Manufacturing In Vietnam: 5 Key Factors For Moving From ...

04 Nov.,2024

 

Manufacturing In Vietnam: 5 Key Factors For Moving From ...

Many importers have found moving manufacturing to Vietnam isn&#;t as simple as just finding a new supplier. Let&#;s look at four key factors to consider before you move your manufacturing from China to Vietnam.

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The U.S.-China trade war has added new energy to the debate over whether importers should shift production to Vietnam. Importers have been considering relocating supply chains away from China for years and some have already taken the bait.

Consider Nike, for instance. In , Vietnam became the primary supplier of Nike-branded footwear, accounting for 37 percent of production, while China remained a close second at 34 percent. Fast forward to , and Vietnam had grown to 47 percent while China dropped to only 26 percent.

But many importers have found moving manufacturing to Vietnam isn&#;t as simple as just finding a new supplier.

Many news outlets have touted Vietnam as the &#;next China&#;. But some importers remain skeptical of Vietnam manufacturers&#; ability to provide the same level of industry expertise as offered in China. And despite lower labor costs, importers must also consider the quality of Vietnamese products.

The road to China is well worn at this point. But that doesn't mean you can&#;t also succeed with Vietnam sourcing. Let&#;s look at four key factors to consider before you move your manufacturing from China to Vietnam.

1. Availability of capable manufactures for your product type

The very first factor you should consider when relocating to Vietnam is whether you can actually manufacture your desired product there.

Importers experienced in sourcing from China know it&#;s easy to find a manufacturer for just about any product type in China. And not just one manufacturer&#;you can easily find tens or even hundreds of manufacturers with a similar skill set and product offering.  

Consider that online search engines for sourcing, like Alibaba or Made in China, are overwhelmingly dominated by Chinese suppliers. For example, searching for &#;plastic bag&#; suppliers on Alibaba yields only 485 potential Vietnam manufacturers, compared to 3,850 in China.

Vietnam simply can&#;t offer the level of diversity China can at this stage. But Vietnam&#;s manufacturing industry does boast a higher level of industry diversity than some other alternative sourcing destinations, such as Bangladesh and Cambodia.

The country&#;s top exports include various types of machinery, garments and textiles, footwear and headwear, food and beverage and metals.

Industry maturity and manufacturing expertise in Vietnam vs. China

Importers looking to shift production from China to Vietnam should also weigh the risks of a workforce that is relatively inexperienced with sophisticated manufacturing. Products requiring high levels of technical precision, like aerospace parts, for instance, might be harder to source in Vietnam.

While Vietnamese manufacturers exist in a variety of industries, these factories might be newly established or inexperienced with exporting to your target market. Production line workers may similarly lack experience with manufacturing your product type.

Another key consideration is equipment and tooling. Has your existing Chinese supplier designed custom molds or tooling for your product? They might refuse to transfer custom-made molds to your new Vietnam manufacturer if you don&#;t already have an appropriate and binding IP agreement in place.

Finding a qualified tooling engineer in Vietnam to design new molds can be difficult&#;78 percent of Vietnam&#;s workforce lacks academic qualifications. And Vietnam ranks 120th out of 130 countries in terms of &#;know how&#;, or the breadth and depth of specialized skills, on the World Economic Forum&#;s Human Capital Index.

One injection molding company that recently moved to Vietnam relies on a Chinese supplier with computer numeric control machines and engineers to develop molds and tooling. The company then ships this equipment to Vietnam for use in large-scale production. You could find yourself in a similar position in Vietnam depending on your product needs.

2. Costs of moving your existing supply chain from China

Importers most commonly cite China&#;s rising labor costs as a chief reason they&#;re considering moving production away from China.

China&#;s wages have increased over 60 percent since , eroding profit margins on some labor-intensive products. And with new tariffs levied in , some American companies, in particular, have now found China to be cost-prohibitive.

Let&#;s examine the costs of manufacturing in Vietnam vs. China:

Labor costs and human capital in Vietnam vs. China

Vietnam&#;s monthly minimum wages in vary by region from $125 to $180, with the highest rates in urban areas like Ho Chi Minh City and Hanoi. These wages are sometimes half of China&#;s which vary by province from about $140 to $346.

And Vietnam&#;s minimum wage growth is showing signs of stability. Minimum wages increased by an average of 5.3 percent in , a lower increase than in (6.5 percent) and (7.3 percent).

It&#;s no surprise that Vietnam&#;s low labor costs are one of its most attractive features to importers. But is a reduction in labor costs enough incentive to uproot your supply chain?

