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We Are Garden: Vietnam Sourcing Insights

Industry Insights / admin / Pottery, sourcing, Vietnam

Garden Products: Key Sectors and Strengths

ET2C’s Vietnam Sourcing Team has already identified opportunities within the Garden & Outdoor sector exclusively from Vietnam due to raw material availability as well as manufacturing capability already in situ. Combined with other political, social and economic factors, Vietnam presents an opportunity on the global stage.

Although the relationship between the United States and China appears to be thawing, Vietnam continues to attract business from US buyers due to the current tariffs imposed on Chinese products, which will mean costs rising by anything up to 25% later on this year (should the US and China not come to an agreement). Clearly, companies are also looking to de-risk and look to spread their supplier base across multiple jurisdictions. The Vietnamese manufacturing sector will be an important part of any such Asian sourcing strategy with many suppliers investing in additional manufacturing capability and R&D.

As your Asian sourcing expert, we highlighted some key sectors within this broad category. In particular, Pottery, netting, garden tools, garden gloves, plant supports, arches and obelisks, hanging baskets, coco-liners and furniture. To build on our ‘We Are Garden’ initiative, we recently spent some time with a couple of suppliers to provide some greater insight into their background, the industry and the possible opportunities. As part of our next in the series, we interviewed a Pottery supplier who exports to EU, US and Australia.

Pottery Supplier

After a two-hour drive, we turned off the main road into a vast manufacturing site located in Binh Duong Province. Noticeably, the site was very busy with three containers being loaded with different ranges as we pulled in. The company CEO, Mrs T, was waiting for us outside of her office along with some of her key staff. As we were shown around their two showrooms, full of their different ranges and finishes, and their cavernous warehouse there was a clear sense that this factory was very well setup for export (they have TQM, BSCI, C-TPAT certification). Established in 1999, they are a manufacturer of ceramics, cement-based, poly(resin) housewares. Especially, their product portfolio includes but not limited to ceramics, Terrazzo, Terracotta, Pottery, High fired, Lite stone, Poly stone to name some key styles.

Interview

1. Which countries within the Asian Region do you see as your main competitors?

Within Asia, I see Malaysia and Thailand as our main competition. They do not have the labour cost advantage that Vietnam has and therefore mainly produce larger sizes by machine. They also do not have the range of colour options. China is always a competitor, due to its depth of manufacturing, but they are certainly volume geared.

2. What does ‘Sustainability’ mean to your business?

Sustainability means putting an emphasis on our staff and ensuring that they are treated in an ethical and fair way. Also, looking at focusing on the environment and our processes.

3. How do you continue to develop your export market and client base?

We have put a great focus on innovation and look to develop new and unique designs for our clients. Also, the service and quality we provide to our clients is key to grow our business with them as well as identify new clients at Global trade shows. We are also looking to engage more with social media.

4. What are your biggest challenges as a business?

From both an internal and external perspective, with increasing demand, we need to properly manage our staff base and production capability. One of the biggest challenges is the Government restrictions on pottery Kilns as we need to make sure we have space to fire our ceramics.

5. What is the future for the Vietnam manufacturing base in your product category?

The pottery industry in Vietnam is well established and has been exporting products for a long time now. There is innovation coming into the Homewares category and this is evident with the introduction of lightweight options. These are cement compositions (such as polyresin) and have shorter lead times, are lightweight and can be used to make lots of contemporary styles. We have our own unique features, that we have honed over our years of experience, such as unique glazes, water & frost resistance, and special surfaces.

Summary

The Vietnamese Pottery industry is underpinned by over a thousand years of artisan expertise and has developed to the mass market offering that it is today. Although labour is still an important part, there is increasing investment in machinery to make the process more efficient. Moreover, this will detemine more advantageous costs on a global stage. New alternative materials have also become more prevalent as different options for the consumer.

As a Vietnam Sourcing Company, and having been on the ground for over 10 years, we have identified the Garden Product and Outdoor sector as a growth manufacturing sector in Vietnam. Where necessary, we have developed manufacturing capability at factory level to produce high-quality products at competitive prices. There is now a unique opportunity to source a breadth of products all out of Vietnam.

For more information, please contact us at vietnam@et2cint.com. We will help your business positively blossom!

