuy Vy and Ms. Nguyen Hong Chinh. Many thanks for all their help, without them we could not have
gathered as much information as we have. Finally we would like to thank Mrs. Nghiem Lien Huong
and Mr. Jos Langens for their help and hospitality during our stay in HCMC. From them we received
many important additional information, we otherwise would not have been able to find.
A last word to all readers of this report; we have put much effort in writing this report as clear and
pleasant as possible. We hope you will find the information you are looking for. Enjoy!
August 2008, Groningen.
Lisette Buisman and Gerda Wielenga
International Business Research Vietnam 2008 – Bandolera
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Content
Executive Summary............................................................................................................................... 2
Preface
4
Content
5
Chapter 1
Introduction..................................................................................................................... 7
1.1
Bandolera............................................................................................................................. 7
1.2
Purpose of research and research questions........................................................................ 8
1.3
Conceptual Model................................................................................................................ 9
1.4
Report set up ..................................................................................................................... 10
Chapter 2
Methodology ................................................................................................................. 11
2.1
General methodology ........................................................................................................ 11
2.2
Criteria for selection of new garment producers................................................................ 11
2.3
Decision Tree ..................................................................................................................... 14
Chapter 3
The Vietnamese Fabric Market ...................................................................................... 16
3.1
Current situation and trends in the Vietnamese fabric market .......................................... 16
3.2
Overview main domestic production of fabrics.................................................................. 17
3.3
Conclusion ......................................................................................................................... 18
Chapter 4
The Vietnamese Garment Industry ................................................................................ 20
4.1
Economy ............................................................................................................................ 20
4.2
Export of textile and garment ............................................................................................ 21
4.3
Overview of companies...................................................................................................... 21
4.4
The Vietnam Textile and Apparel Association .................................................................... 22
4.5
Future plans ...................................................................................................................... 22
Chapter 5
Evaluation of Garment Producers .................................................................................. 24
5.1
Description of visited garment companies and factories.................................................... 24
5.2
Final evaluation of garment producers............................................................................... 32
5.3
Comparisons to current producers of Bandolera................................................................ 35
5.4
Excluded garment producers ............................................................................................. 35
5.5
Experts and agents............................................................................................................. 36
5.6
Conclusion ......................................................................................................................... 37
Chapter 6
Logistics and Legislation............................................................................................... 391
6.1
Legislation and rules about exporting garment to the EU ................................................ 391
6.2
Pricing and payment ........................................................................................................ 391
6.3
Logistic service companies Vietnam – The Netherlands ..................................................... 40
6.4
Informal trade barriers in the Vietnamese garment industry ............................................. 41
International Business Research Vietnam 2008 – Bandolera
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6.5
Conclusion ......................................................................................................................... 42
Chapter 7
Conclusion and Recommendation ................................................................................. 43
7.1
Conclusion ......................................................................................................................... 43
7.2
Recommendation............................................................................................................... 44
References
...................................................................................................................................... 46
Overview of Appendixes ..................................................................................................................... 47
Appendix 1 Abbreviation List............................................................................................................ 48
Appendix 2 Process of Fabric Production.......................................................................................... 49
Appendix 3 Process of Garment Production ..................................................................................... 51
Appendix 4 Maps of Vietnam ......................................................................................................... 526
Appendix 4.1......................................................................................................Provinces of Vietnam
52
Appendix 4.2 ........................................................................................... Industrial zones of Vietnam
53
Appendix 5 Agenda in Vietnam and Contact Details......................................................................... 54
Appendix 5.1 ........................................................................................................ Agenda in Vietnam
54
Appendix 5.2 .............................................................................................................. Contact Details
55
Appendix 6 List of Rejected Garment Companies ............................................................................. 59
Appendix 7 Checklist ........................................................................................................................ 62
International Business Research Vietnam 2008 – Bandolera
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Chapter 1
Introduction
Bandolera is a Dutch fashion brand for women of 25 – 60 years. The company is searching for new
attractive sourcing places to improve her production process, possibly in Vietnam. In this first chapter
we will give more information about the company and what she is precisely looking for. We will
continue with clarifying the purpose of the research and its research questions. This is further
illustrated with a conceptual model. We conclude the chapter with an outline of the set up of the
report.
1.1
Bandolera
Bandolera was established in 1985 as an original wholesaler. Over the last 20 years, Bandolera has
grown to an international ladies fashion brand. Their main market lies in Europe, but Bandolera also
has selling points in the United States (US) and Canada. The brand Bandolera is sold in 40 different
countries and Not The Same (NTS; an independent coordinated casual line of Bandolera) is available
in 30 countries. With 40%, the Netherlands still takes care of the biggest part of the turnover,
followed by Belgium and Norway.
Bandolera sells over 1.5 million garments annually, representing a yearly turnover over € 50 million
(year 2007). Worldwide Bandolera has more than 2,400 points of sale, including several Bandolera
stand‐alone or franchised shops and several shops incorporated within department stores. In total,
Bandolera has 51 mono‐brand Bandolera stores and NTS shops. The company started with
establishing its own stores three years ago. Of the total turnover of 2007, more than 60% is exported
to 25 countries. Over 2007, the turnover rate growth was 30%.
Quality management is very important for the company. The designing, buying of materials, making of
patterns, planning and supervision of production all takes place at the head office in Rotterdam, The
Netherlands. All materials are tested for quality, shrinkage and wear ability. To keep the ability of
bringing out 16 collections per year, the need for precise delivery dates and quick supply re‐orders is
very high. Bandolera therefore needs to retain control over the whole process from designing to
1
logistics .
Philosophy and market positioning
Bandolera focuses on the young dynamic woman who leads an active life. Bandolera’s collection aims
to create a distinctive image which is trend following, while offering the possibility of multiple
combinations, but still providing an elegant and feminine feeling.
To keep close track on fashion trends, Bandolera has its own trend watchers who are following the
international fashion scene. Next to that, Bandolera offers 16 collections a year, which is a flexible
way for the styling department to keep close track of the trends and share them with Bandolera’s
customers. In short, Bandolera tries to combine high quality and service with a strong, trend following
image.
Sourcing: suppliers in Turkey, India and China
Bandolera is already working with garment producers in Turkey, China and India. They have the
longest and strongest relationship with the factory in Ünlu, Turkey. Bandolera has worked with them
since they started. Of the whole Bandolera collection, 50% is produced in Turkey. Bandolera is co‐
owner of this factory, 20% of the production of this factory is for Bandolera. The relationship with this
factory is strong; they do not just produce the garment, but also take care of small problems at the
scene when these occur (for instance local logistic problems). The factory in Ünlu (Turkey) has 800
sewers. For Bandolera they mainly produce suits (blazers, pants, confection). The production of these
is still cheaper and better in Turkey then in Asia. Bandolera’s head of purchase (Mrs. P. Punt‐
Oldenhof) visits this factory together with a stylist every two weeks. This is mainly to check the
processes and to fit the fitting samples.
For the NTS brand, all garments are produced in Asia. Bandolera is cooperating with India and China
for about 3½ years. In relationship terms this is still short. One of the difficulties with finding a new
1
www.bandolera.com, 4 March 2008
International Business Research Vietnam 2008 – Bandolera
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garment producer in Asian countries is the difference in language and culture. The Asian way of doing
business is not always as straight forward as the Western way of doing business. Samples that are
shown by producers, for example, could be models that they do not make anymore, or even have not
produced in their own factory. It has taken Bandolera 2 years to establish a real open, trustful
relationship with their current producers in China and India. They visit the companies in China 2 to 3
times per year. First Bandolera visits the factory, after that the factory will send the samples to the
Netherlands where they will be checked on fit size. The factories in China are in Hongzou, ShangHai,
Beijng and Hong Kong. They have the fastest delivery times and have the most and newest materials.
The factories in China and India usually have about 50/100 sewers. A lot of jackets are produced in
Asia. For the fitting of the garment from Asia, the samples are flown in by air. Fitting ladies in the
Netherlands will check if the sizes are correct. After that the samples are sent back to the factory. The
usual process is that samples from Asia are sent forth and back by air, while the real production order
is shipped over sea. This is necessary to catch the deadline of total delivery time of 90 days, but also
results in € 400.000 ‐ 500.000 UPS costs per year. The total delivery time of 90 days is very tight and
important for Bandolera to be able to bring out 16 collections per year. These 16 collections per year
mean that they offer a new collection every 2/3 weeks. Therefore the first delivery time is usually the
tightest and is sometimes send by air.
In general, orders are placed per size and per color. Sizes range from 36 – 46. The average quantity
per model of an order from Bandolera is 1.500 pieces (with ranges between 300 – 3.000 pieces, with
pikes to 200 or 5.000 pieces). This order size does not differ over the different product groups (pants,
blouses, etc.). Patterns are designed by Bandolera and send to the producer digitally.
Future plans
In the first half year of 2008, 20 new mono brand stores are opened in the Netherlands, Belgium,
Germany, Poland and Turkey. The brand has also announced a new start in the United States.
Bandolera hopes that the development of activities in the US will lead to an important contribution to
a quick growth of the company worldwide. In the second half of this year another 20 stores are
planned to open. As every company, Bandolera is looking for new ways to improve its production
process. Because of the great development of the textile industry and the low labor costs in Vietnam,
Bandolera is hoping for a new sourcing place to support its future plans.
1.2
Purpose of research and research questions
The purpose of this research is to provide Bandolera a solid report on base of which Bandolera will
make a well‐considered decision whether to produce garment in Vietnam. At the same time the
report will provide practical information about doing business in Vietnam (i.e. governmental laws and
policy with regard to production and export of garment), which is relevant for Bandolera when she
decides to enter the Vietnamese fabrics and garment market.
We are looking for the opportunities for Bandolera to produce middle‐to‐high quality garment in
Vietnam. Main aspects are whether fabrics are available in Vietnam (homemade), investigating which
producers are able to produce the required garment of Bandolera, and also enquire practical things
which are concerned with entering the Vietnamese market. The above mentioned leads to the
following problem statement:
Is it interesting for Bandolera to produce their garment in Vietnam?
To answer this question, we divided the subject in 3 main research questions (RQ). Each of them is
divided in several sub questions (SQ) which we will try to answer in this investigation. The research
questions are also summarized in a conceptual model at the end of this paragraph.
RQ1
What is the availability of fabrics in Vietnam?
This research question provides insight in the different kinds of fabrics (yarns, fabrics, accessory,
embroidery) used for production of garment products of Bandolera. Bandolera has provided the
research time information about the characteristics of the different kinds of yarns and fabrics which
are used in their production/fashion line. Also an overview is given about the fabrics that are available
in Vietnam, which of these are homemade and which of these are imported.
International Business Research Vietnam 2008 – Bandolera
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SQ1.1
SQ1.2
SQ1.3
SQ1.4
What kind of fabrics does Bandolera in general use for the production of her collections?
What kinds of fabrics are available in Vietnam (divided by homemade fabrics and imported
fabrics)?
What is the delivery time of the homemade and imported fabrics?
How can fabrics in Vietnam be characterized in terms of quality compared to surrounding
exporting Asian countries?
RQ2
Can Vietnamese garment producers meet the selection criteria provided by Bandolera?
This research question provides insight in the Vietnamese market of fabrics and garment producers.
An extensive list of Vietnamese textile and garment producers will be put together. A checklist is used
to evaluate each producer whether it is an interesting company for Bandolera to do business with.
This checklist uses grades to assess for example the capacity, quality, references and the level of
English of the local producer. The companies with the most potential are visited in Vietnam and again
evaluated with a checklist of criteria. Contact information of the visited companies is included in
Appendix 5.2 of this report.
SQ2.1
SQ2.2
SQ2.3
SQ2.4
SQ2.5
SQ2.6
Which local producers are advised to us by our contact persons?
Do Vietnamese garment producers have the capacity, machinery, experience and certificates
to produce for Bandolera?
Are Vietnamese garment producers able to produce fashionable garment products similar to
the current Bandolera collection?
Are additional items and accessories (such as buttons and YKK‐zippers) available in Vietnam?
What is the production time and estimated price of counter and fitting samples?
With which lead times and payment terms for complete orders do Vietnamese garment
producers in general work?
RQ3
Which Vietnamese legislations and logistic services influence the export of garment to The
Netherlands?
This research question provides insight into the practical execution of the research in the case that
Bandolera wants to do business with a Vietnamese producer.
SQ3.1
SQ3.2
SQ3.4
1.3
What do Vietnamese legislations specify about the export of different kinds of Vietnamese
garment products to the EU?
Which local producers are available to facilitate in matters of logistics? For example, are
Western companies such as UPS/DHL represented in Vietnam?
What are the costs and delivery times of logistic services from Vietnam to the Netherlands?
(Airmail and shipping?)
Conceptual Model
To mark the boundaries of our research, we created a conceptual model (see figure 1.1 below) in
which we simplify the Vietnamese textile and garment market. The conceptual model represents the
main concepts and their relationships which are of significance to Bandolera and about which we
collected information. The model can be read from left to right, divided in three parts. Starting at the
left side of the model, we begin our research with the availability of fabrics, yarn and accessories
(RQ1). The second ‘column’ focuses on the Vietnamese production lines (RQ2). The third column
represents the subject of RQ3 where the influence of legislations and the availability of logistic
services are attended.
International Business Research Vietnam 2008 – Bandolera
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Figure 1.1
Conceptual model
Fabric
Sample(s)
Yarn
Airmail
Production
lines
Bandolera
Order
Shipment
Accessories
Legislation
Government
1.4
Report set up
The report is divided in 7 chapters, of which the first gives an introduction of the purpose of the
research. In chapter 2 the general methodology and the specific manner of data collection is
described. The 3rd chapter describes the availability and quality of fabrics and fabric production in
Vietnam. In chapter 4 we give a description of the general Vietnamese garment industry with current
statistics and future plans. Chapter 5 gives an overview of the relevant company visits, compared with
Bandolera’s current suppliers and some main conclusions about the availability of potential garment
producers in Vietnam. In the 6th chapter we give more information about logistics and legislation
concerning the export of garment from Vietnam to The Netherlands. We end the report with
conclusions and recommendations for Bandolera in chapter 7.
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Chapter 2
2.1
Methodology
General methodology
The research was conducted in two phases; the desk research in the Netherlands and the field
research in Vietnam. The desk research was executed from February 2008 till May 2008. In this part of
the research information about the Vietnamese textile and garment industry was collected on the
internet. A first selection of garment producers was made through the use of 5 different lists2 of
garment producers. These producers were e‐mailed and if no response was received, a telephone call
was made to get in contact with the companies. Through this way we reached out to 80 companies, of
which 20 responded and 17 appointments were made. A different way to get more knowledge about
the Vietnamese textile and garment industry was to build relationships with useful contact persons
and experts. In the Netherlands, we received information from Mr. Westland and Mr. Vrieswijk about
their experience with export and logistic matters from Vietnam to The Netherlands. We also received
information from Mr. Marsman about his experience with importing garment from Vietnam.
Furthermore we found two theses, though which we reached two old PhD‐students, one in HCMC and
one in Hanoi. With both contact persons we made appointments in Vietnam. We also got in contact
with the University of HCMC and a Dutch garment producer that has been active in the Vietnamese
garment industry since 1986. In desk research phase of the research we were able to get in touch with
5 contact persons and experts in Vietnam and 3 in The Netherlands.
From the 5th of May 2008 till the 06th of June 2008 field research was executed in Ho Chi Minh City (3
weeks) and Hanoi (2 weeks). In this part of the research data was collected through interviews with
garment producers and experts, and through company and factory visits of selected garment
producers. The focus was on the areas in or nearby the centers of both cities, at least within 2 hours
driving. In HCMC this contains the provinces Ho Chi Minh, Binh Duong (and Long An). In Hanoi this
contained the province Hanoi and some surrounding provinces.
In total we were able to build relationships with 11 contact persons and experts who lead us to 17
possibly interesting companies. Of these we were able to contact 11 companies. In total we visited 17
companies and interviewed 7 contact persons or experts.
2.2
Criteria for selection of new garment producers
Bandolera provided the research team with criteria selections to search for potential suppliers. These
criteria are demands Bandolera sets for all her producers and which producers should be able to
fulfill. General criteria such as the capacity, machinery, export experience and certificates (ISO) of the
company will give details about the company’s business. These are usually displayed in the company’s
profile. Based on the information in these profiles, companies were selected for a company and
factory visit. During these visits the criteria discussed below were checked. Below, the criteria and
how these are evaluated during a company visit are discussed.
Company profile
Capacity: The maximum capacity of a producer is not very important, it is more important whether
they can make 10.000 pieces per month (minimum requirement). Because the quantity of Bandolera
orders lie within the range of 300 – 3.000 pieces, it is important that producers are able to produce
these small orders. The average per model is 1.500 pieces, which can be used to make price
comparisons.
Data collection: During the interview questions are asked about the capacity per model, the capacity
per month or year of the factories, the size of current orders, the number of workers in the factories
and the number of production lines.
Machinery: The kind of machinery that is used in the factory shows what skills the company has inside
and which kind of activities they have to outsource. For example, the presence of spinning lines,
weaving looms, knitting machines, dyeing machines, sewing machines and embroidery machines
show which kind of fabric and garment can be made.
2
See references Chapter 8
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Data collection: When visiting the factory, machines are checked whether they are fully used and if
not, what explanation this has. It is a bad signal if there is, for example, a layer of dust on the
machinery. Next to that it is important to check what kind of machinery they have and use. The
brands of these machines are written down.