Vietnam is at an enormous disadvantage when it comes to the size of its labor force. With a labor force approximating 788 million people, China has nearly 14 times the number of workers as Vietnam. And Vietnam is already seeing a major shortage of skilled labor following a surge of manufacturing in the wake of the Sino-U.S. trade war.

Vietnam also falls behind China in a number of other key human capital index rankings, including know-how and development and education. These limitations can certainly offset any savings in labor costs to make Vietnam a less attractive alternative to China for many manufacturers.

Relocation and facility development costs

Labor costs are a major consideration for any labor-intensive product like footwear and garments. But looking solely at labor costs doesn&#;t show the full financial commitment relocating to Vietnam might require.

One Chinese factory owner recently told the South China Morning Post that moving a Chinese supply chain to Vietnam could cost $1.4 million just for the early stage of relocation, including:

Paying for and converting the industrial plants, transferring automated production lines&#;as well as paying allowances to send skilled Chinese workers there.

The cost to rent industrial land on a long-term lease at one Vietnamese industrial park in also increased to $90 per square meter (10.76 square feet), up from $60 to $70 in . And the monthly rent for existing factory buildings in industrial parks near Ho Chi Minh City has risen to $4 per square meter, up from $3 last year.

Time is of the essence for manufacturers looking to build new facilities in Vietnam. As one industrial park executive noted in late :

You must be quick&#; our land is running out soon. A lot of Chinese factory bosses come to visit our industrial park every week.

Imported material and component costs

Another important consideration is the cost of machinery, components and inputs for your product.

Injection molded plastic parts, fabric and electrical components are still often imported from China to Vietnam for production. Vietnamese manufacturers rely on foreign inputs for production across a variety of industries. For instance:

  • Vietnam&#;s garment industry imports 

    70 to 80 percent of textiles

    used in the production of from China

  • Vietnam&#;s electronics industry imports manufacturing inputs worth up to 77 percent of the total product value

  • Vietnam&#;s pharmaceutical industry imports 85 to 90 percent of materials

  • Vietnam&#;s plastics industry imports manufacturing inputs that account for 70 to 80 percent of production costs

Imported materials or components usually increase your price per product unit. And your supply chain will still be vulnerable to increased costs from tariffs and trade tensions if it continues to rely on China for inputs.

But Vietnam does have a geographic advantage&#;its proximity to China. Compared to some other ASEAN countries farther afield, importing inputs from southern China is relatively fast and cheap.

Quality control costs when manufacturing in Vietnam vs. China

Many importers choose to conduct product inspection through a professional third party to verify product quality remotely. But the costs of inspection can vary widely depending on factory location.

You might face higher QC inspection costs if your third-party QC provider doesn&#;t operate widely in Vietnam. Many local inspection companies in China only operate domestically and don&#;t have a global presence.

A shortage of available inspectors or subcontracting of inspectors can lead to several problems, including:

  • Higher travel expenses for inspectors needing to travel a longer distance to the inspection site

  • Longer lead times for scheduling inspection

  • Integrity concerns

    due to a lack of centralized ethical and operational policies

If you&#;re considering relocating your supply chain, reach out to your existing QC provider and see what support they can provide. Carefully evaluate new suppliers before and after selection to ensure they can meet your quality standards.  

3. Vietnam&#;s logistics and infrastructure

With well-paved roads, seven of the world&#;s 10 busiest shipping ports and a massive rail network, China boasts some of the most developed and efficient import-export infrastructure in Asia. It&#;s relatively easy to get from one supplier to the next, whether you&#;re moving freight or just visiting your suppliers.

But when it comes to logistics, importers considering relocating to Vietnam may find the infrastructure there to be a major limiting factor. You might face longer lead times and unexpected delays due to less efficient infrastructure (related: It&#;s Not Just About Quality: 4 More Factors to Consider When Sourcing).

Among the 160 countries included in the World Bank&#;s Logistics Performance Index, Vietnam (39th) ranked well behind China (26th) overall. But importantly, Vietnam did outrank several countries in the region, including Bangladesh (100th), Cambodia (98th), Indonesia (46th) and India (44th).

Differences in quality of infrastructure are the main reason for the scoring difference between China and Vietnam. Though construction of Vietnam&#;s $5 billion North-South expressway, which commenced last month, is expected to bring a major boost to the nation&#;s logistics industry.

4. Ease of doing business in Vietnam

One area where Vietnam actually ranks better than China is in terms of ease of doing business&#;ranking 69th place to China&#;s 46th place on the World Bank&#;s metrics. Vietnam was also among 34 countries that improved the most from to on such metrics, most notably regarding:

  • Starting a business: Lowering the cost of starting a business and publishing notices of incorporation online.
  • Taxes

    : Removing the requirement to submit a hard copy of value-added tax returns and lowering employers&#; contribution to the labor fund.