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Choosing Between Air and Sea Shipping from China

Industry Insights / admin / China, shipment, sourcing

The invention of containerisation has been a game-changer for international trade feeding the beast of Consumerism this past century. Originating in the British coal mining industry of the late 18th Century to address the necessity to break bulk, which was a fairly time consuming and inefficient process, the first container system was implemented in Poland in 1919 by the engineer, Stanisław Rodowicz.

Containers are now commonplace and integral to the movement of goods and commodities across the world’s oceans. One of the main considerations when sourcing from China (or any other Asian country) is how to ship your products in the most cost-effective and efficient way. In this piece, we will be reviewing the implications of how to ship your goods.

How to Measure Costs

Sea Shipping

Clearly, shipping by ocean freight is the first option that companies consider when moving goods from Asian to their markets. In fact, ocean freight is approximately 90% of all outbound shipping ex China, primarily due to the cost-effectiveness.

When factoring the most financially astute options, consider that the expense should also factor in timing and local charges. And obviously also quantity, weight and volume (CBM).

There are three types of container for ocean freight:

20 foot (ft) container (approx 28CBM)
40 foot (approx (62 CBM)
40 ft HQ (65 CBM)

Freight on Board

It is really important to understand at the outset for any production, or order placed, on an FOB basis (Freight on Board) what the CBM will be and the implications of how you plan to ship the goods. First thing, avoid shipping ‘air’/empty space, as this will directly impact the unit cost of your products. Also, from a transit perspective, it can lead to damaged goods in certain instances. For example, the goods could move within the container on rough seas. For this reason, the factory should make sure that they load the container effectively to minimise any movement of packaging. Clearly, this is something a sourcing partner on the ground can assist with.

In case the order doesn’t feel a container to the full, you have a couple of choices. You can:

Ship by LCL (less container load)
Consolidate with other shipments
Ship by Air (if time is short).

The best option would be to consolidate other production runs, which will require assistance from your freight forwarding company. Although there will be additional local charges incurred by the factories, which you will need to likely manage and additional costs on your invoice from the freight forwarder, this would likely be the most cost-effective option. The LCL option would mean your goods being palletised and added to another container. More touchpoints and waiting for other goods to be added will lead to higher per-unit costs and longer lead times in getting the goods from their country of origin to your warehouse.

Air Shipping

Air shipment is the most expensive method of transport. However, it enables goods to arrive within a much shorter time into your warehouse. Calculated on the higher of CBM (volume) and weight, it can be advantageous for smaller products. In fact, in this case the per unit cost will not be prohibitively higher relative to ocean freight costs. This is particularly true with higher-margin products that are better placed to absorb the airfreight costs.

Current Considerations

This is all in an age of Consumerism that is driving changing patterns in how companies purchase their products. Companies are mostly looking to benefit from more frequent orders but lower volumes to minimise working capital tied up with factories whilst leveraging the greater flexibility that smaller production runs present, particularly relevant within the fashion sector. Working closely with your freight forwarder and your local sourcing partners is therefore increasingly important to ensure that you are shipping your goods in the most efficient way.

New Sulphur Regulations: IMO 2020

It is also worth mentioning that cost structures for container shipping will be changing in 2020 (if you have not already had uplifts). This is due to the new Sulphur regulations that come into force in 2020. This is certainly a win for the environment and requires significant investment by the carriers across their fleets. The approximate cost of a 20ft from China to the United Kingdom (at the time of writing is) is $700 and a 40ft is just under $1,000, plus additional surcharges.

Risk Management

Whatever mode of freight you are considering when it comes to shipping goods from China or more broadly Asia, make sure that you have the necessary insurance (Goods-in-Transit insurance) to protect against any damage or loss. Containers, as robust as they are, are loaded onto carriers and pass through thousands of miles of open ocean. During these journeys, there will be knocks, rough seas and in some instances lost containers. In fact, hundreds of containers are lost every year at sea, which is now also presenting an environmental issue as highlighted by the first of its kind ‘Shipping containers at sea, an unacknowledged drift report’.