Export experience: The experience of Vietnamese companies with exporting to western countries
(preferably they export to the EU, but if not they should at least export to the US). Producers that do
not already export are not potential, because then they are not familiar with the process of exporting
and dealing with English speaking customers.
Data collection: In the interview, questions are asked for which customers they produce and to which
countries they export. While walking around in the factory and looking at samples in the showroom,
labels of garment are checked for familiar brands. The ability to work with foreign countries also
becomes clear in how well the communication is going during the interview. We check this by judging
the grade of English of the contact person and whether or not it is necessary to use a linguist
ISO norms: The ISO 9001 certificate is a standard to check the organization of the company, but the
use of it should not be overestimated. ISO 9001 is one of the standards in the ISO 9000 family of
standards for quality management systems. ISO 9000 is maintained by the International Organization
for Standardization and is administered by accreditation and certification bodies. Some of the
requirements in ISO 9001 include (1) a set of procedures that cover all key processes in the business,
(2) monitoring processes to ensure they are effective, (3) keeping adequate records, (4) checking
output for defects, with appropriate and corrective action where necessary, (5) regularly reviewing
individual processes and the quality system itself for effectiveness, and (6) facilitating continual
improvement. ISO 9001 certification does not guarantee that the company delivers products of
superior (or even decent) quality. It just certifies that the company engages internally in paperwork
prescribed by the standard. Some companies use the ISO 9001 certification as a marketing tool.
Data collection: During the interview, questions are asked about the presence of ISO 9000, ISO 9001
and SA 8000 certificates. Usually certificates like ISO are publicly displayed.
Fabrics
In the research we search for all kind of fabrics and garment. Strong requirement is that producers
work with middle‐to‐high quality fabrics and can supply these fabrics. The focus thus lies on good
quality fabrics, not cheap ones. The processing of good fabrics is more complex. To have short
delivery times, fabrics should be produced in Vietnam and not imported from China. Because delivery
times are short, fabrics should be available in just a few days. If fabric has to be imported, it takes at
least a few days to cross the border. Because Bandolera works with a tight schedule, they stress on
precise delivery dates and quick supply re‐orders. Bandolera starts her process of designing a new
collection with the fabric. The fabric is the first input and with this fabric they design a new model.
Therefore Bandolera is searching for special fabrics of good to, preferably, high quality. Next to that, it
is also very important that the quality of the fabrics is stable. The quality Bandolera is looking for is
middle price level, not at the budget‐end and also not at the high‐end price level. The producers have
to be able to show with what kind of fabric they are working with and can find. They almost never
have fabrics in stock. Bandolera mostly uses its own colors, therefore fabrics have to be dyed specially
for Bandolera´s production.
Data collection: When visiting the companies, questions will be asked about which kind of fabrics the
companies work with and where they get there fabrics from. When asking about the delivery times of
the fabrics, the focus lies on fabric from scratch (before the dyeing takes place), because Bandolera
often uses her own dyeing colors. Another important aspect of fabrics is the quality, this is difficult to
check. Therefore we ask questions, take pieces of fabric and we also ask if quality of the fabrics is
stable. In a later stadium, these fabrics can be re‐checked for quality by Bandolera.
Garment
Bandolera is looking for the production of all kinds of product groups; t‐shirts, jeans, blouses, etc. The
only garment product group Bandolera is not interested in is underwear. Every factory is usually
specialized in one product group, for example they are only specialized in making jeans. But if they
can make blazers, they usually also are able to produce blouses. If factories make many different
product groups, then these will be separate divisions with a different manager you have to deal with.
International Business Research Vietnam 2008 – Bandolera
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Bandolera collections are not simple, but mainly have detailed and complex designs. Some
embroidery has to be done by hand. Therefore the products are very labor intense. Interesting is
whether Vietnamese garment producers are specialized in one specific garment group and if this fits
with the Bandolera style. Producers have to already be familiar with the kind of garment products
that Bandolera is looking for, they should not have to develop it.
Data collection: As mentioned most companies specialize in one kind of product group. Important is
what kind of garment the company is specialized in, which they can produce and which they produce
at the moment. Furthermore questions are asked about which brands of yarn, interlining and
shoulder pads they work with. A good brand for yarn is COATS. A good tool to judge a company is to
check whether they understand the product specifications of Bandolera, if they have their own
laundry and also if they are able to print digitally sent patterns. When visiting the factory and judging
samples from the showroom a better insight can be given of the quality of lining, shoulder pads and
workmanship.
Accessories
Not only the fabrics should be available, but also the zippers and the buttons. It is a prior requirement
that they work with YKK zippers. These are the only zippers which can be guaranteed to work
correctly. The buttons Bandolera is working with varies with the season.
Data collection: During the interview questions are asked with what kind of accessories the company
is working. Zippers have to be from the brand YKK. Furthermore it is important to ask for a sample
book of the buttons the company is working with. Usually every producer has its own brand and there
is no well known brand of buttons. Best would be to get a sample book of buttons, but this can also
be copied. With blazers it is important to ask what kind of shoulder pads they use. Producers should
be able to show what kind of buttons, shoulder pads interlining they work with. For embroidery and
prints we ask whether the company can make them in their own factories or if they have to outsource
them. During the visiting of the factory, we check with what kind of machines the embroidery and
prints are made.
Samples
For fitting of the garment from Asia, the samples are delivered/send by air. The experience of
Bandolera with Asian suppliers is that they usually do not charge costs for the first sample. The
making of the first sample (proto‐type) usually takes 21 days. Before a whole order is placed,
Bandolera asks for 50 salesroom samples. After this the proto‐sales take place in about 2 months.
Data collection: When visiting the factory, it should be possible to ask whether a B‐choice (a rejected
product) can be given to us. The making of the first sample (the proto‐type) usually takes about 21
days. This sample should be without costs. Before a whole order is placed, Bandolera asks for 50
salesroom samples. Usually the costs of these samples should be about 150% of the production price.
Furthermore we ask if they have a separate sample room and if yes, what is the capacity and the
number of employees working there. When looking at samples in the showroom it is important to ask
whether they made a production order of these samples and if this took place recently. The samples
of Bandolera will be demonstrated at the end of the interview. We will use these to ask them if they
can make similar garment and if yes, we also ask for an estimation of the production price.
Delivery times
The lead time of Bandolera’s production order has a maximum of 90 days, within which the garment
should be delivered in stock in Rotterdam. On average it takes 2 weeks (14 days) to produce the fabric
and 4 weeks (28 days) to ship the garment. That leaves 48 days to finish the garment. If the delivery
time cannot be handled, the products can be flown in by air but the question is if this is affordable.
There are different prices in which deals and contracts can be made. Pricing on CMPT base only
includes the price of total product, inclusive fabric, sewing thread, buttons and sewing of the
garment. Pricing on FOB base means free on board, this means that the producer will deliver until the
Vietnamese border. Bandolera requires C&F pricing, this includes freight until Bandolera’s stock in
Rotterdam. Therefore all logistics from producer until the Netherlands should be arranged by the
supplier. In the Netherlands, Bandolera works with the logistics company Unique Logistics. They
arrange all distribution within the Netherlands. Data collection: Different questions are asked about
the delivery times during the interview. Important delivery times are the delivery times of the fabric,
International Business Research Vietnam 2008 – Bandolera
13
of the proto‐type and also that of the total production order. Furthermore we ask questions about the
manner of logistics, pricing and exporting. These usually are expressed in CMPT, FOB and C&F prices.
2.3
Decision Tree
To give an answer to the main question whether it is interesting for Bandolera to produce their
garment in Vietnam, we created a ‘decision tree’ (see below). The tree is divided in 3 hierarchies,
depicted with 3 different colors. To give a positive answer on the main question, all questions in the
pink boxes below should be answered with a ‘yes’. From left to right these pink boxes relatively
represent the research questions 1‐3. The answers given on these questions depend on the
information found about the questions in the green boxes in the lowest level of the tree.
International Business Research Vietnam 2008 – Bandolera
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Figure 2.1
Decision tree research Bandolera – ‘Is it interesting for Bandolera to produce their garment in Vietnam?’
International Business Research Vietnam 2008 – Bandolera
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Chapter 3
The Vietnamese Fabric Market
As mentioned in chapter 1, Bandolera is looking for all kinds of high‐quality fabrics. In this chapter we
give insight in the availability of fabrics in Vietnam. In paragraph 3.1 we start with an overview of the
current situation and trends in the Vietnamese fabric market. In paragraph 3.2 we will discuss the
fabric production of three main fabrics in Vietnam. We end the chapter with a conclusion in which we
give answer to research question 1.
3.1
Current situation and trends in the Vietnamese fabric market
The Vietnamese textile and garment industry has long time been under influence of the communistic
system. Its current situation and the trends in the industry are influenced by their relatively late
international start. As explained more clearly by Mr. Toan (owner of Yen Bien Company in Hanoi),
“Vietnam did not export garment until there was an open policy in 1986. Therefore the production of
fabrics at the beginning was poor. After the open policy, the production started to increase bit by bit.
But the production is mainly for massive quantities, which are needed because the main reason for
customers to go to Vietnam for production of garment is its low pricing”. These massive quantities and
the economic growth in general have helped the Vietnamese garment industry to expand (and keep
expanding) rapidly.
Currently Vietnam still relies on substantial imports of fibers, yarns, fabrics and garment accessories.
In 2004 the value of imports of fibers, yarns, fabrics and garment accessories reached 4,601 million
U.S. dollars (USD), which is more than double the 2,284 million USD worth of these imports in 2000.
Compared to the 1,089 million USD worth of imports in 2000, the imports of cotton, yarn and fabrics
tripled to 3,722 million USD in 2006. The most important import item is fabric, upon which Vietnam's
garment industry is heavily dependent. In 2006 fabric imports were worth 2.954 million USD,
compared with only 761,3 million USD in 2000. Fabric imports rose in value by 288 percent over the
six‐year period. The Vietnamese government has a clear strategy of increasing the supply of
domestically produced inputs such as raw cotton, yarns, fabrics and garment accessories. Vietnam’s
3
overall aim is to reduce the import content to less than 25 percent by 2010 .
Table 3.1 Import value per year (US dollars x 1.000)
Import/Year
Fibers, Yarn, Fabric and accessories
Cotton, yarn and fabrics
Fabrics
2000
2.284
2004
4.601
2006
1.089
761.300
3.722
2.954.000
Machinery investments – Investment in modern machinery has increased in recent years. During 2006
the industry added 171.720 new spindles and 5.840 open‐end rotors. This followed an extended
period of expansion during the ten‐year period of 1997‐2006, when 840.132 spindles and 19.784
open‐end rotors were obtained. In the weaving sector the industry added 6.012 shuttle less looms
during 1997‐2006, of which 1.357 alone were added to the industry's capacity in 2006 following the
addition of 476 looms in 2005. These figures are summarized in table 3.2 which shows that Vietnam is
moving towards more modern manufacturing technology.
Table 3.2 Machinery investments per year (US dollars)
Investments / Year
1997 ‐ 2006
Spindles
840.132
Open‐end Rotors
19.784
Shuttle less Looms
6.012
2005
2006
171.720
5.840
1.357
476
The textile and clothing industry has also managed to attract a substantial amount of foreign
investment. The largest foreign investor in the Vietnamese textile and clothing industry is Taiwan,
followed by South Korea and Hong Kong. However, looking at the total foreign direct investment (FDI)
3
th
http://www.just‐style.com, 9 June 2008
International Business Research Vietnam 2008 – Bandolera
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in Vietnam, the textile and clothing industry only gets a very small piece of it. Most of the foreign
investments are made in Vietnam’s crude oil fields and the Vietnamese finance and banking industry4.
3.2
Overview main domestic production of fabrics
The Vietnamese export of textiles and garment continues to grow. The Trade Information Center
estimates a 1.7 billion U.S. dollars export of Vietnamese textile and garment during the first 4 months
of 2008. This is a year‐on‐year rise of almost 39 percent5. In the meantime, the garment sector copes
with a chronic shortage of materials for its production. Garment experts say that to earn 7.7 billion
U.S. dollars from exports in 2007, the sector spent 5.3 billion U.S. dollars importing raw materials6.
On the question where to find fabrics in Vietnam, we received the answer from Mr. Manning, owner
of apparel agency/supplier Indo Pride International in HCMC. He informed us that “all fabrics can be
found within 2 hours drive from HCMC. At macro scale, most fabric is to be found in South Vietnam.”
Different sources have independently informed us that “the fabrics available in Vietnam are mainly
cotton, followed by polyester and silk” (Mr. Toan, owner of Yen Bien Company in Hanoi). Below we
will discuss the production and availability of these three types of fabrics in Vietnam separately.
Cotton
Three out of the four agents and experts we interviewed, informed us that cotton is the main fabric
available in Vietnam. Due to the rapid development of the Vietnamese garment sector, the demand
for cotton has increased drastically. However, according to the report of the Voice of Vietnam (VOV),
Vietnam’s cotton acreage has been reduced in 2008 to 6,000 ha and only produces 2,600 tonnes7. The
garment sector’s demand is about 160,000 tonnes of cotton and needs up to 200.000 tonnes for its
export plans. The current production of 2,600 tonnes therefore doesn’t even meet more than 2
percent of the garment sector’s demand. The 2001‐2010 cotton development program has been set
up to expand the cotton acreage to 150,000ha, which should produce approximately 80,000 tonnes.
These plans have great difficulty reaching their goal. The cotton acreage has been shrinking year on
year. The Dak Lak province for example, has a large acreage under cotton cultivation in the Central
Highlands. However, the acreage has downsized from 16.000ha in 2002 to 9.000ha in 2003, 4.000ha
in 2004 and still decreased after 2004. The main cause of the continuing shrinkage in the cotton
acreage is its low economic efficiency. Farmers are selecting other short‐term cash crops of higher
economic values to grow, such as maize and soybeans rather than cotton. On average, cotton growers
need 3.5‐4 million Vietnamese Dong (VND) to invest in 1ha of cotton to yield a ton of seeds and earn
just 3 million VND. Meanwhile, when they grow maize, which yields 5 tonnes/ha, they can earn up to
10 million VND. In 2004 the Vietnam Cotton Company even proposed that the government should
stop cultivating cotton in the flood‐prone Mekong River delta and adjust the cotton acreage from
80.000ha to 50.000ha by 2010. Despite these difficulties, the Vietnamese Textile and Garment Group
(VINATEX) set its mind to create 45.000‐50.000 new hectares of cotton growing area by 2010. To
realize this goal, they developed cotton plantations in Ninh Thuan, Binh Thuan, Dak Lak, Quang Ngai
and Dong Nai provinces8.
Polyester/synthetic fibers
According to different news articles, the polyester production in Vietnam is increasing and big
investments are made. At present (2008), the supply of polyester fiber produced by foreign‐invested
and private factories nationwide only meets around 4 percent of the Vietnamese demand. The
VINATEX and the Vietnam National Oil and Gas Group (PetroVietnam) recently have jointly poured
over 125 million USD into the development of facilities for producing polyester fiber from
petrochemical products at the Hai Phong‐based Dinh Vu Industrial Park. They plan to meet 15‐20
percent of the national demand for polyester fiber by 2009 and 50 percent by 2012. The VINATEX and
4
th
http://www.vietpartners.com, 10 June 2008
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http://english.peopledaily.com.cn, 10 June 2008
6
th
http://english.vietnamnet.vn, 19 May 2008
7
th
http://english.vietnamnet.vn, 19 May 2008
8
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www.vinatex.com, 19 May 2008
5
International Business Research Vietnam 2008 – Bandolera
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PetroVietnam have called for foreign investors to build three polyester fiber factories in southern
Dong Nai and Binh Duong provinces.
We received more information about the production of polyester from Mr. Toan, owner of Yen Bien
Company in Hanoi. He told us that “Taiwanese and Malaysian manufacturers produce polyester in
Vietnam but only for reason of export. Thai Tuan is a well known fabric producer in Vietnam (mainly
for polyester), but their fabric is expensive in local terms.” We visited the Thai Tuan Textile and
Garment Corporation at the 9th of May 2008. In Vietnam the company is well known for its production
of polyester fabrics. They specialize in producing jacquard, plain from polyester, spandex and viscose,
using technologies transferred from Japan and the EU. Thai Tuan supplies a variety of fabrics, of which
most is exported to surrounding Asian countries. Their capacity is 15 million meters fabric per year
with 1.500 workers employed. The delivery time of their fabrics is 50‐60 days by ship. In high peaks in
the business the delivery can take about 70 days. We took different samples with us to give Bandolera
insight in the Vietnamese level of quality.
Silk
The Vietnamese silk production has a long history in which Vietnamese silk was produced locally for
royal families or people of rank. Vietnam’s province Ha Tay, was known as the biggest and oldest silk
production centre in Vietnam. The most popular and biggest village was and still is Van Phuc, 10 km
south of the centre of Hanoi. Van Phuc Village, now has 730 households with 1.600 people earning a
living by weaving silk. The village stocks a wide variety of silk products, and ships goods all over
Vietnam, as well as exported overseas. Fabric made of 50% silk, 75% silk or 100% silk is priced
depending on the quality of pattern and fabric thickness. Statistics show that 785 of all 1.343
households in Van Phuc commune take part in the craft. Silk sales generate about 1.6 million USD and
make up 63% of the commune's economy each year. Given that each power‐loom generates one
weaving job, the craft village can create more than 1.000 jobs each year9.
We visited Van Phuc on the 3rd of June. In the village we visited 2 homes where we were showed the
process of making silk and the silk market. Many shops sell garment, ties, and other accessories.