  • Contract enforcement

    : Publishing judgements given at all levels in commercial cases online.

The gradually improving regulatory environment in Vietnam has made operating a local business there easier than ever. 

5. Foreign-owned Vietnam manufacturers

A growing number of factories in Vietnam are Chinese or Taiwanese owned, which can make your transition out of China and into Vietnam much smoother.

If fact, you might be surprised to learn that most export-oriented Vietnam manufacturers are actually foreign owned. For instance, Samsung has invested $17.3 billion over the past decade into building eight new factories and one R&D center in Vietnam.

Vietnam&#;s foreign direct investment (FDI) rose nine percent in , continuing a year-on-year increase seen since . Japan, South Korea and Singapore are the largest sources of foreign investment in Vietnam, while Chinese investment continues to grow at a fast pace.

Vietnamese officials are also considering opening three new special economic zones (SEZs) to foreign investment in , though anti-China political protests have stalled a decision thus far. The government is proposing offering 99-year leases and tax exemptions to spur further investment.

Chinese influence in Vietnamese factories

The larger your Chinese supplier is, the more likely they are to have considered moving operations to Vietnam to reduce costs. You may be able work with them to keep some production processes or orders in China, while outsourcing others to Vietnam.

And since many mainland Chinese and Taiwanese companies own factories in Vietnam, your time and energy spent learning the nuances of Chinese culture will not have gone to waste.

Furthermore, the foreign influence at these factories will often extend well beyond ownership to mid-level managers. Chinese-owned contract footwear manufacturers may employ as many as 200 Chinese workers alongside 10,000 local Vietnamese workers.

You&#;ll generally find that these factories also employ Vietnamese staff proficient in both English and Chinese. This makes it easy to transfer existing QC checklists, specification sheets or other product documentation that might have been written in English and Chinese.

Conclusion

If you&#;re sizing up Vietnam as a potential destination for relocating production from China, consider these key points:

You will get efficient and thoughtful service from Dayin.

  1. What you can reasonably expect to manufacture

     in Vietnam? The lower cost of labor might obscure equally important concerns like potentially lower quality and increased supplier risk.

  2. What kind of

     financial investment will be required for a stable supply chain? Will cheaper labor costs offset any other potential relocation costs?

  3. Are local substitutes available for necessary components and materials for your product?

     They may not be as easy to find or as quick to obtain as in China.

  4. What partners can help you relocate your supply chain without massive disruptions to product quality?

     Talk with any of your current suppliers&#;manufacturers, QC or logistics providers&#;to see how they might be able to help.

Above all else, remember there will always be somewhere cheaper to manufacture your product. So whatever competitive advantage you hope to gain with sourcing in Vietnam, first consider these four factors before leaving China.

Editor&#;s note: This post was originally published in March and has been updated for freshness, accuracy, and comprehensiveness.

Have you considered moving your supply chain to Vietnam? Share your experiences in the comment section below!

Injection Molding 101

What Is Injection Molding?

Injection molding is a form of mass production typically used when there is a need for many identical parts. Injection molding involves the injection of heated materials into a mold, which then cool and solidify into the desired shape. Once the mold has been designed and created, it can be used to manufacture thousands or even millions of identical parts, making it suitable for mass production of parts used in many industries. These industries include aerospace, medicine, automotive, and more. 

Injection-molded products can be made using metal, glass, rubber, elastomers, confections, and plastic. This versatility makes it an excellent option for those needing mass-produced parts. 

Why Utilize Injection Molding?

One of the most attractive injection molding features is that you can scale up production to almost any level. Initial costs for the design and mold can be prohibitive for small production runs, but once these initial costs are paid, the price per unit for injection molded parts is meager. Additionally, as production scales up, the cost per unit tends to drop remarkably. 

The turnaround time for parts manufactured using injection molding is rapid. The ability to produce hundreds of parts per minute with a single injection molding machine makes the process ideal for mass production.

Additional materials can be mixed in with plastic, allowing for a final product with greater strength.

Injection-molded parts have a very high level of consistency. As a result, the variation between different pieces is negligible, and this consistency improves the reliability of the parts. 

Injection molding is considered to be very environmentally friendly when compared to other manufacturing methods. Many different forms of manufacturing have high scrap rates and wasted material. Injection molding, however, has a relatively minimal amount of waste involved. In addition, much of the plastic that is leftover from the process can be recycled, further minimizing waste.