Also, liaise with your freight forwarding company and any local sourcing partner when it comes to a certain type of product. For example, when shipping wooden products from humid climates to colder temperatures. In this case, make sure they have the relevant anti-humidity or anti-mould safeguards in place. A container should be sealed and the seal number past to you as the consignee for checking on arrival. It should be untampered on arrival and should there be any evidence of tampering. Then you need to make sure that the Freight Forwarder is made aware before the container is opened.

Summary

There are numerous factors to consider when it comes to shipping goods from China and other Asian countries. A good supplier will assist and guide you when it comes to CBMs, container loading, etc. Whether you are thinking of sea shipping from China or air freight, make sure you are leveraging the advice of your Freight forwarder or your local sourcing partner who are best placed to help you. At ET2C, we have our own experienced logistics department to help our clients with all their shipping needs, liaising directly with your freight forwarder at origin to ensure that not only the containers are correctly loaded and sealed but to make certain that the shipping documentation meets all your needs to import from Asia. For more, please contact us at contact@et2cint.com.

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Your Go-To Guide for Supplier Risk Mitigation

Industry Insights / admin / business, Industry, risk mitigation, suppliers

The internet has been an incredible enabler when it comes to sourcing new factories. In a few clicks, you can find a whole smorgasbord of suppliers ‘able’ to manufacture and deliver what you need. However, understanding the risks when outsourcing production and the risk mitigation strategies to address these is integral to avoiding any potential pitfalls. Asia, in particular, presents a greater challenge due to a more complex business environment that is overlaid with more marked cultural, language and regulatory differences.

With two decades of experience operating in Asia, we have honed our approach to vetting and onboarding suppliers to deliver on time and against specification. Below we have pulled together some key points to help with this end of the process.

Vetting a Supplier

Selecting the right supplier is critical. It will determine the success or failure of the production.

When selecting a supplier, you should ultimately be sure that your interests are shared, or at least aligned. Success for you needs to mean success for your supplier. There is simply no point in today’s environment with short-termism and lop-sided relationships in which the supplier is suffering on price, payment terms, short delivery times etc. There will only be one ultimate loser, and that is invariably the buyer. When first identifying the right supplier for your needs, make you address the points below:

1. Understand their business

Take an ‘under-the-hood’ approach, which means developing an understanding of the facility (how many production lines, people, seasonality, size, turnover etc.), their history, other clients (third party references if possible) and where their expertise lies.

2. Ask for their registration documents

We do this as a matter of course. Although often in a foreign language, be sure that the supplier is who they say they are and not an imposter! For example, an export agent and not the ultimate manufacturer as this may lead to additional costs and possible contractual complexities in the case of any disputes.

3. Check any quality certifications

As independent verification of standards, these are useful but make sure that these are still within the validity period, they are verifiable by the governing bodies (not fakes) and are evident on any visits.

4. Visit the site and meet the management

Sounds simple, but we have seen many businesses pay suppliers without visiting the site and spending long enough with the management team. Understand their product expertise and manufacturing capability and what drives the management team (for example, is ethics important).

A lot of these can be addressed by having some kind of local presence on the ground, with staff who can speak the language and visit the factory to make sure that all is in order. We have seen factories change the signs on the side of the building as soon as the potential client leaves! Not a good omen.

Onboarding a Supplier

This is where we see a number of companies making mistakes when implementing a direct sourcing strategy. Any risk mitigation strategy has to be underpinned by law. This is complex where legal systems are less robust or less developed than in the West. Some key points to consider in this regard:

a. Legal Jurisdiction

In some Countries it is difficult to enforce a contract that has been breached. For example, it is not easy to enforce a purchase agreement against a Chinese factory governed by US law. And even when there is enforceability present, some legal systems are less than effective when it comes to claiming for any breach of contract. Make sure you take legal advice in this regard*.

b. Non-Disclosure Agreements

These are commonly used to ensure that there is protection against any company IP being shared or used. However, the best protection is to make sure that any NDA covers off Non-use, Non-disclosure and non-circumvention. These are commonly referred to as NNN agreements.

c. Communication Requirements

At the outset, be clear as to the expectations. Set up a critical path with key milestones and agree with your supplier what is expected of them as part of the management of the information flow. For example, make sure that there is a clear specification sheet that provides product details, colourways, packaging requirements etc. This eliminates the risk of timing issues or mistakes executing the product quality.