‘White yarn/silk’ costs about 150.000 VND (9 USD) per meter. Their product capacity is not high, they
can i.e. make 4,5 meters (is 9 roles of yarn) per day. This concerns the thicker silk, which is more
expensive because more cocoons and more labor are needed for production. Plus it’s more difficult to
put on a role. Silk from the Van Phuc village is not exported for commercial ends. Cocoons are sourced
from the Ha Dong province: Dan Phuong (Hoai Duc). There is a small silk production in Vietnam, but
still in a traditional way and of low quality. Japanese silk has higher quality because they have thinner
yarn and better machines. Vietnam does not have the machinery and capacity to produce silk for the
industry to export. These findings were in line with what we already heard during our interview with
Mr. Manning (owner of apparel agency/supplier Indo Pride International in HCMC). He told us that, in
Vietnam you can find “…some silk, but this market is very narrow. The average Vietnamese does not
buy silk (to expensive) and the silk is not as fine as that from Japan or even as that from china.
3.3
Conclusion
The first research question considers the availability of fabrics in Vietnam. In this conclusion we try to
answer this question and its sub questions. Sub question 1.1 (What kind of fabrics does Bandolera in
general use for the production of her collections?) has been discussed in chapter 2. Bandolera design
process starts with special fabrics of preferably high quality. Furthermore, it is important that the
quality of the fabrics is stable.
The sub question 1.2 discussed the availability of fabrics in Vietnam. The question is “What kind of
fabrics are available in Vietnam? Which are produced domestically and which have to be imported?”
Concluding from the information as described in this chapter we can conclude that most common
fabric found in Vietnam is cotton. There is some production of polyester and silk, but there is not
much and the quality is worse than that of competing, surrounding Asian countries. All fabrics that
can’t be bought from the local market are imported. This certainly counts for high quality fabrics
9
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http://english.vietnamnet.vn, 27 May 2008
International Business Research Vietnam 2008 – Bandolera
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which still need to be imported from countries like Thailand, Taiwan, etc. Although the government
plans to expand the production of fabrics with incentives the production of cotton is decreasing due
to low economic efficiency. Furthermore, the demand for low quality, high quantity fabrics is much
bigger than the request for special fabrics of good quality.
Sub question 1.3 discussed the delivery times of the fabrics. Information about delivery times were
received during company visits. In general the delivery time of fabrics imported from China, Taiwan,
Korea, etc is 4‐10 days if the fabric is available. When companies also produce their own fabrics, the
time to produce them is on average 21‐28 days. We have little information about the delivery time of
domestically produced fabric, but the best estimation is about 2‐5 days if the fabric is available. The
last sub question focuses on the comparison of the quality of fabrics produced in Vietnam, compared
to the surrounding exporting Asian countries. The information we conducted during our literature
study as well as the information we received in Vietnam self points to a low‐to‐mid level quality
fabrics. Compared to surrounding Asian countries, Vietnamese fabrics are of lesser quality. In terms of
quality, Vietnam cannot compete with countries such as China, Taiwan or Japan. Although Vietnam is
heavily investing in its fabric production capacity, these still face many difficulties and the market is
unstable.
International Business Research Vietnam 2008 – Bandolera
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Chapter 4
The Vietnamese Garment Industry
With a good insight in the Vietnamese fabrics industry, this chapter focuses on the Vietnamese
garment industry. In 4.1 we give a general overview of the Vietnamese economy. This paragraph is
followed by a focus on the export of the textile and garment industry in 4.2. In paragraph 4.3 we give
a rough overview of the textile and garment enterprises settled in Vietnam. Many enterprises are
member of the VITAS: a non‐governmental umbrella association working in the field of textile and
garment industry in Vietnam. Their roles and future plans will be described in paragraphs 4.4 and 4.5.
In 4.6 a short conclusion will be given about the Vietnamese garment industry.
4.1
Economy
Over the last many years, Vietnam textile and garment industry has witnessed strong development.
Products made in Vietnam have penetrated to the world market, thus it was contributing to the
economic development of the country. The export values increased rapidly, and this sector is one of
the industries that is for many consecutive years ranked very high in terms of key export products.
The industry counts near 2.000 companies who have in total more than 2 million workers. Over many
years, the industry continuously invested and changed equipment and technology to meet the market
demand and to improve its competiveness.
In general there are two major factors which contribute to Vietnam’s remarkable performance. The
first is the transition of central planning to an open‐market system and the second is the increasing
integration between regions and countries by becoming a member of the Association of Southeast
Asian Nations (ASEAN), ASEAN Free Trade Area (AFTA) and the World Trade Organization (WTO).
These 2 factors are strongly related to each other. The Vietnamese textile and garment industry made
significant achievements, thanks to the above mentioned factors and the political stability. The
industry employs a large labor force, with low labor cost. Thanks to the open door policy, the
government of Vietnam took bold reform measures to promote the economic development of the
country.
In 1995, Vietnam became a member of the Association of Southeast Asian Nations (ASEAN). Vietnam
actively participated in all activities of this organization and step by step integrated into the regional
and global economy for the benefit of the country (and region). On 1 January 1996 Vietnam officially
joined the Commonly Effective Preferential Tariff (CEPT) and implemented the AFTA with the
roadmap of ten years (1996 – 2006). In that period all tariff on textile and garment products is down
to 0 – 5% only.
Given the current trend of economic globalization and integration of countries around the world, the
competition is hard in gaining market share. Vietnam (and other developing countries) has to cope
with many difficulties: it is currently less developed in terms of machinery and equipment,
technology, and labor skills. Other difficulty is the high inflation (2007: 16%10) and economic growth
(2007: 8,5%11). Besides this, labor costs are becoming more competitive. There are many workers in
this sector, so companies compete with each other to get (the best) workers. On the other side, it
could be possible that in future labor costs are getting less important when there is more demand for
technical skills. However, nowadays economies of scale play an important role in all of these activities.
Vietnam’s accession to the WTO on 11 January 2007 brings significant opportunities to the garment
exporters. They are not restricted anymore by export quota’s (quantity restriction). However the WTO
brings opportunities to enter markets of all countries, and therefore competition among the
exporters is becoming tougher.
10
11
th
www.iht.com, 5 June 2008
th
www.english.vietnamnet.vn/biz, 5 June 2008
International Business Research Vietnam 2008 – Bandolera
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4.2
Export of textile and garment
In short, the textile and garment sector has made a remarkable contribution to the economic
development of Vietnam. With nearly 2 million people involved, the industry contributes 8,2% to
Vietnam’s industrial value, 5 billion USD or 16,5% to the country’s export turnover for the year of
2006. In table 4.1 an overview of the total textile and garment export of Vietnam is given.
Table 4.1 Total Textile and Garment Export 1997 – 200612
Value (USD million)
Growth rate (%)
1997
1.349
17,3
1998
1.351
0,1
1999
1.747
29,3
2000
1.892
8,3
2001
1.962
3,7
2002
2.752
40,3
2003
3.654
32,8
2004
4.386
20,0
2005
4.838
10,3
2006
5.834
20,6
Export growth since 2001 has been steep. It was particularly strong in 2003 at 33% and in 2002 at
40%, but growth slowed in 2005 to just 10%. This was due mainly to the fact that quotas restricting
imports from other Asian countries were eliminated at the beginning of the year, but imports from
Vietnam into the USA ‐ Vietnam's largest export market ‐ were still subject to quotas. US retail buyers
therefore turned to countries such as China and India for their clothing. In 2006, however, the USA
implemented safeguard quotas on several categories of Chinese textiles and clothing, with the result
that buyers returned to Vietnam. As a result, Vietnamese exports soared by 20,6% to USD 5.834
million.
As mentioned before Vietnam joined the WTO in 2007, and the USA was obliged to remove all quotas
on textile and clothing imports from the country. The removal of quotas boosted US demand for
Vietnamese clothing, especially for lower‐end products.
In Table 4.2 an overview is given of the export divided to several markets: EU, US, Japan, or other
countries.
Table 4.2 Textile and Garment Export (by market)13
2006
2005
2004
2003
2002
EU
21%
16%
18%
18%
US
52%
56%
57%
55%
Japan
11%
13%
13%
14%
Others
16%
15%
12%
13%
Total USD (million)
5.834
4.838
4.836
3.654
2.752
Vietnam plans to double the value of its textile and garment exports from USD 4.8 billion in 2005 to
USD 10 billion, according to a new report by Textiles Intelligence. At the same time it hopes to double
the number of people working in the industry from 2 million to 4 million workers. Vietnam’s textile
and garment industry plans to achieve these targets by streamlining production and thereby reducing
unit costs to boost international competitiveness. On the way towards achieving its 2010 objective,
the industry has set an export target for 2007 of USD 7 billion14.
4.3
Overview of companies
As mentioned before there are on average 2.000 textile and garment companies in Vietnam. In table
4.3 an overview is given of the companies split up by locations or by product categories. Especially in
the South of Vietnam (near HCMC) most enterprises (70%) are established. In the North are (near
Hanoi) 10% of the companies located, and in the rest and Central Vietnam the other 20% are
established. In Appendix 4 a map of the provinces of Vietnam is attached. In Vietnam are 50 state‐
owned companies, the others are limited liability companies, joint stock companies, and private
companies (on average 1.500). The remaining enterprises are (foreign) investment projects and joint
ventures.
12
Vietnam Textile and Apparel Association, Directory 2006, p.9
Vietnam Textile and Apparel Association, Quality – Credibility, 2007
14
th
th
www.just‐style.com, 4 June 2008 (article of 8 August 2007)
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International Business Research Vietnam 2008 – Bandolera
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Table 4.3 Number of enterprises (updated 2006)15
By location
Ho Chi Minh City
1090
Hanoi City
157
Dong Nai province
142
Binh Duong province
116
Long An province
27
Da Nang city and surroundings
55
Others
364
By product categories
Materials and spinning
Woven
Non‐woven
Garment
Accessories
Services
96
382
6
1446
35
265
The main difference between state‐owned companies and private companies is the decision‐making
process and the size of the company. In state‐owned companies the decision‐making is rather slow.
This is because these companies are really big, and that there is much more hierarchy than in private
companies. In these enterprises there is more decentralization, like less hierarchy, faster decision‐
making process, and having the possibility to decide on your own.
Many garment factories cooperate with another factory. They have ‘subcontracts’. Most factories
cannot do every activity to finish a garment product. That is a main reason why companies have
subcontracts and why they are more dependent of each other.
4.4
The Vietnam Textile and Apparel Association
The Vietnam Textile and Apparel Association (VITAS) is a non‐governmental umbrella association
working in the field of textile and garment industry in Vietnam. They have 15 branches in Vietnam and
in total 635 members. These members account for 70% of the total capacity of the industry.
The role of VITAS is to promote business and investment cooperation as well as exchanging
information among members, between members, and the outside. Furthermore, VITAS represents its
members and consults the State and Government bodies that are relevant and comforting policies
and mechanisms relating to the development of the Textile and Garment industry in Vietnam. The
VITAS is representing the Vietnam textile and garment industry in international organizations and
tries to be a bridge of cooperation between the domestic industry and the outside world. The VITAS
also supports foreign companies in looking for Vietnamese textile and garment producers.
One of the biggest members of VITAS is The Vietnam Textile and Garment Group (VINATEX), which is
the biggest group of companies in the field of textile and garment in Vietnam. It has over 90 member
companies in Vietnam which together cover activities from spinning, knitting, weaving, and dyeing to
finishing. The total labor force of the VINATEX is nearly 100.000 employees and another 35.000
employees work in joint‐ventures with foreign and local partners. The production capacity of the
VINATEX is 100.000 tons of spun yarn, 250 million square meters of fabrics, 350 million pieces of
woven garment, 80 million pieces of knitting, 200 million pieces of garment, and 15.000 tons of raw
cotton (data from 200616).
The VITAS gives advice to the government, and together with the big stakeholders they set some
plans for future to increase development, competition, and export. In the next paragraph those plans
are described.
4.5
Future plans
The industry needs government support to accelerate its development to shorten the gap to other
large exporters in the world. Together with the VITAS the government made investment plans to
increase exports. To achieve those goals the government came up with two main policy objectives: (1)
shift the focus in garment manufacturing from CMT (cut, make and trim) to FOB (free on board)
production, and (2) increase the domestic content of garment production by investing in cotton
production, and in spinning and weaving facilities. The government has also identified three other
aims for the industry:
15
16
Vietnam Textile and Apparel Association, Quality – Credibility, 2007
Vietnam Textile and Apparel Association, Quality – Credibility, 2007
International Business Research Vietnam 2008 – Bandolera
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1.
2.
3.
The industry must build on its existing reputation for high quality by moving from the lower
end of the market to the mid‐range and the high end of the market.
The industry must become more efficient in the sourcing of materials. This should be
achieved by:
‐ increasing Vietnamese fabrics production;
‐ implementing more efficient import sourcing methods;
‐ achieving further vertical integration by adding upstream capacity.
The competency and productivity of the industry must be increased by enhancing research,
training and development.
The government is planning to invest around USD 3 billion in developing the textile and garment
sector during the run‐up to 2010. It is envisaged that USD 180 million will be spent on projects to
expand raw material supplies, USD 2.27 billion on textile and dyeing projects, USD 443 million on
garment projects, and USD 200 million on trade centers and personnel training.
Meanwhile, state‐owned VINATEX plans to invest over USD 1 billion in 24 key expansion projects from
2006 to 2010. According to VINATEX, these projects aim to develop production and distribution
systems, fashion design and infrastructure.
One sector targeted for expansion is raw cotton production. To process the additional cotton
produced, VINATEX plans to invest USD 26,7 million in the construction of five new cotton processing
mills during the next two years in a bid to satisfy demand for raw materials from the country's textile
producers. Further down the supply chain, VINATEX expects to produce over 400 million square
meters of fabric per annum by 2010, including 270 million square meters for export.
There are also projects of the industry with the goal to invest in upgrading the productivity. These
special programs are in line with the industrial strategies and the WTO‐framework. These programs
include:
‐ Investment in raw material development;
‐ Investment in fiber production;
‐ Investment in cloth weaving;
‐ Investment in knitting development;
‐ Investment in developing color printing, dyeing and finishing;
‐ Investment in producing synthetic cloth;
‐ Investment in producing industrial textiles;
‐ Investment in mechanical industry for textile and garment;
‐ Investment in environment protection and social responsibility;
‐ Investment in producing garment accessories.
The Vietnamese textile and garment sector is rapidly catching up with surrounding countries such as
China and Taiwan. The investments of the government and the low labor costs attract many foreign
investors and customers. However, earlier investment plans of the Vietnamese government have
often shown to go wrong or get mixed up at the implementation phase due to lack of funds or
planning and communication problems. At the moment high inflations and economic growth are
affecting the Vietnamese industries negatively. Another problem is that many industries in Vietnam
are developing faster than the infrastructure, causing logistic difficulties.
International Business Research Vietnam 2008 – Bandolera
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Chapter 5
Evaluation of Garment Producers
In this chapter we will give an overview of the visited garment producers in Vietnam. As mentioned
before we visited 17 companies both state‐owned and private companies. In general state‐owned
companies have a very large production capacity and most of the times they only produce basic
garment (with less details and embroidery). In general, small orders are more easily accepted by
private companies which are more flexible in making detailed garment. In the first paragraph we give
a description of the visited companies. In paragraph 5.2 we evaluate the companies potentiality based
on 5 prior requirements. Because we did not have price estimations from all companies for all
samples, we did not take the price level in consideration in this evaluation. General price comparisons
are made in paragraph 5.3 with Bandolera’s current producers. In paragraph 5.4 we shortly discuss
the excluded companies and the reason for rejection. The chapter ends with a general conclusion on
the Vietnamese garment market.
5.1
Description of visited garment companies and factories
Of each garment producer we give a short overview of the company visit in which we first discuss a
few details about the establishment of the company, their export experience, the fabrics they work
with, and the kind of garment products they (can) make. After that we give a short summary of the
key details of the company: capacity, certificates, customers, factory capability, use of other materials
and delivery times. We conclude every company description with the payment terms and minimum
order quantity they and a conclusion. It must be noticed that a couple of companies miss some details
on which they will be compared to others. There are three main reasons why this happened. Firstly,
there were some company visits during which the companies were not able to answer all of our
questions. Another reason is that during some company visits there was simply no time to ask about
all criteria selections. And last of all, there were some selection criteria of Bandolera that we received
after we already visited some companies (i.e. minimum order quantity).
Complete reports of interviews/observations are on the attached DVD, including the directories of
this presented report.
1. AGTEX 28 COMPANY
Agtex is a state owned company, established in 1975. In HCMC they have 6 factories, in total they
have 5.500 employees. Of the total production, 60% is exported to the US, 20% to the EU, and about
10% to other Asian countries.
At Agtex they make fabrics and garment. Of the fabric production they have a spinning capacity of
100% cotton combed yarn, T/C yarn. Furthermore, they have a weaving capacity to make high quality
wool, wool blend, T/C, T/R and 100% cotton fabric. Dyeing is done in their own fabric, they dye high
quality wool, wool blend, T/C, T/R, 100% cotton fabric. They can produce fine fabrics until a weight of
500 gram. Micro‐fibers are imported from Thailand. 100% cotton yarn is produced in own factory,
polyester and woolen yarn are imported from Korea. The washing of garment is outsourced. For the
garment, they are specialized in making jackets, trousers, lady suits and blazers.
Capacity:
men’s shirts and ladies’ blouses (3 million pcs/per year), Trousers and pants (2
million pcs/ per year), Uniform (3 million sets/ per year), Men’s and ladies’ suit (1
million sets/ per year) and Sport suit (500.000 sets/per year
Certificates:
ISO 9001:2000
Customers:
United Colours of Beneton (pants), Alfred Dunner (jackets) and Dorthoty Perkins
(jackets for USD $10‐12).