Much of the injection molding process is automated, which reduces cost, and produces a reliable and consistent product with low error rates.

Injection molding can be used to make parts with a highly detailed design due to the molding process. Many other manufacturing methods are unable to produce items with a high level of detail. This issue helps make injection molding an attractive option to those looking to produce more complex parts with little tolerance for error.

What Industries Use Injection Molding?

Due to the variety of materials supported and the high level of consistency provided by injection molding, the process is suitable for producing parts needed by a wide variety of industries, including:

CONSTRUCTION 

Home and building construction both utilize many parts that are manufactured using injection molding. In addition, many applications in the construction industry have high requirements for part quality, consistency, and durability, making injection molding a popular choice for many parts used in the industry.

AUTOMOTIVE

Consistency and safety are essential factors for parts used in the automotive industry, and injection molding is commonly used to meet these requirements. Additionally, the ability to customize the color and finish of injection-molded parts allows the level of versatility that automakers require. As a result, many interiors, exterior, and under-the-hood auto components are all manufactured using injection molding. 

FOOD & BEVERAGE

Food containers, beverage caps, filtering components, conveyor systems, straws, and other food and beverage items are all commonly produced through injection molding. Because of food safety requirements, you can use only certain materials for the manufacturing of these items. With injection molding, manufacturers can use BPA-free and other non-toxic plastics to produce items that you can safely use to hold food and withstand temperature changes.

MEDICINE

Many types of medical equipment utilize injection molded parts, including heart pumps, monitors, laboratory equipment, and many more. Injection-molded parts can meet any special requirements for the medical industry, including resisting breakage, contamination, and temperature changes.

TELECOMMUNICATIONS

Much of the information in the world transmits through the use of fiber-optic cables, which require special adapters and parts to function correctly. Many of these parts are made using injection molding, making the process critical to this crucial industry.

HOUSEHOLD GOODS

Many everyday household items are made using injection molding. For example, toys, plastic bottles, plastic food containers, and many other common household goods are manufactured with this process.

ELECTRONICS

Computer monitors, keyboards, laser printers, cell components, and many other electronic items all contain parts manufactured with injection molding.

How Does Injection Molding Work?

Before the actual injection molding process begins, you must create a 3D design of the product itself. A STEP file is one of the common file types used for this. You must also consider the design, desired material, shape, and any additional features. Then, upon manufacturer approval of the design, the mold itself is created. 

The mold is a precision-machined metal piece that consists of the core and the cavity and is used to form the materials into the desired shape. 

The mold is usually made from aluminum, steel, pre-hardened steel, or beryllium-copper allow. The type of material used for the mold can have an impact on the entire process. For example, a steel mold can be more expensive but more durable and can construct more parts before needing replacement.

Aluminum molds are less costly but do not last as long as steel molds. One advantage of an aluminum mold is that it can dissipate heat, allowing for a reduction in the time required to mold each part better. This increase in speed can help manufacture more parts in a shorter amount of time.

The molding process consists of five key steps:

1. Clamping

Since the mold itself comprises two pieces (the core and the cavity), these pieces must be held together by a clamping unit. As the material is injected, the clamping unit pushes the two halves of the mold together and holds them tightly in place.

2. Injection

A hopper feeds the materials into a barrel. This barrel contains an auger, which is essentially a screw-shaped device that rotates to feed the material into the injection machine. Heat and pressure are applied to the barrel and auger to melt the pellets into liquid form, and this liquid is then injected into the mold cavity through a sprue and runners. 

As the liquid enters the mold, the displaced air exits the mold through vents. High pressure ensures the mold fills as completely as possible. A mold may also have multiple cavities, allowing many products to be made with each injection.

3. Cooling

After the material injects into the mold, it will begin to cool and harden. This cooling is facilitated by coolant flowing through channels around the mold. The mold remains closed until the material hardens into its final shape. Once the cooling period has ended, the mold can be opened again. The cooling time can be affected by both the thickness of the part and the type of material used. The time it takes to make each part is called a cycle, and a longer cooling time impacts the duration of each cycle.

4. Ejection

The part may stick to the mold, so an ejector rod or ejector pins are used to eject the molded part. 

The part is caught by a bin placed under the mold. Once the part is ejected, the process begins again to create the next part.

5. Finishing

The sprue and runners are trimmed from the part, leaving only the final product. Some injection molding machines utilize a hot runner system, which eliminates both runner and sprue. This utilization minimizes the amount of waste but can increase the cost of the injection molding machine. 

