Introduction

Vietnam’s garment manufacturing sector is aiming for a $100 billion export target by 2030, known as ‘Vision 2030’. The plan includes significant investments in modernising infrastructure, enhancing workforce skills, and adopting sustainable practices. The government and industry stakeholders are collaborating to create a favourable business environment that attracts foreign investment and nurtures domestic enterprises.

The VITAS website states that the Vietnam textile and apparel industry aims to be a sustainable and innovative industry by 2030, with a turnover of USD 100 billion, a 10% global market share, a 40% GDP contribution, 4 million jobs, and improved worker welfare. The industry also strives to improve its competitiveness and reputation in the international market, by adopting advanced technologies, enhancing quality and design, and meeting environmental and social standards.

Moreover, the industry plans to develop its supporting industries, such as cotton, yarn, fabric, dyeing, and accessories, to reduce import dependence and increase domestic value chain.

Furthermore, the industry seeks to cooperate and integrate with the regional and global partners, by joining free trade agreements, attracting foreign investment, and expanding export markets. Also, by 2035, the industry aspires to develop sustainably according to the circular economy model, complete the domestic production value chain, and effectively participate in the global value chain.

Beyond Logistics: The Multi-faceted Challenges of Vietnam & Supply Chain

Vietnam’s garment sector faces challenges such as reliance on imports, supply chain fragmentation, technological gaps, labor issues, geopolitical risks, and environmental concerns. Addressing these through domestic sourcing, process integration, tech adoption, labor improvements, market diversification, and sustainability is key to its growth.

1. Reliance on Imported Raw Materials: The industry’s heavy reliance on imports for materials like cotton and fabric makes it susceptible to market fluctuations. Developing a robust domestic supply chain can mitigate these risks.

2. Fragmented Supply Chains: A multitude of SMEs leads to fragmented supply chains, causing inefficiencies. Enhancing collaboration and streamlining processes can improve competitiveness.

3.Technological Gap: Many manufacturers lag in adopting modern technologies, affecting productivity. Investment in technology and training is essential for market responsiveness.

4. Labor and Wage Issues: Rising wages and labor concerns threaten the industry’s cost advantage. Improving labor standards and
investing in workforce development can help retain talent.

5. Geopolitical Uncertainties: Global economic and political instabilities impact the industry. Diversifying markets and creating contingency plans can build resilience.

6. Environmental Impact: The industry’s significant water use and pollution are concerns. Adopting sustainable practices can meet consumer demands for ethical production.

Strategic Initiatives for Vision 2030 Navigating the Challenges in Vietnam & Garment Manufacturing

Vietnam, with its immense potential, can effectively address the above challenges by implementing a multi-faceted approach. Developing Domestic Raw Material Sources: Vietnam has been reliant on imported raw materials, with a significant portion coming from China, Taiwan, and Korea. By developing domestic sources, Vietnam can reduce this dependency and enhance its self-sufficiency.

Supply Chain Consolidation: Streamlining the supply chain can lead to improved efficiency and traceability. Investment reports suggest that Vietnam’s textile and garment supply chain is evolving, with a focus on overcoming challenges posed by global economic conditions.

Innovation and Technology: The adoption of Industry 4.0 and digitization is transforming Vietnam’s apparel sector, with companies increasingly implementing new technologies to stay competitive.

Labor Conditions: Improving labor conditions is essential for retaining a skilled workforce. Despite significant improvements, challenges such as excessive overtime and low wages persist.

Market Expansion: To expand into new markets, Vietnamese manufacturers need to build scale, develop compelling value propositions, and innovate across omni-channel platforms.

Sustainable Practices: VITAS aims to make the industry more environmentally friendly by reducing energy consumption by 15% and water consumption by 20% by 2023. Sustainable initiatives are becoming a requirement, not just a trend.

Fostering a Fair and Safe Work Environment to Attract and Retain Talent

Vietnam’s garment industry employs approximately 2.7 million people, with a significant majority being women. The industry has faced challenges such as high employee turnover, gender-based discrimination, excessive overtime, and low wages. To address these issues, Vietnam is revising its labor laws to promote collective bargaining and social dialogue, and has ratified key International Labour Organization(ILO) convention. Fair Wear, an initiative active in Vietnam since 2006, works with 32 member brands sourcing from 190 factories to improve labor conditions. By fostering a fair and safe work environment, the industry can attract and retain skilled workers, which is crucial for maintaining competitiveness and quality standards.

Expanding into New Markets and Building Resilience Against External Shocks

Vietnam’s garment and textile exports reached approximately $44 billion in 2022, marking a 14.7% year-on-year increase. However, the industry faces challenges such as declining global demand and profitability issues among leading enterprises. To counteract these challenges, Vietnam is diversifying its export markets beyond traditional ones like the United States and Europe, tapping into emerging markets in Asia and Africa. This expansion helps build resilience against external shocks like economic downturns and trade disputes.

Investing in Technology to Enhance Efficiency and Productivity

Vietnam’s garment and textile industry is investing in technology to remain competitive. The adoption of Industry 4.0 and digitization is transforming the sector, with companies increasingly implementing new technologies. This includes automation, which can significantly improve productivity and quality.
For instance, cut-make-trim (CMT) models, which account for about 70% of the output of domestic garment and manufacturing firms, are seeing increased use of advanced business models like original equipment manufacturing (OEM) and original design manufacturing (ODM).

Building Resilience Against Geopolitical and Economic Uncertainties

The garment and textile industry, accounting for a significant portion of Vietnam’s total export value, plays a crucial role in national economic development. With the enactment of the US Uyghur Forced Labor Prevention Act, Vietnamese garment and textile companies must ensure that forced labor practices have no place in their supply chains. This requires tackling forced labor issues not only domestically but also internationally. Building resilience against geopolitical and economic uncertainties involves enhancing supply chain traceability and compliance with international labor standards. By focusing on these strategic areas, Vietnam’s garment manufacturing sector can continue to grow and adapt to the changing global landscape, ensuring a sustainable and prosperous future.

The Transformative Role of Groyyo Consulting in Achieving Vision 2030

Vietnam’s garment industry has a vision to become a more competitive, sustainable and innovative industry by 2030, but it faces many challenges in the global market. Groyyo Consulting can help the industry overcome these challenges by providing tailored solutions in the following areas:

Supply chain optimization: Groyyo Consulting can help streamline operations, reduce costs, and improve lead times, creating a more agile and responsive manufacturing environment.

Technology and automation: Groyyo Consulting can guide manufacturers in adopting cutting-edge technologies, such as automated cutting machines, AI- driven design tools, and ERP systems, to modernize production processes and stay competitive.

Labor management and sustainability: Groyyo Consulting can offer strategic advice to ensure fair labor practices and improve working conditions, as well as implement sustainable practices that reduce environmental impact and align with global standards.

Geopolitical risks and economic uncertainties: Groyyo Consulting can provide valuable insights to help manufacturers navigate these challenges, and enable them to make informed decisions and build resilience against potential disruptions.

Partnerships and collaborations: Groyyo Consulting can facilitate partnerships and collaborations within the industry, connecting Vietnamese manufacturers with global fashion brands, suppliers, and technology providers, leading to shared knowledge, access to new markets, and collaborative innovation.

By partnering with Groyyo Consulting, Vietnam’s garment industry can enhance its operational efficiency, improve its sustainability, and strengthen its position in the global market. Vision 2030 is a very formidable target set by Vietnam. Together, they can work towards a more prosperous and resilient future for Vietnam’s garment industry.

Get to know more about Vision 2030 here.

Divya Mohan
Business Manager