Factory:
spinning, weaving, dyeing, cutting, sewing, finishing
Other materials: interlining (Korea); shoulder pads (UK); YKK and YBS zippers; buttons sourced local
Delivery times: micro fibers: 30 days; Interlining: 15 days; Shoulder pads: 20 days. Production of
proto‐type takes 5 – 7 days; production of fitting sample 2 days; production lead
time is 30 days.
International Business Research Vietnam 2008 – Bandolera
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They mainly work with FOB pricing. Minimum order quantity is 1.000 pcs, minimum per color is 1.000
meters of fabric.
Conclusion: this is possibly a potential company because of the jackets and suits they can make, but
we have not seen very special fabrics or embroidery machines. Also this is a state‐owned company
which usually guarantees that they only take big orders. They have sent us fabrics which we will send
to Bandolera for further judgment.
2. CHOLIMEX GARMENT JOINTSTOCK COMPANY
Established in 1986, belongs for 50% to the government and is for 50% a joint stock company. In
HCMC they have 2 factories, but they also have subcontracts with other factories. They have 500
workers in 1 factory, in total 700/800 workers. They export to Europe, (The Netherlands, France,
Germany, Russia, Hungary, Bulgaria), the US, Canada and some Asian countries.
Main fabrics they work with are cotton and denim. They source it partly local, and also import from
China. For high quality fabrics, the customer has to supply the fabric. For the garment, they mainly
produce pants, jeans and also shirts. They are specialized in sewing (they have 800 sewing machines).
Capacity:
Certificates:
Factory:
Other materials:
Customers:
Delivery times:
1 line/400 pcs/day
ISO 9001:2000, SA8000
printing, weaving, sewing
YKK zippers
Nike, Wallmart, Steve & Barry´s denim, raider jean co, Dickies, Adidas, Lee sports,
Pierre Cardin
normally it takes 40 days to import fabric from China. Other information not
available
They usually work with CMPT prices, but they also work with FOB pricing. Minimum order quantity of
trousers is 6.000 pcs.
Conclusion: this is not a potential company, because their minimum order quantity is too high.
3. DONG PHUONG KNITTING COMPANY (DOPIMEX)
DOPIMEX is a state‐owned company, established in 1973. Now they have 2 factories: knitting, and
dyeing & sewing. They will expand the sewing factory to have a total of 3 factories. Current number of
employees is 700. They export to the US 40%; EU 30%: Germany (2 customers), England, Holland,
Switzerland. They produce both fabrics and garment.
The fabrics they produce are of middle‐quality. Most of the yarns are sourced in Vietnam. Sometimes
it is imported from Korea (higher quality). The fabrics they produce are elasthan, spandex, cotton, and
polyester. They import MELAND YARN from Korea.
Main garment products are knitted products like t‐shirts, polo‐shirts, fleece, and uniforms. Printing,
embroidery, washing are all subcontracted. Accessories are bought from local market.
Capacity:
Certificates:
Customers:
Factory:
Other materials:
Delivery times:
3.000.000 pcs/year (sewing capacity)
ISO 9001:2000
US: Target, JC Penney, C&L; Holland: TNT (polo‐shirts).
cutting, dyeing, knitting, sewing
YKK zippers, Meland Yarn
Meland Yarn import from Korea takes 20 days. Making proto sample takes 3‐7 days.
First (sample) order: 30 days, next orders 40‐60 days per part. With 4 colors and 6
sizes it takes 90 days for the first part of the order. Next parts of the order take 60
days.
Pricing is usually on FOB (80%), but can also be done on CMP (20%). They can also do on C&F/CIF
(they did this before for the US). Minimum order quantity is 30.000 pcs. They think that an order of
5.000 pcs with 2 or 3 colors is very small.
International Business Research Vietnam 2008 – Bandolera
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Conclusion: based on the above mentioned this is not a potential company because their minimum
order quantity is too high.
4. DUY THINH COMPANY, LTD
This company has in total 3 factories and about 750 workers. The head office is in HCMC, but they also
have offices in Shanghai and Thailand. This company supplies garment to the local market and export
it mainly to the US. They can weave the yarns to fabrics. Fabrics they use are cotton (20/40 gms),
elasthan and polyester. They source the fabrics local, but do also import the fabrics from China and
Thailand (higher quality). Main product we saw are shirts. To place an order customers have to book
space in advance: 3 – 6 months before. This is because many buyers from China move their
production order to Vietnam. At the moment their factory capacity is occupied until September 2008.
Capacity:
Certificates:
Customers:
Factory:
Other materials:
Delivery times:
500.000 pcs/month (shirts)
no ISO norms
mainly warehouses, Vanity, 2AmazeU
weaving, cutting, sewing, finishing, printing
YKK zippers; buttons sourced local
7‐10 days to make counter sample. Production of complete order depends on the
quantity; 30‐60‐90 days (fabric+ CMPT+ thread + button+ printing+ packing).
Pricing is done on FOB terms. Their Payment term is T/T 30% deposit, 70% before shipment. The
minimum order quantity is 3.000 pcs with a minimum of 1.000pcs/color.
Conclusion: this company is only potential for production of simple shirts in larger quantities, we
haven’t seen any detailed fashionable garment.
5. HOA MY TRADING‐SERVICE & MANUFACTURE COMPANY, LTD.
This company produces underwear for men and women and also underwear dresses. Main fabrics
they use for the production of underwear is cotton and polyester, and sometimes silk. They produce
underwear for the higher segment of the industry. The largest part of their products is sold in big
warehouses in Japan. Some of their products are produced for the local market. They do not export to
the US or the EU.
The capacity of their factory is about 20.000 pieces per week. They have about 50 employees working
in their factory. They also have their own cutting room and a design team of about 8 people. They
mainly import their fabrics from Taiwan and for the rest use some local fabric suppliers. The home
made fabrics are of moderate and not always stable quality.
Conclusion: this is not a potential company, because Bandolera is not interested in underwear.
6. MAI LAN ANH GARMENT AND TRADING CO., LTD.
This private company is established in 1990. They have 2 factories and about 700 workers in factory.
The visited factory has 5 lines. The other has 10, of which 3 lines are reserved for Japan and the other
7 are used for the US customer. Mai Lan Anh exports to the EU (30%), US (50%) and Japan (20%).
Fabrics they are working with are denim, which is imported from China, Hong Kong and some from
Taiwan (higher quality and higher price). They produce mainly pants for women: denim jeans. They do
also khaki trousers. They only make garment. They can make denim jackets, but prefer pants.
Embroidery and washing/laundry is done by sub‐contractor.
Capacity:
Certificates:
Customers:
Factory:
Other materials:
Delivery times:
100.000 pcs/month
no ISO norms
C&A (Germany)
cutting, sewing, spinning, knitting
YKK zippers; buttons imported from China; COATS; also many accessory sourced
local
based on 5.000 pcs fabric delivery (Taiwan/China) takes 1 month; if fabric in store
shipment takes 9/10 days
International Business Research Vietnam 2008 – Bandolera
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Pricing is on CMPT, FOB or C&F. The minimum order quantity is 5.000 pcs/model.
Conclusion: this is not a potential company, because the minimum order quantity is too high.
7. MINH ANH CORPORATION
Company established in 2001 (renamed in 2007). They export to US (35%), Japan (20%), Taiwan and
Europe (40%). In Europe they export to Spain, Paris, Italy, Belgium. They have 1 factory with 150
workers and they use 8 workshops outside their factory for extra sewing of garment. The printing and
embroidery is done by subcontractor.
Most of the fabrics are bought from a fabric supplier in Vietnam. Some is imported from China and
Taiwan. They only work with knitted fabric. Not from Korea, because delivery times are too high. Main
used fabrics are spandex and cotton. The (cotton) rib they use is 1x1 and 2x2. They do not work with
polyester anymore. They mainly produce simple, basic garment like polo’s and shirts.
Capacity:
Certificates:
Customers:
Factory:
Other materials:
Delivery times:
basic garment 200.000‐400.000 pcs/month, non‐basic garment 100.000 pcs/month
no ISO norms
JC Penny, Polo, Canada Houses
cutting, sewing and finishing
COATS (sourced from Phong Phu), Interlining sourced local
proto sample 1 day; import of fabrics from China takes 2 months; dyeing yarn takes
45 days; required lead time is 30 days
They mostly work on FOB base, but they say that pricing on C&F base is also possible.
Conclusion: this is not a potential company because they do not have ISO norms and do not produce
detailed clothes.
8. NHA BE GARMENT JOINT‐STOCK COMPANY (NHABECO)
The joint‐stock company is established in 1957. They have over 12.000 workers and 27 factories (15 in
HCMC, rest in provinces which are 1 – 4 hours driving from HCMC). Turnover of 2007 was 170 million
USD. They export to EU (35‐45%), US (45‐50%), Japan (15%) and local market. EU export countries are
Germany, France and UK. Fabrics are imported from China, Korea, Taiwan, Pakistan, Bangladesh and
sometimes even Italy. They also source fabrics local. However, these are not of high quality, it is just
‘acceptable’. Quality of the used fabrics is stable. Fabrics used are polyester (imported and local),
polar fleece, cotton (local and imported from Bangladesh, Pakistan) and knitted fabrics.
NHA BE is mainly specialized in suits and pants for suits. They do not make small, detailed orders
because they have to keep the machinery running and buy bigger quantities of fabric. They have a
laundry factory (washing) at 1,5 hours driving from HCMC.
Capacity:
5 million pcs of shirts, jackets and coats per year; 1 million sets of ladies and men’s
suit per year; 5,5 million fashion garment per year
Certificates:
ISO 9001:2000, ISO‐9002
Customers:
C&A, Fifth Avenue, Zara, Tayroma, NewLook, C.K., Colombia Sportswear, Perry Ellis,
Wallmart
Factory:
cutting, sewing, finishing, washing
Other materials: COATS; Interlining: Kufner, Freudenberg, Picardie and PCC (local interlining is used
for simple not important parts of the garment); shoulderpads: HELSA, SANKEI
(Japan) and local; YKK, YKK and YCC zippers; buttons of Ruby and sourced local from
many suppliers
Delivery times: import of fabrics takes 50 days; sample lead time is 1 week; product lead time is 30‐
45 days.
They only do FOB prices, but C&F is possible. Minimum order quantity is 2.000 pcs.
Conclusion: this could possibly be a potential company if Bandolera is willing to do an order for suits or
pants for suits without too many details.
International Business Research Vietnam 2008 – Bandolera
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9. PHONG PHU CORPORATION
Phong Phu Corporation is established in 1968. It is a state‐owned company and is one of the biggest
textile companies in the industry with 5.000 workers, and nearly 80 million USD of annual sales
turnover. They produce yarns, towels, denim fabrics, garments and sewing threads of all kinds. They
do only cutting and sewing.
Main garment product is basic denim jeans (cotton denim, straight denim, twill, khaki, calico) with
specializations in manufacturing denim with fashion values as slub, crosshatch and jacquard. They
cannot do a lot of detail, they do not print on denim.
Since 1988 they have a joint‐venture with COATS Plt of England. They also have a modern spinning
mill with the technologies of Muratec and Rieter. They say that the quality of fabric used is stable.
They do not import fabrics, delivery time when not in stock is 15 days.
They export for 30‐40 % to Japan, 50% to US and 10% to other countries. Exporting countries in the
EU are Germany, France and Belgium. They have export experience of 5 years, but they do not have
experience with exporting small fashionable orders. In future they want to expand and keep 1‐2 lines
for fashionable orders.
Capacity:
Certificates:
Factory:
6 million jeans/year
ISO 9001:2000, NF EN ISO 9002:1994
spinning (3 factories), weaving (2; 1 for fabric and 1 for furry towels), finishing and
dyeing (1) and make garment (2). Located in HCMC, Hanoi, Danang and Nha Trang.
Other materials: COATS; YKK zippers
Customers:
DKNY, Benneton, ENYU, OKD
Delivery times: garment production 30 days if fabric available; 45‐60 days including fabric
production; making sample 5 days; after approval it takes 10 days to start the order
which takes 15‐30 days to cut and sew only; shipment to The Netherlands 25 days
The pricing for export is based on FOB and C&F. Minimum order quantity is 10.000 or 20.000.
Conclusion: Phong Phu is a company which offers high quality products. However, their minimum
order requirement is too high for Bandolera. Otherwise it could have been a potential company.
10. PHUONG DONG GARMENT JOINT‐STOCK COMPANY
Phuong Dong was established 10 years ago and is a member of the VINATEX. They have 4.000
workers. In total they have 8 factories (3.500 machines) and they have 1 factory for women’s fashion.
They make pants, shirts, skirts, jackets and dresses (small orders). We did not see them producing it
all.
They only work with woven fabrics. Fabric is imported (60%) from China, Pakistan, Taiwan, Malaysia,
Indonesia and Sweden. Fabrics which they source local (40%) is 100% cotton, 70% cotton/30%
polyester, spandex and elasthan. Imported fabrics are mainly cotton, polyester and 100% nylon. They
do not work with wool and silk. About linen they are not sure. Fabric suppliers are Tung Shin Fabric
Company, Wool Italy, and for washing (also stonewashing) they have subcontract with Do Thanh
Company. Accessories and elastics are sourced local. For dyeing it is not clear, but is probably no
activity of Phuong Dong because they only produce garment. The level of English speaking was below
average, because the manager was not available.
Capacity:
Certificates;
Factory:
Other materials:
Customers:
Delivery time:
large
ISO 9001:2000, SA8000
cutting, sewing, finishing. Printing inside and subcontract
COATS; Interlining: PCC, Kuffner, Chargeur; shoulderpads: local; YKK zippers
Nike ACG, ProJob (Sweden), Columbia Sports, SJB Active, Chiros, Boys Scouts of
America, Titanium, Nautica, PerryEllis, Grand Slam, Eddie Bauer, Worthington, LA
Conduct (kids)
importing fabric from China to HCMC by sea 1‐2 months; making proto sample 1
week, for 50 pcs this is 1‐2 weeks
Pricing is on C&M, CMT, FOB and C&F. Minimum order quantity is 3.000 pcs and 1.000 pcs/color.
International Business Research Vietnam 2008 – Bandolera
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Conclusion: this company is only potential for basic cloths or suits
11. PROTRADE GARMENT CORPORATION LTD.
Garment Export Enterprise situated in the Binh Duong Province. They have many factories and each
has its own specialization. They are specialized in woven products and focus mainly on jeans, casual
pants and shirts. They showed very good samples (brand names: Marveus, Express design studio, Lei
denim jeans) including many details (belt, prints, glitters).
They have 2.500 workers. They have excellent work conditions and all new employees get a training
of 35 days in their own training institute.
They export to the US (30%: AMF, NF Polyester, Express, Pacific Sunwear). Exporting countries in the
EU (65%) are Germany, France, UK, and Sweden. Fabrics are imported from Korea, Japan and Taiwan.
They only work with woven fabrics like cotton, polyester and denim. We saw big stocks of fabric. They
source a little local. Production of denim jeans (including embroidery) looks really good. Also lining
and interlining are of good quality. We saw production of rib trousers (Abercrombie) and blouses
(Marks & Spencer), mainly for males. Also for women, but only when it is simple/basic. Also shirts are
produced here. Protrade has a partnership with Alan lee Washing Company LTD. This washing
company is 15 minutes driving from Protrade.
Capacity:
jeans 200.000 pcs/month; casual jeans 180.000 pcs/month; shirts 300.000
pcs/month
Certificates:
ISO 9001:2000
Factory:
cutting, sewing, finishing, designing, embroidery
Other materials: YKK zippers, COATS
Customers:
Marks & Spencer, Decathlon, Tchibo, Refuge, Abercrombie, JC Penney, Kohl’s, Walt
Disney, Sears, Haggar
Delivery times: no information available at the moment of the interview, because the interview was
part of the visit of the University of HCMC at this company
Pricing is based on FOB. They do not have experience with C&F, but maybe can do in future. There is
no minimum order quantity (from 100 – 200 pcs to 1 million). They can also do small orders.
Conclusion: this could be a potential company for Bandolera. They have good specialties in
embroidery.
12. SAIGON 3 GARMENT JOINT‐STOCK COMPANY (GATEXIM)
Saigon 3 is established in 1986. From that time they focused on jackets and sportswear, but now their
main focus is on making (denim) jeans and (khaki) pants. They have in total 6 (sewing) factories with
33 sewing lines (2.600 machines). The factories are divided between different customers. Saigon 3
Garment Company has a fashion centre: they design garment for local market. They have 2.800
workers in factory.
They export to USA 40%, EU 5%, Japan 50% and 5% to others. There is less export to Europe because
customers in Europe order too small and too detailed quantities. They export 10 million pcs/year. You
have to reserve production lines for 6 months or you have to place order 6 months in advance.
This company only makes garment, mainly jeans and pants. They only work with woven fabrics, no
knitted fabrics. They prefer to make pants with a maximum of 5 pockets. Otherwise it is too detailed.
They can do embroidery, but outside (subcontract).
Fabric is imported (80%) from Japan, Hong Kong, China, Taiwan (denim, khaki, canvas, poplin). Local
(20%) they supply the same fabrics but with less quality. Local fabric suppliers in Vietnam are TCE,
Pangnim, Choorgnaw (all Korean of origin) and Phong Phu (company we also visited). Most of the
time fabrics are in stock.