The Injection Molding Cycle

The amount of time to complete a single cycle depends on a few factors, including:

MOLD CAVITIES

You can use a mold with multiple cavities when making a smaller part. With multiple cavities, each time liquid is injected into the mold; multiple parts are created. Therefore, the amount of time per cycle will be increased, but more parts are produced with each cycle.

MOLD CYCLE 

The mold cycle can be defined as the amount of time it takes to complete a single injection molding process. However, the calculation of this time does not have a well-defined formula and depends on several factors like: 

  • Type of Material

The density of the material used can increase the amount of time required for cooling, influencing the length of each molding cycle.

  • Part Thickness

A thicker part will require more time to cool, increasing the length of each cycle. Check out our article on minimum wall thickness in plastic injection molding to learn more.

  • Type of Molding Machine

Electric molding machines are typically faster than machines using hydraulic motors, reducing the length of each cycle.

  • Runner and Sprue Trimming

The time necessary to trim the runner and sprue after cooling can affect the length of each cycle. Hot runners can eliminate the need for trimming, or robots can automatically perform the trimming, increasing speed.

Anatomy of an Injection Mold Machine

There are different types of injection molding machines. Some are motorized, while others are driven by hydraulic motors. There are also hybrid units that utilize both servo and hydraulic motors. 

An injection mold consists of four main parts, each of which contains secondary parts.

BASE

The base, also called the machine bed, works as a frame to mount the clamping unit and injection unit. Due to the heavy stress load on the machine, the strength and durability of the base are essential, making heavyweight steel beams the material of choice for most injection mold machines.

CLAMPING UNIT

The clamping unit holds the two halves of the mold together to prevent leakage and is responsible for opening and closing the mold halves, as well as ejection of the part.

Mold

  1. Cavity: The cavity is the shape of the part that is being manufactured.
  2. Runners: The runners are channels that enable the plastic to flow into the cavity.
  3. Sprue: The sprue is the primary channel that the liquid flows through.
  4. Parting Line: This is the break between the two halves of the mold. When separated, it allows the parts to be ejected from the mold.

Barrel

  1. Hopper: The hopper is used to store the pellets before they are heated and fed into the barrel.
  2. Heater Bands: The heater bands wrap around the barrel and apply heat to help melt the pellets into liquid form.
  3. Auger: The auger, or reciprocating screw, turns to propel the pellets forward. The friction from the turning of the screw also creates heat to assist in melting the pellets.
  4. Nozzle: The nozzle is located on the tip of the barrel and directs the melted liquid into the actual mold.

Our Jaycon team has created a short animated video to detail the basics of the injection molding process. (See below).

More Than Just Injection Molding

Jaycon Systems is a product design, prototyping, and manufacturing company that specializes in injection molding. We can provide mold tooling, plastic injection molding, post-processing, and product packaging. Whether you need a prototype unit or mass production of millions of parts, our solutions can scale to meet the needs of any size application.

We have facilities in both Florida and Shenzhen, China, that utilize high-end injection molding equipment. We have the capacity for up to 50 injection mold tooling sets per month and can meet production needs of up to 800,000 pieces per month.

We can provide injection molded parts using a variety of materials, including:

  • All thermoplastics and elastomers
  • Acrylonitrile butadiene styrene (ABS)
  • Polyethylene
  • Polycarbonate
  • Polyamide (nylon)
  • High impact polystyrene
  • Polypropylene

We are also able to support requirements for many popular add-ons, including:

  • Anti-UV
  • Fire retardants
  • Talc
  • Antibacterial agents
  • Plasticizers
  • Other additives
  • Chrome finish

In addition to the initial plastic injection molding, we are also able to provide many post-processing services such as:

  • Box-build assembly
  • Electroplating
  • Hydro-dipping (water transfer)
  • Pad printing
  • Screen printing
  • Laser etching
  • Overmolding
  • Insert molding
  • Ultrasonic Welding
  • Molded-in color
  • Molded-in symbols
  • Hot stamping
  • Internal and external Threads
  • Metal stamping

Successful projects start with a good plan. We work with you every step of the way to ensure the optimal design, manufacturing, and quality control of your parts. Our engineers can help you choose your material and surface finish, and our injection molding process minimizes the appearance of markings typical to injection molding.

The first step is to submit your STEP files through our contact form. A Jaycon engineer will respond with a custom injection molding quote within 24 hours. This secure contact form ensures the safety of your files, as well as a mutual NDA you can sign before the submission of your STEP files. Then, Jaycon will show you how we can help turn your design into reality.

The company is the world’s best Vietnam High Precision Injection Molding supplier. We are your one-stop shop for all needs. Our staff are highly-specialized and will help you find the product you need.