Capacity:
Certificates:
Factory:
Other materials:
600.000 pcs/month
ISO 9001:2000
cutting, sewing, finishing
interlining: Kufner, BCC, Vilene (all imported) and some local; COATS (delivered by
Phong Phu); YKK and HKK zippers; buttons sourced from Hong Kong (Kudhom, also
located in Italy and Sweden)
International Business Research Vietnam 2008 – Bandolera
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Customers:
Delivery times:
Arizona, Esprit/EDC, Levi’s (for many years), DKNY, Boy Friend Jeans, UniQLO , Style
up, Emilio Shorts, Stockholm (Sweden), Columbia, C&A, Nike, JC Penney, Tropical
Sportswear
import fabrics from China or Taiwan takes 4 days by sea; If supplier does not have
fabrics in stock it takes an extra 2 weeks; Production lead time for 20.000 pcs is 4
weeks; Making first sample 4 days (including washing Æ subcontract); Making
fitting samples 4‐14 days
The pricing is only on CMP and FOB. C&F is possible in future when relationship is established.
Minimum order quantity is 5.000 pcs per style/color. Smaller orders are acceptable when you also
place orders of >5.000 pcs. Usually the orders of Europe are smaller because of the many details.
Conclusion: this can be a potential company for Bandolera, but only for pants without too many
details. Chance exists that they don’t want to produce for Bandolera, because the orders are too small.
13. THANH CONG TEXTILE GARMENT JS COMPANY
This company is established in 1976. Thanh Cong produces fabrics and garment. In total they have 7
factories and 5.500 workers. Their recent turnover is USD 65 million/year. They export to the US
(60%), EU (15%) and Japan (25%). They export mainly shirts (like EDC/Esprit), knitted uniforms. They
also sell at local market.
They use many fabrics: combed cotton, polyester, viscose, TC/CVC, polyester/viscose yarn, OE 100%
cotton yarn, and slub yarn for giving special effects on fabrics. The weight of the fabrics they produce
is from 20‐60 gms. This is the finest they can do. They can make woven fabrics and knitted fabrics, but
cannot make woven garment because they do not have the machinery for that. Fabrics they import
are mostly from COOLMARK® (Taiwan), others are sourced local. They say that quality of the fabrics is
stable. According to Mr. Duy Thai of HCMC University the quality of fabrics is mid‐level. The knitted
fabric for EDC is imported from Hong Kong.
Printing and washing is subcontracted. However they can only do simple design printing. Buttons are
imported and dyed in their own company. Accessories are sourced at the local market. Garment they
make are mainly shirts. They cannot make jeans. They only can make garment of knitted fabrics.
Cotton is the main fabric for garment.
Capacity:
Certificates:
Factory:
large
ISO 9001:2000, SA8000
spinning lines, weaving looms, knitting machines, dyeing, sewing, finishing,
embroidery
Other materials: YKK zippers; Interlining: Freudenberg, Vilene;
Customers:
EU: EDC, Melcosa, Marubeni, Visconti, H.T. Hughes, Canada House; US: Columbia,
Eddie Bauer, Haggar, JC Penney
Delivery times: if fabric not in stock at supplier delivery time is 60 days; dyeing takes 3 days; proto‐
types 3 days if fabric is available (capacity sample room 300 pcs/month); product
lead time 45 days till shipment (based on 1.000‐20.000 pcs); Shipment 30 days
(costs are USD 2.500)
Pricing is mostly on FOB, but C&F is also possible. Minimum order quantity is 1.000 pcs/color.
Conclusion: this company is interesting for shirts like EDC/Esprit, but we haven’t seen anything with
many details and according to our contact person quality of the fabrics is mid‐level.
14. THANG LOI INTERNATIONAL GARMENT JSC (VIGATEXCO)
This company is established in 1959. They are a state‐owned company and the main products they
offer are woven fabrics, bed sheets, jackets (Dockers), shirts, pants, and nurse uniforms. They have 3
factories and there are working on average 1.050 employees.
Most garment is sold on the local market, but they also export (is increasing). They export to the US
market for 60/70%, and to the EU for 30% (mainly Germany, 3rd producer of Thang Loi), other
exporting countries are Island, Japan, and Hong Kong.
International Business Research Vietnam 2008 – Bandolera
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Thang Loi only makes woven fabrics themselves. They import pro‐material from Africa. Furthermore
they import from China, Thailand and Korea. Main fabrics are imported with stable quality. The order
repeats all the time. It takes 7 days to import fabrics from Thailand to HCMC. They import 20.000
meters.
Capacity:
Certificates:
Factory:
Other materials:
Customers:
Delivery times
247.000 pcs/month
ISO 9002:1994, SA 8000:1997
cutting, sewing, finishing
YKK zippers; accessories, lables, interlining, sewing thread, buttons all sourced local
Dockers, Hangar, Dickies, Mervin, Nautica, PNG, Puma, Pacific Trail
7 days to import fabrics (20.000m. from Thailand);
They especially do CMPT price, but in future they will do FOB. They want to be less dependent on the
customer and provide the fabrics by their selves.
Conclusion: this is not a potential company. They are mainly specialized in uniforms and don’t have
experience with producing fashionable (women’s) fashion.
15. VIET FASHION COMPANY (NINOMAXX)
This fashion company, established in 1998, has 64 shops in Vietnam and 2 shops in the US. This
company is leading the Vietnamese fashion (casual wear, 22% market share) industry, and is still
expanding. They want to open shops in foreign countries but they also want to produce fashion cloths
for other companies without using their brand name. Their brand is the most used and sold in
Vietnam. Ninomaxx has a factory in HCMC, district Vinh Loc, industrial zone (C18 Vinh Loc Industrial
zone, 2F street ) which has 13 production lines. They have 1.000 workers, of which 600 in factory.
Ninomaxx wants to produce for other brands and she is developing this for the near future. Now they
already deliver for other brands in Germany and Italy since 2006. They mainly use fabrics like denim,
cotton, polyester and linen. Fabrics are imported from Thailand, Korea, Hong Kong and some are
sourced local. Quality of fabrics is very good because they have a reputation of the best, leading
garment fashion store in the industry in Vietnam.
They are specialized in women’s fashion. They mainly sell jeans, casual wear, t‐shirts. Printing is
outsourced, but they can attach pearls by tailor. They do embroideries in own factory.
Capacity:
Certificates:
Factory:
Other materials:
Customers:
Delivery times:
1,2‐1,4 million pcs/year
no certificates
cutting, sewing, finishing, embroidery
YKK zippers; buttons local sourced,
O’Neill (sport clothes), GIODANO in Italy (jeans & khaki pants)
no information available
Pricing is on FOB. They do not do C&F, but maybe in future when they have more experience with
exporting. Minimum order quantity is 1.000 pcs, but they can also do orders ranging from 500‐3.000
pcs. They can make everything: of simple pieces they can make 2.000‐3.000 pcs/week, of complex
pieces (i.e. the black/white dress of Bandolera summer 2008 collection) they can make 2.000
pcs/week.
Conclusion: this company can be interesting because they already produce fashionable garment for
women with some details. Downside is that their main business is producing and selling their own
brand in Vietnam.
16. VIET THANG GARMENT JOINT‐STOCK COMPANY (VIGACO)
Viet Thang was established in 1991 and became a private company in 2005. Viet Thang has 1.500
workers. They have 6 factories; one for spinning and weaving, one for dyeing and finishing and 4 for
garment. The different factories work together but do not belong to the same company. Viet Thang
mainly produces wrinkle free pants and shirts and blouses for men. They export about 30% to the EU
(UK, Spain and Germany) and 40% to the US.
International Business Research Vietnam 2008 – Bandolera
31
They can produce fabrics until weight 50 grams. Good quality fabrics are imported from China,
Thailand, Korea, and Japan. Fabrics they work with are cotton, polyester, T/R. In future they are going
to work with elasthan. They do not use silk, wool and linen. They only work with woven fabrics, they
cannot make knitted garment. At this moment they produce shirts, blouses and pants. They do
produce fashionable garment, but only for local market and they do not want to export these kind of
garment. They are not able to do stonewashing for the trousers.
Capacity:
Certificates:
Customers:
300.000 pcs/month
ISO 9001:2000, ISO 14100; SA 8000
Jack Wolfskin, Seiden Sticker, John Harris, Canada (C&A), Piere Cardin, Vossen & Co
(Belgium), Lonneker Textiles BV (The Netherlands), Gruppo Coin Spa (Italy)
Factory:
spinning, weaving, dyeing, cutting, sewing, finishing
Other materials: YKK zippers; accessory sourced local; buttons sourced local; metal buttons imported
Delivery times: fit sample 1 week (if fabric available); import fabric from China 30 days; product
lead time 30‐45 days
Pricing is on CMPT or FOB. They can also do C&F. The minimum order quantity is 1.500 pcs/color.
However, than it is required that there is placed an order of at least 5.000 pcs. 3.000 pcs is possible,
but then pricing is higher.
Conclusion: this is not a potential company, because they produce only large batches and were not
able to show production of garment for women.
17. VIET THY FASHION COMPANY, LTD
This company is established in 1995. They have 100 workers, but the employment is not stable,
because it is hard to get workers in HCMC. They have over 30 sub‐factories. At the moment Viet Thy
Fashion exports to Spain, Sweden, Brazil and a little to Japan. Fabrics they use are imported from
Taiwan, Korea, Hong Kong (30%), and sourced local (70%). Yarn is imported from Korea (Toonkook).
They work with knitted fabrics: cotton and khaki. Garment products they make are children’s wear,
shirts and pullovers. Mainly knitted products: knitted shirts and khaki trousers. The washing, printing
and accessories are done in different sub‐factories.
Capacity:
Certificates:
Factory:
Other materials:
Customers:
Delivery times:
5.000‐10.000 shirts/month; 600.000 pcs/year
no ISO norms (expected next year)
cutting, sewing, finishing
COATS; Interlining: Freudenberg, Wendler (Hong Kong), I&A (Vietnam)
New Portland, New Mix USA, Ruehl no 925 Greenwich St. New York City, No
Boudaries L/G, Pahladium Sweden, Asia Bay (USA), Gimeno (Spain), Bibitas
make fabrics takes 3‐4 weeks; product lead time (incl. making fabric) 5.000 pcs in 2
months, 10.000 pcs in 3 months; proto 1 week, dyeing fabric 2 weeks; delivery
imported fabrics 3 weeks, shipment 5 months (costs USD 1.500)
Conclusion: this is not a potential company, because the company is not able to make very fashionable
garment, many activities are outsourced and the level of English is poor.
5.2
Final evaluation of garment producers
Bandolera has given many criteria to select potential garment producers. Of these criteria, 5 can be
regarded as prior conditions. In this paragraph the garment producers will be evaluated on these prior
conditions and their potential. We will discuss these 5 conditions and summarize the scores of the
companies in table 5.1.
1. Communication
The grade/level of English of the contact person we spoke of the garment company. The grade of
English ranges from: ‐‐ (poorly) to ++ (very good).
International Business Research Vietnam 2008 – Bandolera
32
2. Minimum order quantity
Each garment factory has a minimum order quantity which judges if an order will be accepted.
Quantities showed in the column are ‘per style/model’.
3. Capability of factory
Most visited garment producers outsource several activities related to finishing the garment product.
This could include dyeing (if they also produce their own fabric), washing, embroidery, attaching
buttons and zippers, and printing. In table 5.1 the following abbreviations are used:
D
: dyeing
W
: washing
E
: embroidery
: attaching buttons/zippers
A
P
: printing
4. Export experience
Strong requirement in evaluating garment producers is that they have experience with exporting to
foreign countries, especially Europe and the US. In table 5.1 is showed the percentage of export to the
EU and the US.
In the column we show the number of sources who recommended the garment producer. This
column is followed by another one which contains the names of the persons who recommended the
garment producer.
International Business Research Vietnam 2008 – Bandolera
33
Table 5.1 Judgment of Vietnamese garment producers
Communication
Minimum
order
quantity
1 28 Company / AGTEX28
2 Cholimex Garment Joinstock Company
/ Trading ‐ Service Enterprise
++
++
1.000
6.000
D
+
‐
W
‐
3 Dong Phuong Knitting Company
(DOPIMEX)
4 Duy Thinh Company, ltd.
5 Hoa My Trading‐Service &
Manufacture Company, ltd.
6 Mai Lan Anh Garment and Trading
Company
7 Minh Anh Corporation
8 Nhabe Garment Company (NHABECO)
‐
30.000
+
‐
+
‐
9 Phong Phu Corporation
++
‐
Capability of factory
E
‐
Export
Recommended by
number of contact
persons
Potential
company
0
1
Y
N
A
+
+
P
‐
+
EU
60%
+
USA
20%
+
‐
+
‐
40%
30%
0
N
‐
‐
+
+
+
‐
+
‐
+
‐
0
1
N
N
University
University
++
5.000
‐
‐
‐
+
‐
30%
50%
1
N
Mrs. Huong
++
+
2.000
‐
‐
‐
+
‐
+
+
+
‐
+
35%
40%
40%
50%
1
1
N
Y
University
VITAS
+
+
+
1
N
Mrs. Huong
+
+
2
N
65%
30%
1
Y
University, Mrs.
Huong
University
5%
40%
2
Y
Interpreter, VITAS
15%
60%
1
Y
University
+
30%
65%
0
N
+
+
100% 0%
30% 40%
1
1
Y
N
0
N
++
10 Phuong Dong
‐
10.000 or
20.000
3.000
11 Protrade Garment Company,ltd.
+
100‐200
‐
+
12 Saigon 3 Garment Joint‐Stock
Company (GATEXIM)
13 Thanh Cong Textile Garment JS
Company
14 Thang Loi International Garment JSC
(VIGATEXCO)
15 Viet Fashion Company (Ninomaxx)
16 Viet Thang Garment Joint‐Stock
Company (VIGACO)
17 Viet Thy Fashion Company, ltd.
++
5.000
‐
‐
++
1.000
‐
+
+
‐
‐
‐
‐
+
+
+
‐
500 or 1.000
3.000
+
‐
+
‐
‐
‐
‐
+
+
‐
‐
International Business Research Vietnam 2008 – Bandolera
34
Interpreter
University
5.3
Comparisons to current producers of Bandolera
In this paragraph the visited garment companies are compared to the current garment producers of
Bandolera. Nowadays Bandolera’s garment is produced in China and India. They also have a factory in
Turkey, but we do not compare with this country, because this factory is situated in a total different
area. Comparisons will be made on availability of fabrics, quality and price.
As mentioned in chapter 3, less and less fabrics are produced in Vietnam. Most fabrics are imported
from other Asian countries such as China (Hong Kong), Taiwan, Korea or Japan. This is because the
fabrics abroad are of higher, more stable quality than the homemade fabrics (low‐to‐middle level
quality). This is probably due to the less advanced machinery and the low production of fabric sources
in Vietnam. The mainly used fabrics, for export as well as local market, are cotton, spandex/elasthan,
denim, and polyester. For local market sometimes linen and silk are also used. A weakness of the
Vietnamese textile and garment industry is that there is such a small production of (middle‐to‐high
quality) fabrics. Therefore the industry stays dependent of other foreign fabric suppliers.
Concluding, compared to China and India, homemade fabrics are of less and unstable quality. If
Bandolera has the intention to let their garment be produced in Vietnam, they should import the
fabrics.
Pricing of garment products
We asked the visited garment producers to estimate the FOB price of some samples of Bandolera.
Price estimations of Bandolera garment is showed in table 5.2 and for the NTS garment it is showed in
table 5.3. There must be made some remarks before showing the tables, because we do not have
price estimations of all factories of all items:
1. During the first week we had just 3 samples to show to the producer;
2. It happened many times that producers just can make one piece (shirt or trouser / knitted or
woven) of garment, so they cannot estimate prices of all samples;
3. When we noticed that it is not a potential company for Bandolera we did not show samples
and did not ask price estimations;
4. Having short time resulted in not being able to ask price estimations.
Table 5.2 Price comparisons (in USD) of Bandolera garment
(non‐disclosure)
Table 5.3 Price comparisons (in USD) of NTS garment
(non‐disclosure)
Although we do not have price estimations from every company or for every sample, the general
conclusion that we can draw from table 5.2 and 5.3 is that the price level of Vietnamese garment
producers is significantly lower than the prices of Bandolera’s current producers. Probably this is due
to the low labor costs of Vietnamese workers, and due to the economies of scale factories have
because of the large productions. Also should be taken in consideration that the above mentioned
FOB prices are estimations based on the minimum order quantities of the companies. Also the
exchange rate euro – USD is very positive for Europe, and has also indirect (positive) effects on the
FOB prices for Bandolera.
5.4
Excluded garment producers
During our desk research in The Netherlands as well as our field research in Vietnam we excluded
many garment factories from our research. In The Netherlands main reasons were that we cannot
communicate with the companies because they do not speak English, or we could not get in contact
with them. E‐mails failed to be delivered, websites did not work, and we also cannot reach them by
phone. However, during the desk research companies were rejected because they have no experience
with women fashion or export. In total we excluded 50 companies during our desk research.
International Business Research Vietnam 2008 – Bandolera
35
During the field research we excluded many garment factories based on their minimum order
quantity. If their minimum order quantity is above 1.000 – 2.000 we did not visit the companies. Our
interpreter helped us in selecting the right companies by calling. We checked some rejected
companies of the desk research and checked new companies which were i.e. recommended by
experts/agents. In total we rejected 65 companies during our desk and field research. In Appendix 6
there is a list of the companies we excluded. Concluding, main reasons of exclusions are the same as
the criteria displayed in table 5.1.
5.5
Experts and agents
Besides the company visits, we also interviewed several experts and agents about the Vietnamese
garment industry. During our stay in Ho Chi Minh City we contacted lecturer Duy Thai, of the
department of Textile Engineering at the University of Technology in HCMC. He helped us finding and
visiting different garment producers. He already warned us at day one that “…it is a difficult process to
find a garment producer, especially when you want to use local fabrics. Factories cannot offer
everything, including middle‐to‐high quality fabrics and accessories. Vietnamese producers cannot
guarantee that the quality will be stable”.
We interviewed Mr. Toan (owner of Yen Bien Company) in Hanoi. He has 13 years of business
experience and gives us more information about where to find a producer for the production of
fashionable orders. According to him, “Vietnamese garment producers can produce the garment of
Bandolera, but these will be private, small companies in which they often do not speak English and
which need all materials to be delivered”. Usually there will be maybe one or two who can speak a
little English, but they will not have experience with export. “If Bandolera wants to let their garment
be produced in Vietnam they should find someone who can arrange the right companies for them and
also the materials. If Bandolera can tell the companies where to buy the fabric from, this should not be
a problem”. He explains that the production is “mainly for massive quantities of low to mid‐level
quality. These massive quantities are needed because the main reason for customers to go to Vietnam
for production of garment is its low pricing. There are a lot of big quantities of low quality fabrics
available for low prices, which has the interest of huge corporations mostly from the US”.
Mr. Toan has and sometimes still cooperates with Mr. J. Somers (owner of private company Venture
International in Hanoi). He started his business in Vietnam 25 years ago and knows the business quite
well. He stopped producing fashion orders, because “you mainly cope with the small quantities and
quick turns around. Next to that, the lead time is longer because you have to supply a lot, for example
fabrics and buttons”. To produce fashionable orders of small size, “…you have to look for a small
private entrepreneur (max. 250 machines) and you should not work with a state‐owned company
because everything where is dealt with goes very slowly”. He warned us that “…fabrics of middle‐to‐
high quality still need to be imported. Many big companies move to Vietnam because of the low labor
costs (selling prices), but they still buy the fabrics in China”.
From a more formal perspective, we spoke with Mr. Le Van Dao (vice chairman of the VITAS). He
provided us with general, macro information about the textile and garment sector. In this interview it
became clear that Vietnam is especially interesting for the U.S., because of its need for high quantities
for low prices. Huge American corporations even go factory hopping to search for the cheapest
producer. This is in big contrast to most European companies who experience great difficulty looking
for a producer that will produce small quantities of high quality for them. The most important aspect
in this search is finding and sustaining a good relationship with the factory.
Overall, the agents and experts that we contacted paint a similar picture. The search for a good, fitting
garment producer for fashionable garment is constraint by aspects as quantity, price, (un)stable
quality and import of fabrics and accessories.
International Business Research Vietnam 2008 – Bandolera
36
5.6
Conclusion
Summarizing Chapter 5 it can be stated that the fabrics made in Vietnam are of low‐to‐medium
quality. That is why almost all exporting garment factories we visited import their fabrics from foreign
countries as China, Hong Kong, Taiwan and Korea.
Research question 2 asks the question whether Vietnamese garment producers can meet the
selection criteria provided by Bandolera. With the information of this chapter we can answer this
question. Sub question 2.1, which companies are advised to us by our contact persons, was already
answered in table 5.1. Sub question 2.2 asks whether Vietnamese garment producers have the
capacity, machinery, experience and certificates to produce for Bandolera. In general Vietnamese
garment producers do have the capacity and machinery to produce fashionable cloths. There are
many high (technical) skilled people who can make the garment, but the order size is of decisive
influence in accepting an order (minimum order quantity of Bandolera is 500 pcs/model). They want
the machines keep running and therefore detailed garment is not preferable, and often rejected.
Producing fashionable cloths take a longer production time, more labor and workers need more
exercise to make the garment. However, letting basic garment be produced in Vietnam with a
minimum order size of 5.000 – 10.000 is possible.
We have not visited companies that were already producing garment similar to Bandolera’s
collections. This gives answer to sub question 2.3; Vietnamese garment may be able to produce
fashionable garment products similar to the current Bandolera collection, but we have not seen them
producing it.
Sub question 2.4 focuses on the availability of additional items and accessories, such as buttons and
YKK‐zippers. Besides that fabrics of middle‐to‐high quality should be imported, Vietnamese garment
producers source all kind of accessory. Many additional items are sourced locally, but Vietnamese
garment producers also use (and import) international brands as YKK zippers, COATS (sewing thread),
Kufner, Freudenberg and Vilene (interlining). We can conclude that additional items are available, for
example YKK has an office in Vietnam, but items such as fashionable buttons are still mainly imported
from China or Taiwan.
Sub question 2.5 focuses on the production time and estimated price of counter and fitting samples.
These differ per company and are all described in the company visits and tables 5.2 and 5.3. On
average the production time is within the time limit of 60 days and estimated prices are lower than
Bandolera’s current prices. In general the production lead time of garment is about 30 – 45 days.
Importing the fabrics or making the fabrics ranges from 5–30 days. Depending on the kind of
shipment to The Netherlands, the lead time is about 25–30 days. Concluding, Vietnamese garment
producers are able to deliver the products in time. This gives partly answer to sub question 2.6, which
focuses on the lead times and payment terms for complete orders Vietnamese garment producers in
general work with. Most payment terms Vietnamese garment producers work with are CMPT or FOB
prices. Bandolera is used to work with payment terms on C&F based pricing. This is highly unusual in
Vietnam.
In paragraph 5.5 experts and agents generally concluded that quantity, price, (un)stable quality and
import of fabrics and accessories play a main role in deciding and finding a garment producer in
Vietnam. Their opinions are in line with the findings of the factory visits.
The ‘minimum order quantity’ is of decisive influence in determining which company could be
potential for Bandolera. Looking at the market trends and the economic development of this industry
in Vietnam, it is very difficult for Bandolera to find a producer who can make the garment product
(from sourcing fabric till finishing the product). However, when looking at the price comparisons with
Bandolera’s current producers show that at a financial level, the Vietnamese market shows a very
interesting picture. Vietnamese garment producers have significantly lower prices, even if they have
to import fabrics and accessories. Information about the financials in this report is based on price
estimations given by Vietnamese garment producers. To make valid price comparisons, more research
International Business Research Vietnam 2008 – Bandolera
37
or experience is necessary. If Bandolera decides to explore the Vietnamese market and take for
granted some restrictions we can recommend the five most potential companies for Bandolera:
‐ Agtex 28
‐ Viet Fashion Company (Ninomaxx)
‐ Protrade Garment Company, ltd.
‐ Saigon 3 Garment Joint‐Stock Company (GATEXIM)
‐ Thanh Cong Textile Garment JS Company
International Business Research Vietnam 2008 – Bandolera
38
Chapter 6
Logistics and Legislation
In this chapter we give insight in relevant legislation and the available logistic services to export
garment from Vietnam to The Netherlands. In the first paragraph 6.1 we discuss the legislation and
rules about exporting garment to the EU. In paragraph 6.2 we discuss the pricing of garment and used
payment terms in more detail. Paragraph 6.3 gives an overview of the logistic service companies
positioned in Vietnam providing express services to The Netherlands. In paragraph 6.4 we give some
practical insights in how to do business in The Vietnamese garment industry. We conclude the chapter
with a conclusion in which we answer the third research question.
6.1
Legislation and rules about exporting garment to the EU
If Bandolera is able to find a satisfying garment producer Vietnam, the cooperation between both
companies can turn into a long‐term relationship. Bandolera does not have the intent to invest in the
development of the production for Bandolera in Vietnam. The intended cooperation with a potential
garment producer is one of placing orders only. This cooperation starts by placing the first order,
which is done by agreeing on the deal and signing the contract. There are few formalities needed for
establishing a contract.
Vietnamese factories have a business certificate legislation to export. Currently, the textile and
garment sector is encouraged by the government to export its products. There are no restrictions on
the export of garment products, which have made it simple for Vietnamese enterprises to arrange the
export of their products. They can deal directly with the Customs Department. Vietnamese factories
have a GSP Form A. GSP stands for Generalize System of Preference. With this GSP Form A certificate
producers have a lower tax compared to normal. With the certificate, the export tax for jacket and
trousers is only 10%. Without the GSP Form the export tax is 14 or15 %. To arrange the export, the
documents are sent by the producer to (1) the Bank for LC payment and (2) to the buyer to show to
the customs department when goods arrive. Furthermore the GSP form should be sent to the
Chamber of Commerce and Industry. The export part and sending of required documents to the right
institutions is arranged on the Vietnamese side and is no different than the procedure of exporting
any other product. Any Vietnamese company with export experience will be able to arrange all
necessary documents.
6.2
Pricing and payment
There are an estimated 250 private manufacturers and 90 state‐owned enterprises producing
garments in Vietnam. The majority of private firms make garments for the Cut‐Make‐Trim (CMT)
business. CMT entails that the customer is supplying all of the raw materials, accessories and sewing
threads, if necessary. The company then cuts, and sews the fabric (often of an industrial nature) and
makes up the finished products which are then returned to the customer. In some cases firms deal
directly with buyers, while in others they rely on sub‐contracts from state‐owned enterprises. The
CMT process adds as little as 20 percent to the value of the final product since the manufacturer/sub‐
contractor does not source the fabric, i.e., the agent/buyer delivers the pattern, fabric and trimmings
to the local manufacturer/subcontractor who then constructs the garment. The manufacturer or the
agent then re‐exports the finished product17. A more extended version is payment of CMPT (Cut,
Make, Pack, and Trim) terms, which only adds a packing service.
Producing garments on FOB (Free On Board) terms requires the producer to deliver goods on board a
vessel designated by the buyer. The seller fulfills its obligations to deliver when the goods have passed
over the ship's rail. When used in trade terms, the word "free" means the seller has an obligation to
deliver goods to a named place for transfer to a carrier. Producing garments for FOB business
generates significantly higher margins since the manufacturer sources the fabric him/herself and, in
some cases, contributes to the pattern design. However, due to the skills and capital required, FOB
business is still too risky for most private and state‐owned Vietnamese producers. Contracts involving
17
nd
http://www.byte‐software.com, 2 June 2008
International Business Research Vietnam 2008 – Bandolera
39
international transportation often contain abbreviated trade terms that describe matters such as the
time and place of delivery and payment, when the risk of loss shifts from the seller to the buyer, as
well as who pays the costs of freight and insurance.
Bandolera usually works on Cost and Freight (C&F) terms, which means that the seller delivers when
the goods pass the ship’s vessel (or truck/vessel/airplane) at the named port of shipment. The seller
takes care of all costs and freight necessary to bring the goods to the named port of destination. The
risk of loss of or damage to the goods, as well as any other additional costs due to events occurring
after the time of delivery, is for the buyer. C&F terms require the seller to clear the goods for export18.
6.3
Logistic service companies Vietnam – The Netherlands
In total Vietnam offers over 30 enterprises that deliver services in logistics, shipment and
transportation. In the 2008 membership directory of the European Chamber of Commerce in Vietnam
we found 8 large enterprises and 21 small and medium enterprises operating in the logistics and
transportation services. Of the 8 large enterprises, we have contacted three well known couriers that
provide express and logistic services, namely DHL, Fed Ex and TNT. We will discuss them below.
DHL is the Deutsche Post World Net brand. This is a global market leader of the international express
and logistics industry, specializing in customized solutions. DHL offers expertise in express, air and
ocean freight, overland transport, contract logistics solutions as well as international mail services.
The network of DHL is internationally linked to more than 220 countries and territories. In Vietnam
they have around 350 employees, with their Country office in HCMC and their Branch office in
19
Hanoi . Boxes send by air have a maximum size of 66x49x38 cm. which has a volume of 16 kg. The
costs of sending such a box from Vietnam to The Netherlands are about 383,09 US$. Bandolera mainly
uses boxes with sizes 60x40x40 cm with a weight of 10 kg. DHL customers can also provide their own
boxes. The costs of sending a box with a volume of 10 kg from Vietnam to The Netherlands are about
301,59 US$. Boxes will be delivered within 2‐3 days, but in the weekends and with holidays the
package can arrive a few days later. Payment executed by the customer in a foreign country can occur
through account number. When the package is picked up in Vietnam from home or office, the costs
should be paid directly.
Fed Ex Corporation is a logistics services company, based in the United States. FedEx provides
customers and businesses worldwide with a broad portfolio of transportation, e‐commerce and
business services. Fed Ex has more than 290,000 employees and contractors worldwide. The average
daily volume is more than 7.5 million shipments for express, ground, and freight. Fed Ex serves more
than 220 countries and territories, including every address in the United States. The Fed Ex website
has over 15 million visitors monthly; more than 3 million package tracking requests daily and 15
million packages shipped via FedEx Ship Manager monthly. Fed Ex air services are supported with 671
aircraft, covering more than 375 airports served worldwide20. Boxes provided by Fed Ex have sizes of
60x40x35 cm or 70x46x35 cm. For a volume of 10 kg, they use boxes with 41x34x27 cm sizes. The
costs of sending such a box without a contract from Vietnam to The Netherlands are about US$160,‐ +
22% petrol tax. In total the costs of sending a box of 41x34x27 cm to the Netherlands will be
US$195,20. Boxes will be delivered within 2‐3 days if there is no delay at the airport. For payment, the
customer can give his/her account number which will be checked by Fed Ex. Payment from this
account number happens when package is arrived at place of destination. When the package is picked
up in Vietnam from home or office, the costs should be paid directly. Fed Ex can only arrange
transport by air, not by sea.
TNT is a global express and logistic service. TNT offers network infrastructures in Europe and Asia and
is expanding operations worldwide. TNT serves more than 200 countries has about 500 employees in
Vietnam. TNT is head quartered in the Netherlands and has established a joint venture, TNT–Viettrans
Express Company Ltd. in 1997. At the moment they have operations in 23 cities and provinces in
18
nd
http://www.alphatrans.com, 2 June 2008
th
http://www.dhl.com, 4 June 2008
20
th
http://www.fedex.com, 4 June 2008
19
International Business Research Vietnam 2008 – Bandolera
40
Vietnam. TNT‐Viettrans is a subsidiary of TNT Global which is one of the four leading couriers that
provide express, logistics and international mailing services21. Boxes delivered by TNT for shipment by
air with a volume of about 10 kg have sizes of 50x40x30 cm. Customers can also provide their own
boxes. The costs of sending such a box from Vietnam to The Netherlands are about US$269,86. This is
a fast delivery service and will deliver the package within 2‐3 days. TNT can also provide the customer
with a slow delivery service in which the package will be delivered within about 7 days. The costs of
sending a box with this slow delivery service from Vietnam to The Netherlands are about US$148, 83.
Payment under signed contract can be done through an account at the end of the month or right
away. Without a signed contract, the costs can be paid in cash when the package is picked up in
Vietnam from home or office. TNT does not ship packages by sea.
Concluding from the information given above, we can recommend TNT as a good express service
giving the best price. This company has a lot of experience with national as well as international
express and logistic services and has a high reputation.
For the shipment of large orders by sea, Bandolera is already cooperating with Unique Logistics.
Unique Logistics BV started in 1994 as forwarding agent at Schiphol airport and is in this capacity part
of Unique Logistics International (ULI). Unique Logistics has 55 offices worldwide, covering over 200
countries. They offer customers a complete pack of logistic services, acting independently from the
Netherlands. Unique Logistics is already active in exporting goods from Vietnam to the Netherlands.
Transport by sea from HCMC to Rotterdam takes about 32 days, by air transport takes about 24‐48
hours. Unique Logistics can provide Bandolera with shipment of large orders from Vietnam to The
Netherlands, should Bandolera decide to sign a contract with a Vietnamese garment producer.
6.4
Informal trade barriers in the Vietnamese garment industry
As mentioned earlier, there is a high labor competition going on in Vietnam due to low labor costs,
and the increasing demand for more technical skilled workers. The workforce is young and mobile and
a trend of ‘job hopping’ is developing. This makes it difficult for enterprises to maintain a stable,
capable workforce.
About how to do business in Vietnam it is mainly important to establish a good relationship with the
seller. Although the Vietnamese garment industry is a busy one, the people are open, friendly and
well willing to start a new interesting business relationship. However, there are some difficulties. Just
like ‘job hopping’ there is also a trend noticed that big customers ‘hop’ between garment factories,
because they search for the lowest price. Garment factories are aware of this, building a relationship
will take time. Because the Vietnamese garment market is mainly ruled by big customers, it is more
difficult for smaller (mainly European) customers to build a relationship. Because of the boom in the
industry, Vietnamese business people are becoming more and more ‘short‐term minded’ and it can
be very difficult to arrange meetings. When established, meetings or appointments should be
confirmed numerously to avoid them to be forgotten.
In a few of our interviews we received more practical information about the way of doing business in
the Vietnamese garment industry. Mr. J. Somers (Venture International), advices to avoid working
with state‐owned companies, because “they are slow, especially in making decisions. Private
companies can decide themselves and are much faster. When selecting a garment producer, they
should be visited to check whether it is possible to build a relationship”.
According to Mr. M. Manning (Indo Pride International) the Vietnamese “do business the way they
drive a motor bike. They turn and turn, cut off, just for a few minutes extra time spare. It takes very
hard work to achieve good quality in Vietnam. Some of the best looking factories in Vietnam are the
worst to deal with. Contracts do not mean much to the Vietnamese. State owned companies are the
worst to deal with. The VINATEX is a very large organization, owning 80% of the market. This is a very
difficult organization to get in and also very difficult to get in good relationship with. The longer you
are dealing with them, the less they are willing to do business. They are mostly just interested in
getting one deal”.
21
th
www.tnt.com, 4 June 2008
International Business Research Vietnam 2008 – Bandolera
41
6.5
Conclusion
The third research question stated the following question: Which Vietnamese legislations and logistic
services influence the export of garment to The Netherlands?
Sub question 3.1 about which Vietnamese legislations influence the export of different kinds of
Vietnamese garment products to the EU, can be answered shortly. As described in paragraph 6.1
there is no restriction on the export of garment and very little legislation exists. The government is
promoting the export of garment and therefore there is no barrier formed by formalities and
documents.
Sub question 3.2 focuses on the availability of Vietnamese companies and logistic services to facilitate
in matters of logistics. Paragraph 6.2 and 6.3 have displayed that for most private and state‐owned
Vietnamese producers it is still too risky to take responsibility of financing the transport of the
products until they are on board of the shipping vessel. Doing business on FOB is becoming more and
more the regular terms of pricing, but doing business on the, by Bandolera requested, C&F pricing is
yet highly unusual in Vietnam. However, reliable, well known couriers such as DHL, Fed Ex and TNT
are represented in Vietnam and offer quick delivery of smaller packages by air.
Sub question 3.3 focuses on the costs and delivery times of logistic services from Vietnam to the
Netherlands. By air we have concluded that delivery times all are within 2‐3 days. Costs for shipment
of boxes with volumes of about 10 kg range between US$301 and US$149. DHL has been found to be
the most expensive courier and TNT the cheapest option.
The chapter concludes with some information on the informal trade barriers in the Vietnamese
garment industry. Concluding from this chapter we can see that the Vietnamese garment industry has
some barriers which make it difficult for a company such as Bandolera to do business. Although there
are no restrictions on the legal side of the deal, in practice we see that many companies still find it
risky to do business on FOB pricing, not to mention the C&F pricing. Therefore the matters of logistics
can become a barrier, the need for more agents or enterprises to arrange the logistics can result in
delay, which can deliver big problems in Bandolera’s tight delivery schedules. Furthermore we see
that there are informal trade barriers in Vietnam. Because employment in the textile and garment
industry is high and the work force is mobile, garment producers can have trouble to find and keep
good workers. Next to that, the different Vietnamese way of doing business and the low level of
English has a good change of resulting in misunderstandings. All together we see a mixed of both
negative and positive results on the third research question, but in the light of the results on the first
and the second research question we do not recommend Bandolera to do business in Vietnam.
International Business Research Vietnam 2008 – Bandolera
42
Chapter 7
Conclusion and Recommendation
In this chapter we will first give our conclusion of the executed research in the textile and garment
market in Vietnam. After that, we will give recommendations to Bandolera about the production of
garment in Vietnam.
7.1
Conclusion
During our field research in Vietnam we had many appointments. During the first 3 weeks in Ho Chi
Minh City we had 19 appointments, of which 17 appointments with garment producers. In Hanoi we
mostly had appointments with contact persons who gave us market information. In total we had 8
contact persons: Mr. Dao Duy Thai from the HCMC University, Mrs. Ngiem Huong who wrote a
relevant thesis about the Vietnamese garment industry, Ms. Nga and Mr. Cuong who wrote a thesis
about the difference between state‐owned and private companies in the Vietnamese garment
industry, Mr. Le Van Dao as Vice Chairman of the VITAS, Mr. Somers who is owner of private company
Venture International, Mr. Manning who is owner of apparel agency/supplier Indo Pride International,
Mr. Toan who is owner of Yen Bien Company and Mrs. Phan Thi Dieu Ha of the Ministry of Industry &
Trade – department of textile and engineering.
We visited state‐owned companies as well as private companies. Main difference is that the decision‐
making process in private companies is much faster. The decision‐making process in state‐owned
companies is more controlled by hierarchy, and in general produce higher quantities.
Most garment companies (70%) are located in the south of Vietnam. The provinces Dong Nai and Binh
Duong are both (industrial) development zones where new factories are established. These locations
are within 2 hours driving from the centre of Ho Chi Minh City, where also the harbor (and airport) is
located. This is an advantage for short deliver times to the harbor/airport for export of garment as
well as import of fabrics (or other materials) etc. In Hanoi and the province Long An 10% of the
garment companies are located. These are mainly specialized in children’s wear and working wear.
Women fashion is not made in this region.
At this moment there is much competition in the textile and garment industry in Vietnam. This
industry employs a large labor force (over 2 million workers), with low labor costs, and which is
abundant in skilled manual labor. There is also a trend noticed that people do ‘job hopping’, even to
other kind of industries. The advantage of abundant and cheap labor will become less important and
less attractive over time, when there is more demand for technical skills. Nowadays the Vietnamese
textile and garment industry is less developed in terms of machinery and equipment, technology, and
labor skills, compared to other Asian countries.
The fact that people in this industry are not specialized in making detailed garment is related to the
above mentioned subjects. Garment factories namely do not have the resources and materials, and
capital to invest into machinery needed for producing ‘fashion cloth’.
Besides the above mentioned, the Vietnamese factories are not able to make/produce middle‐to‐high
quality fabrics. This is because they cannot control the quality of fabrics on their own. The quality is
low and not stable. When fabrics of middle‐to‐high quality are needed, these are imported from China
and Taiwan (also Korea and Japan).
The Vietnamese production of the main fabrics (such as cotton, polyester and silk) are insufficient and
of low quality to fulfill the needs of the local garment producers. The production of some fabrics is
even decreasing, despite of big investments by the government. Therefore it seems likely that
Vietnam will stay dependent on fabrics from surrounding Asian countries for the next couple of years.
Next to supplying fabrics from other foreign countries buttons, sewing threads, interlining, shoulder
pads, and other embroidery are imported as well. These could also be sourced local. Sometimes the
supplier cooperates with a foreign company as Coats. Also the brands, Kufner, Freudenberg, Vilene
are noticed here. Due to the fact that most must be sourced from other Asian countries, the
lead/delivery time of garment as well as the cost price of garment increases.
International Business Research Vietnam 2008 – Bandolera
43
Especially for European countries it is difficult to enter the Vietnamese garment market because they
order most of the times small quantities. Besides that, they have quick turn‐a‐rounds (Bandolera has
16 collections per year) and want also high quality. For American customers it is easier to find a
producer because they want big quantities for low prices. Also experts, agents, the VITAS and even
the government notice the problem that it is much more difficult for European companies to find a
Vietnamese garment producer. They do notice the problem, but at this moment there are no
concrete plans to solve this.
In the textile and garment industry is a certain ‘business culture’ noticed. Companies want to make
high turnovers with high profit margins. Therefore they prefer large batches/quantities of basic
garment with less details/embroidery. Because of these activities they can keep the machines running
and realize economies of scale. Garment producers also prefer that the customer supplies all. Pricing
on FOB is becoming more common, but is still considered as a risky business. Let stand the C&F
pricing method preferred by Bandolera. We also noticed by observations and interviews that people
in the North of Vietnam are more conservative and pragmatic. You have to remind people
continuously of appointments you have made with them. General informal trade barriers in forms of
language and communication problems have a negative influence on the ease of doing business with
Vietnamese producers. The level of English is sometimes very poor and Vietnamese will rather give a
random answer than admitting not to understand the question or not knowing the answer to the
question.
7.2
Recommendation
It seems to be that there are two niches in the garment industry. One small niche which is focused on
small quantities/high prices and one big niche which is focused on high quantities/low prices. Within
these niches you can distinguish the private companies and state‐owned companies. Especially
private companies are smaller and are possible more willing to produce fashionable clothes for
Bandolera. However it should be taken in consideration that in these companies the level of English is
low, they have no or little experience with export, and that Bandolera has to supply the fabrics and
accessories. It is also difficult to find the right private company, because they do not have a website or
are no member of the VITAS.
If Bandolera wants a Vietnamese garment producer who can produce orders of 5.000 – 10.000 pieces
of basic cotton shirts or basic jeans, they can also contact state‐owned companies. However there is a
chance that their order would be rejected because it is too small. US companies prevail in this big
niche and place orders of >100.000 pieces. Even if Bandolera let their garment be produced in a state‐
owned company and the company arranges the import of middle‐to‐high quality fabrics, pricing in
Vietnam is cheaper than in China and India (based on price estimations). However, if Bandolera let
their garment be produced in Vietnam, the import of fabrics and accessories can increase the deliver
times. Probably they can arrange everything in 90 days, but in the worse case scenario these 90 days
can be crossed.
Besides the order quantities, a strong requirement of Bandolera is that garment producers can take
care of all the extra activities related to producing garment: (producing) fabric, buttons, zippers,
embroidery, accessories, printing, washing, and arranging export. In Vietnam we did not see any
company who can offer all these activities by themselves. Fabrics of middle‐to‐high quality are most
of the times (90%) imported, and all the other activities besides cutting, sewing and finishing the
product, are outsourced. Based on the requirements we got several advices from different persons
and companies that Bandolera should go to Hong Kong (or the areas within 800 km from Hong Kong).
Bandolera is already participating in the Chinese and Indian market.
Based on the above mentioned we do not recommend Bandolera to let their garment be produced in
Vietnam. This mainly applies for the fashionable products (with many details). Bandolera could
produce basic garment in Vietnam, but risks the fact that not all garment producers will accept their
small order quantities for a reasonable price. Moreover, when producing in Vietnam, it will be
necessary to keep a close eye on the production, because language and cultural difference might lead
International Business Research Vietnam 2008 – Bandolera
44
to mistakes and misunderstandings. Therefore we believe that Bandolera should consider carefully
whether she wants to invest time and energy in entering this new and still unstable market.
International Business Research Vietnam 2008 – Bandolera
45
References
Books
‐
‐
Vietnam Textile and Apparel Association, Directory 2006
Vietnam Textile and Apparel Association, Quality – Credibility, 2007
First selection used lists of companies
‐ Directory of companies in Vietnam (Business in Asia.com) – Textile and garments
(www.business‐in‐vietnam.net/vietnam/exporttextile.html)
‐ http://itpc.hochiminhcity.gov.vn/en/directory/section4_chapter/textiles
‐ List of members of Vinatex (received from Mrs. Nghiem Huong)
‐ Mekong research, company directory – garments (www.mekongsources.com/industry9.htm)
‐ http://asemconnectvietnam.gov.vn/highquality/Det%20may‐giay%20dep.htm)
Report VITAS
‐ Vietnam Textile and Garment Industry plays a very important role in the Economy of our
Country – Presented by Mr. Le van Dao, Vice Chairman Vietnam Textile and Apparel
Association (VITAS)
Theses:
‐ Nghiem Lien Huong (2006), “Work culture, gender and class in Vietnam : ethnographies of
three garment workshops in Hanoi”, Universiteit van Amsterdam.
‐ Nguyen Manh Cuong (2004), “Does ownership matter to enterprise performance?: a
comparative study of private and state enterprises in Vietnam’s textile‐garment industry”,
Thesis, Institute of Social Studies, The Hague.
Websites articles
‐ http://english.vietnamnet.vn
‐ http://findarticles.com
‐ http://moeaitc.tier.org.tw
‐ http://vietnamnews.vnanet.vn
‐ http://zoek.volkskrant.nl/artikel?text=kleding%20vietnam&FDOC=0&SORT
‐ www.2.gtz.de/vietnam
‐ www.alphatrans.com
‐ www.byte‐software.com
‐ www.business‐in‐asia.com
‐ www.delvnm.ec.europa.eu
‐ www.english.vietnamnet.vn/biz
‐ www.euromonitor.com
‐ www.fibre2fashion.com/news
‐ www.iht.com
‐ www.just‐style.com
‐ www.textilenepal.com/garment
‐ www.thingsasian.com
‐ www.vfabric.com/sgtextile
‐ www.vietpartners.com
‐ www.vinatex.com
‐ www.wikipedia.com
International Business Research Vietnam 2008 – Bandolera
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Overview of Appendixes
1.
2.
3.
4.
5.
6.
7.
Abbreviation list
Process of fabric production
Process of garment production
Map of provinces of Vietnam
Agenda in Vietnam and contact details of visited companies/contact persons
List of rejected garment companies
Checklist
International Business Research Vietnam 2008 – Bandolera
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Appendix 1 Abbreviation List
C&F
CIF
CMP
CMPT
EU
FOB
HCMC
ISS
US
VITAS
VN
YKK
Cost and Freight
Cost, Insurance and Freight
Cutting, Making and Packing
Cutting, Making, Packing and Trimming
Europe
Free on Board
Ho Chi Minh City
International Social Studies
United States of America
Vietnam Textile and Apparel Association
Vietnam
recognized
International
zipper
International Business Research Vietnam 2008 – Bandolera
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Appendix 2 Process of Fabric Production
Weaving is the process of making cloth, rugs, blankets, and other products by crossing two sets of
threads over and under each other. Weavers use threads spun from natural fibers like cotton, silk, and
wool and synthetic fibers such as nylon and Orlon. But thin, narrow strips of almost any flexible
material can be woven. People learned to weave thousands of years ago using natural grasses,
leafstalks, palm leaves, and thin strips of wood.
Today weaving ranks as a major industry in many countries. Weaving is often completed on high
speed looms. But weaving is not limited to cloth and textile products. Weaving plays an important
part in the manufacture of screens, metal fences, and rubber tire cord. Craft workers also use varied
fibers to weave baskets and hats.
Spinning is an ancient textile art in which plant, animal or synthetic fibers are twisted together to
form yarn. Characteristics of spun yarn vary based on the material used, fiber length and alignment,
quantity of fiber used, and degree of twist. A modern technique to spin is the use open end, or rotor,
spinning. The principal behind the technique is similar to a clothes dryer spinning full of sheets. If you
could open the door and pull out a sheet, it would spin together as you pulled it out. Sliver from the
card goes into the rotor, is spun around into yarn and comes out, wrapped up on a package, all ready
to go to the next step. Several design of rotors are in use by different manufacturers of spinning
equipment and are specialized for different types of fibers.
knitting is a method by which thread or yarn may be turned into cloth. Knitting consists of loops
called stitches pulled through each other. The active stitches are held on a needle until another loop
can be passed through them. Different yarns and knitting needles may be used to achieve different
end products, by giving the final piece different color, texture, weight, or integrity
Machine Processing: yarn formation
The machines used for different fibers vary slightly in the initial steps, but once the fiber is ready to
spin the process and machinery is pretty much universal. Slight changes are made depending on the
coarseness of the fiber or yarn desired.
The cotton boll is white, roughly spherical and fluffy. After being harvested, the cotton is sent through
a cotton gin because the seeds have to be removed before carding. A modern day cotton gin looks
similar to a carding machine, in that the fiber goes through many different rollers. The teeth on the
gin are different from those on a carding machine. The ginning process removes the seeds from the
cotton fiber. The first cotton gin was produced by Eli Whitney.
At this point, the ginned cotton is normally put into bales, and shipped to the cotton mill.
When the cotton comes out of a bale, it is all packed together and still contains vegetable matter. In
order to fluff up the cotton and remove the vegetable matter, the cotton is sent through a picker. A
picker looks similar to the carding machine and the cotton gin, but is slightly different. The cotton is
fed into the machine and gets beaten with a beater bar, to loosen it up. The cotton then collects on a
screen and gets fed through various rollers, which serve to remove the vegetable matter.
The cotton comes off the picking machine in large bats, and is then taken to carding machines. The
carders line up the fibers nicely to make them easier to spin. The carding machine consists mainly of
one big roller with smaller ones surrounding it. All of the rollers are covered in small teeth, and as the
cotton progresses further on the teeth get finer (i.e. closer together). The cotton leaves the carding
machine in the form of a sliver; a large rope of fibers.
Next, several slivers are combined. Each sliver will have thin and thick spots, and by combining several
slivers together a more consistent size can be reached. Since combining several slivers produces a
very thick rope of cotton fibers, directly after being combined the slivers are separated into rovings.
These rovings are then what are used in the spinning process. Generally speaking, for machine
processing a roving is about the width of a pencil.
International Business Research Vietnam 2008 – Bandolera
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Spinning:
The spinning machines stake the roving, thin it and twist it, creating yarn. The roving is pulled off a
bobbin and fed through some rollers, which are feeding at several different speeds. This thins the
roving at a consistent rate. If the roving was not a consistent size, then this step could cause a break in
the yarn, or could jam the machine. The yarn is twisted through the spinning of the bobbin it is rolled
on, exactly like a spinning wheel but just in a different configuration. This process was improved in the
1950s with the invention of the Wilson Yarn Clearer.
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Appendix 3 Process of Garment Production
In this appendix we give a quick overview of an average production flow of garment making. First the
garment is designed and a pattern is made and marked. The pattern is digitized into a garment CAD
system which directs plotters and cutters. Then the pattern is used to cut fabric which is sewn into the
finished garment. In general there can be distinguished 9 steps:
1.
2.
3.
4.
5.
6.
7.
8.
9.
First samples are made. This includes; testing washing effect, checking color shading and washing
effect, making samples, summit for customer approval and washing process records;
Fabric lots separation. Washing fabric for separating fabric lots. Recording and work with garment
factory to separate garments according to color shading and shrinkage;
Making first lot in bulk production, analyze color shading and washing effect;
Receiving garments and pre‐washed inspection;
Pre‐treatment;
Wet processes;
Rinse and drying;
Final inspection;
Packing and delivery.
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Appendix 4 Maps of Vietnam
Appendix 4.1 Provinces of Vietnam22
22
www.wikipedia.com
International Business Research Vietnam 2008 – Bandolera
52
Appendix 4.2 Industrial zones of Vietnam23
23
www.business‐in‐asia.com/vietnam
International Business Research Vietnam 2008 – Bandolera
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Appendix 5 Agenda in Vietnam and Contact Details
Appendix 5.1 Agenda in Vietnam
Appointments in Ho Chi Minh City (5 ‐ 23 May 2008)
Monday
Date & Time
5‐May
09.00AM
11.00AM
Tuesday
Wednesday
6‐May
7‐May
07.30AM
Thursday
8‐May
02.00PM
10.00AM
11.30AM
Friday
9‐May
02.00PM
07.00PM
09.00AM
11.00AM
Date & Time
Monday
Tuesday
12‐May
13‐May
09.30AM
Wednesday
14‐May
03.00PM
09.30AM
02.00PM
Thursday
15‐May
08.30AM
Friday
16‐May
05.30PM
09.00AM
11.00AM
Date & Time
19‐May
20‐May 07.00AM
02.00PM
Wednesday
21‐May 09.00AM
Monday
Tuesday
Thursday
22‐May
Friday
23‐May
09.00PM
Company name
HCMC University of Technology,
Department of Textile Engineering
Hoa My Trading‐Service &
Manufacture Company, ltd.
Contact persons at company
Msc. Dao Duy Thai, Mrs. Nguyen Le Nga
Meeting Becamex IDC Corp. ‐ Binh
Duong Province
Viet Thy Fashion Company, ltd.
Thanh Cong Textile Garment JS
Company
Thang Loi International Garment JSC
(VIGATEXCO)
Duy Thinh Company, ltd.
Nghiem Huong (contact person)
Cholimex Garment Joinstock
Company / Trading ‐ Service
Enterprise
Thai Tuan Textile & Garment
Company (fabrics producer)
Mr. Vo Son Dien
Mr. Bui Luong Hoa, Mrs. Ngo Thi Ngoc My
Mr. Nguyen Tuong Vu
Mrs. Pham Thi Kim Loan, Mrs. Dang Thi
Ngoc Bich
Mr. Tran van Tan
Mr. Phung Dung
Mrs. Le Thanh Xuan
Mrs. Nguyen Thi Ngoc Truong
Company name
Contact persons at company
Phong Phu Corporation
Nhabe Garment Company
(NHABECO)
28 Company / AGTEX28
Viet Thang Garment Joint‐Stock
Company (VIGACO)
Dong Phuong Knitting Company
(DOPIMEX)
Nghiem Huong (contact person) /
Mai Lan Anh (company)
Minh Anh Corporation
Phuong Dong
Mrs Nguyen Thi Anh Hong
Mr. Nguyen Huu Tam
Mr. Nguyen Thanh Hai
Mr. Tran Duc Dinh
Mr. Nguyen Tuyen Quang, Mr. Phan Minh
Dung
Mrs. Duong Thi Bich Lan
Mrs. Christina Nguyen
Mrs. Nguyen Thi Kim Dung
Company name
Contact persons at company
Protrade Garment Company,ltd.
Indo Pride International, ltd.
Saigon 3 Garment Joint‐Stock
Company (GATEXIM)
Viet Fashion Company (Ninomaxx)
Mr. Ngo Hung Quy (Peter)
Mr. Marcus W. Manning
Mrs. Phan Thi Kim Hong
Mrs. Nguyen Ha Nhu Lieu, Mr. Nguyen
Thanh Luan
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Appointments in Hanoi* (26 May ‐ 06 June 2008)
Date & Time
26‐
09.30AM
May
06.00PM
Tuesday
27‐
09.00AM
May
Wednesday 28‐
May
Thursday
29‐
09.00AM
May
Friday
30‐
May
Company name
VITAS
Contact persons at company
Mr. Le Van Dao
Dutch Embassy
Venture International
Ambassador Mr. Haspel
Mr. J. Somers (senior), Mr. J.F.
Somers (junior)
Ministry of Industry and Trade, Export‐
Import department
Mrs. Phan Thi Dieu Ha
Date & Time
31‐
May
Tuesday
1‐Jun 09.00AM
02.00PM
Wednesday 2‐Jun 08.30AM
Thursday
3‐Jun
Friday
4‐Jun
Company name
Contact persons at company
Visit to 'Van Phuc Village' (silk village)
Dutch Embassay
Yen Bien Company
Mr. Toan
Monday
Monday
*No many company visits in Hanoi because of negative advice of many contact persons/experts
of the garment market
Appendix 5.2 Contact Details
In the contact list only the name of the contact person, including their mobile number and e‐mail
address are shown. Complete information can be found on the attached business cards.
List of addresses of visited factories:
AGTEX28 – 28 Company, HCMC
Nguyen Thanh Hai, assistant for R&D Dept.
Mobile : 0919 976 065
Email : agtexhcm@gmail.vnn.vn
Website : www.agtex.com.vn
Cholimex Garment Jointstock Company, Trading – Service Enterprise, HCMC
Mrs. Le Thanh Xuan, sale executive
Mobile : 0906 836 365
Email : trading@cholimexgarment.com
Website : www.cholimexgarment.com
Dong Phuong Knitting Company, HCMC
Nguyen Tuyen Quang, director
Mobile : 0906 639 068
Email : tuyenquang@dopimex.net
Phan Minh Dung, deputy manager sales and marketing dept
Mobile : 0903 397 367
Email : dopimex@hcm.fpt.vn – phandunghcm@yahoo.com.vn
Website : www.dongphuong.com.vn
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Duy Thinh Company, HCMC
Mr. Phung Dung, CEO
Mobile : 0903 939 648
Email : phungdung@duythinh.com.vn
Website : www.duythinh.com.vn
Hao My Trading‐Service & Manufacture Company, HCMC
Bui Luong Hoa, director
Mobile : 0918 030 258
Email : hoamygwens@vnn.vn
Website : www.hoamy‐underwear.com.vn
Mai Lan Anh Garment and Trading Company, HCMC
Duong Thi Bich Lan, manager assistant
Mobile : 0908 227 783
Email : sales@mailananh.com – oanh@mailananh.com
Website : www.mailananh.com
Minh Anh Corporation, HCMC
Christina Nguyen, sales
Mobile : 0916 306 060
Email : Christina@minhanhcorp.com
Nhabe Garment Company, HCMC
Mr. Nguyen Huu Tam, team manager
Mobile : 0903 706 438
Email : tam@nhabe.com.vn
Website : www.nhabe.com.vn
Ninomaxx, Viet Fashion Company, HCMC
Phu Trách Tuong Hieu
Mobile : 0983 279 038
Email : thanhluan@ninomaxx.com.vn
Website : www.ninomaxx.com.vn
Phong Phu Trading & Investment Promotion Joint Stock Corporation (PPP), HCMC
Mrs. Nguyen Thi Anh Hong, marketing executive
Mobile : 0908 262 890
Email : Hong.Nguyen@phongphupromotion.com
Website : www.phongphupromotion.com
Phuong Dong Garment Joint‐Stock Company, HCMC
Nguyen Thi Kim Dung, merchandiser
Mobile : 0983 869 184
Email : dung.nguyen@pdg.com.vn
Protrade Garment Company, HCMC
Mr. Ngo Hung Quy – Peter, marketing manager
Mobile : 0913 657 376
Email : peter.ngo@protradegarment.com
Website: www.protradegarment.com
Saigon 3 Garment Joint‐Stock Company, HCMC
Phan Thi Kim Hong, trading manager
Mobile : 0918 397 707
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Email : kimhong@saigon3.com.vn
Website : www.saigon3.com.vn
Thai Tuan Textile & Garment Company, HCMC
Nguyen Thi Ngoc Truong, deputy export manager
Mobile : 0913 925 035
Email : thaituaninfo@taituan.com.vn – nguyentruong@thaituan.com.vn
Website : www.thaituanfashion.com
Thang Loi International Garment JSC, HCMC
Tran Van Tan, merchandiser of planning import‐export dept.
Mobile : 0903 698 032
Email : tranvantan2000@yahoo.com – trantan@thangloi.com.vn – detthangloi@hcm.vnn.vn
Thanh Cong Textile Garment JS Company, HCMC
Mrs. Dang Thi Ngoc Bich, export director
Mobile : 0918 101 536
Email : bich,imex@thanhcong.net
Mrs. Pham Thi Kim Loan, export executive
Mobile : 0909 461 145
Email : loan.imex@thanhcong.net
Website: www.thanhcong.com.vn
Viet Thang Garment Joint Stock Company, HCMC
Tran Duc Dinh, vice manager of business dept.
Mobile : 0903 310 006
Email : dinh@vigaco.com – vigaco@vnn.vn
Website : www.vietthang.com
Viet Thy Fashion Company, HCMC
Mr. Nguyen Tuong Vu, director
Mobile : 0903 910 952
Email : vity@mail.saigonnet.vn
Website : www.vietthy.com
List of addresses of contact persons (experts)
Ho Chi Minh City University of Technology (HCMUT), department of textile engineering
Mr. Dao Duy Thai, lecturer
Mobile : 0918 189 345
Email : duythaidm@yahoo.com
Indo Pride Internationa., HCMC
Mr. Marcus W. Manning, managing director
Phone : (84) 8 830 0404
Email : marcus@indoprideapparel.com
Website : www.indoprideapparel.com
Institute for Social Studies, Hanoi
Mrs. Duong Thi Nga
Mobile : 0912 440 508
Email : duongnga.iss.@gmail.com – Vietnam.iss@gmail.com
Ministry of Industry and Trade, Hanoi
Phan Thi Dieu Ha, deputy director general, export – import department
Phone : (84.4) 2 205 437
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Email
: haptd@moit.gov.vn
Vietnam Textile & Apparel Association (VITAS), Hanoi
Mr. Le Van Dao, vice chairman
Mobile : 0913 219 514
Email : daolv@vinatex.com.vn – info@vietnamtextile.org.vn
Website : www.vietnamtextile.org.vn
Yen Bien Company LTD, Hanoi
Mr. Nguyen Khanh Toan, director
Mobile : 0903 444 019
Email : gotohanoi@gmail.com
Website : www.garment.vn
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Appendix 6 List of Rejected Garment Companies
North of Vietnam
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Company name
Asia Queen Silk Company
Binh Minh Company
Chien Thang Garment Company (CHIGARMEX)
Dap Cau Garment Company (DAGARCO)
Dong Xuan Knitting Company (DOXIMEX)
Duc Giang Garment Company (DUGACO)
Fsilk
Hanoi Textile‐Garment Company (HANOSIMEX)
Ha Noi Industrial Canvas Textile Co. (HAICATEX)
Ho Guom Joint‐ Stock Garment Company
Hoa Viet Synthetic Fiber Co. Ltd.
Hoang Thi Loan Knitting Company
Hop Thanh Company
Hung Yen Garment Company (HUGARCO)
March 8 Textile Company (EMTEXCO)
Nam Dinh Garment Company (NAGACO)
Nam Dinh Textile Company (NATEXCO)
Nguyen Hoang Exim Company
Place
Hanoi
Hanoi
Hanoi
Bac Ninh Town
Hanoi
Hanoi
Hanoi
Hanoi
Hanoi
Hanoi
Hanoi
Vinh City
Thai Binh
Hung Yen Town
Hanoi
Nam Dinh City
Nam Dinh City
Hanoi
19
20
21
22
Song Hong Garment Company
Thang Long Garment Company (THALOGA)
Trade & Service Company No 1 (TRASCO)
Vinh Phu Textile Company (VITEXCO)
Nam Dinh
Hanoi
Hanoi
Viet Tri City
no e‐mail or
telephone reply /
webiste error
X
X
X
X
X
X
X
X
X
X
X
X
X
no English
speaking
too big minimum
order quantity
X
no women
fashion
X
X
X
X
X
X
X
X
X
X
X
X
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produces
fabrics
Central Vietnam
23
24
25
26
27
28
29
Company name
Danang Textile
Danang Silk and Agricultulutal Company
Hoa Tho Textile‐Garment Company (HOTEXCO)
Hue Textile Company (HUTEXCO)
March 29 Textile & Garment Company
Nhat Hoa Silk
Nha Trang Textile Company (NHATEXCO)
Place
Da Nang
Da Nang
Da Nang
Hue City
Da Nang
Da Nang
Nha Trang City
South of Vietnam
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
Company name
AN PHUOC Garment, Embroidery & Shoes Co., Ltd.
Bach Tuyet Cotton Corporation
Binh Dinh Export Textile & Garment Company
D.K Saigon NCCK. Wear
Doc Lap Garment Company (DOLIMEX)
Dong A Textile Company (DATEXCO)
Dong Nai Garment Company (DONAGAMEX)
Dong Nam Textile Company (DONATEXCO)
Dong Tien Import‐Export Company (DOTIMEX)
Fashion Trading Manufacturing
Garment Company No. 10 (GARCO‐10)
Gia Dinh Textile
Hoa Binh Garment Company (PEGARIMEX)
Hung Nga Fashion Company
Hung Thanh Dat Company
Hung Xuong Company
Huu Nghi Garment Company (HUGAMEX)
Place
HCMC
HCMC
HCMC
HCMC
HCMC
HCMC
HCMC
HCMC
Can Tho
HCMC
HCMC
HCMC
HCMC
HCMC
HCMC
HCMC
HCMC
no e‐mail or
telephone reply /
webiste error
no English
speaking
too big minimum
order quantity
no women
fashion
produces
fabrics
no English
speaking
too big minimum
order quantity
no women
fashion
produces
fabrics
X
X
X
X
X
X
X
no e‐mail or
telephone reply /
webiste error
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
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47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
Legamex company
My Nga Garment Co.
Nghe Phong Textile Company
Ninh Binh Garment Company
Phan Tiet Garment Company
Phuoc Long Textile Company (FULTEX)
Phuong Nam Garment Company (FUNAGAMEX)
Saigon Textile‐Garment Co. (TEXGAMEX)
Saigon Wool & Trading Corporation
Sao Mai Corporation
Senti Fashion (ladies)
Thoi Trang Han Co.
Traly Jute Company (TRAJUCO)
Viet Hung Company
Viet Tien Garment Company ‐ VTEC
Vietnam Blanket ‐ Wool Company (BLATEX)
Vietnam Cotton Company (VCC)
Vietsun Co.,ltd
Vinh Hung Textile Garment Pte
HCMC
HCMC
HCMC
HCMC
Phan Tiet
HCMC
HCMC
HCMC
HCMC
Dong Thap
HCMC
HCMC
Thai Binh City
HCMC
HCMC
HCMC
HCMC
HCMC
HCMC
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
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X
Appendix 7 Checklist
This checklist is used during all the company (factory) interviews/visits. On the attached DVD the checklists per factory are included.
Criteria judgement of Vietnamese garment producers
yes/no
General
Visited the head office
Visited the factory
Do they have a company profile?
Pricing on FOB
Pricing on CMPT
Pricing on C&F
Produces garment (finished)
Produces textiles/fabrics
Number of workers
Production capacity per week
Production capacity per model
What kind of machinery do they have
spinning lines
weaving looms
knitting machines
dyeing machines
finishing machines
sewing machines
multi‐head embroidering machines
other machines
is it al working
How clean is the factory
Do they work organized
ISO 9001:2000
ISO 14000
SA 8000
1
2
rating
3 4
5
when + address, (and accompanied by lecturer?)
when + address, (and accompanied by lecturer?)
if yes, include attachment
specify kind of garment <‐> period
specify kind of garment <‐> period
specify brandnames of machinery
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Communication/Internationalization
Grade of English
Use of linguist
Export to the EU/US
Who are their customers
Fabrics/Textiles
Which fabrics are they working with
Are textiles homemade
What is the quality
Is quality stable
Do they have inventory of homemade textiles
Are textiles imported
Is quality stable
Imported from China?
Also from other countries?
Deliver times when textiles are not in stock
Garment
Which kind of garment do/can they make
Do they understand our product specifications
Which brand of yarns do they use to stitch
Which brand of interlining do they work with
What is the quality of the lining
What is the quality of the shoulderpads/which brand
What is the quality of the workmenship
Do they have a own laundry(garment washed)
Do they make patterns by thereselfs
if yes, on which computersystem?or by hand?
if no, who is making them?customer?
Accesoires/Trims
Which accesory are they working with
specify which countries
specify the companies
specify, take samples of fabrics
middle price level, not cheap shit, not high end price level
specify from which companies
specify from which countries, and which companies
specify
specify
specify ('plakvaseline')
voering' ‐‐> if sample, judged by Bandolera
if sample, judged by Bandolera
if sample, judged by Bandolera
specify
specify
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Do they use YKK zippers
What kind of buttons do they use
Samples
Do they have a sample room
How many people are working there
How big is capacity of sample room
Can they show us samples
Can they also show the current production
Are they making new samples
Did they make a production of these samples
How many proto's can they make in 1 day
Can they make samples for us
Do they send it to Bandolera?
Can we take samples with us (i.e. B‐choice)
specify, maybe with pictures
specify amount
Deliver times
Deliver times of fabric when not in stock
Deliver times from scratch
Deliver time of proto within 21 days?
Total production deliver time within 90 days?
if no, specify
Pricing
Prices of already produced articles
Prices of our productspecifications based on 1500 pcs.
specify, and compare with China/India
specify, and compare with China/India
(means from the beginning of drawing till final production sample)
Concluding
General interpretation of the factory
Pictures made of factory?
Pictures made of different styles of garment?
Potential company for Bandolera?
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