Making sure that you understand the formal relationship that you are entering into and the fact that in a lot of cases it is a very alien business environment will put you in good stead. In addition, a lot of companies use commercial levers (like payment terms) to provide protection should something go wrong. Working with a company that has experience on the ground can help you manage such risks.

Summary

Over the years, we have been told and likewise heard of some production runs gone badly wrong. Being able to develop a relationship will define how easy it is to work with an overseas supplier. In Asia, relationships are of particular importance and leveraging this can help you benefit from the broad manufacturing base. Look at your suppliers as ‘Partners’, who can actually help you deliver the products you want, help drive innovation and sync with your own procurement technology rather than look simply over a short term horizon.

In the main, having some kind of local presence will only help enhance these relationships whether it be your own office, a sourcing company or some other third party presence. If you were manufacturing 30miles up the road from your head-office, you’d be visiting the facility on a regular basis. The same principle should stand true if the equivalent spend is put to work 6,000 miles away.

At ET2C, we provide our clients with the transparency needed to best manage their suppliers across Asia and help with any risk mitigation strategy. For more information on how we can help you, please contact us at contact@et2cint.com.

*None of the comments in this article should be construed as legal advice. Should you have any queries, you should seek legal advice relevant to your own individual circumstances

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Top 3 Questions to choose the Best Asia Sourcing Company

Industry Insights / admin / Asia, Industry, manufacturing, sourcing

Even with the rise of the internet and platforms, such as Alibaba, dramatically reducing distances and opening up markets, when it comes to identifying the best sourcing partner in Asia, it is always a good idea to ask yourself some pertinent questions. This will ensure that you select the BEST Asia Sourcing Company for your business. To help, we have researched and selected the TOP questions you should consider when looking for the right partner.

Question #1: How established is your sourcing partner?

This is probably one of the most important questions to consider for a few reasons. First of all, understanding current and past clients, as well as the evolution of the business, will aid any decision. This is particularly true where you are able to get third-party client references that underpin any views considered. If you find a company that has been in good standing in the region for over a decade, chances are you have a good contender for helping your business source manufacturers in Asia.

Of course, with longevity comes, a level of experience and expertise. Operationally, the necessary familiarity of sourcing throughout Asia despite volatile and increasingly fluid geopolitical climates. Companies like ET2C, for example, with over 20 years of experience throughout Asia as well as other countries, have consistently been a frontrunner for clients’ Asian sourcing needs.

Question #2: What are the company’s ethical standards?

In general, this is an important element when choosing to do business with any company. Moreover, this becomes essential when working overseas. There, local laws may allow or create a climate for unethical business practices and non-compliance. Ask key-questions to establish that you are dealing with a sourcing company that provides the following:

What are their views on ethical practices within their supplier base?
Do they have their own Code of Conduct when it comes to dealing with the supplier base?
Do they have any process around bribery and corruption?

Undoubtedly, there are some excellent factories across Asia that are producing high-quality products in a fair and ethical way. It is up to your Asia sourcing company to make sure that you are selecting the correct suppliers. Furthermore, it is paramount for you to get the level of visibility required. Examples like the terrible collapse of Rana Plaza in Bangladesh some years ago are a reminder of where certain companies have lost control of their supply chains and are indirectly profiteering from unethical business practices.

A common theme that is consumer-led over the past few years has been the rise and rise of Sustainability. In particular, what this means for companies engaged in product manufacture. With ongoing concerns about the environment, fair practices and material waste, a sourcing company in Asia should be aware of the impact this movement has on supplier selection, product development, and quality standards.

Question #3: Who are the People?

Particularly true of any company operating out in Asia, relationships and people matter. Having clear sight of who you are dealing with will be a key part of any successful relationship. It sounds simple. In an ideal world, it would be but based on our research it is something that should not be underestimated.

You need to get an ‘under the hood’ perspective who the founders are, who your contact is and what they understand about your business. At the end of the day, you want a team in place that not only understands your key drivers but is one that is willing to do everything in their power to deliver the product, leverage in-house expertise and provide a high level of visibility. The best sourcing Asia company will have a team that really cares. Briefly, make sure that the team is aligned with needs. This will pay off over the course of the relationship.

Trust, integrity, and accountability are core values that are reliant on the team in place. In Asia, you can identify these elements as a key success factor. Often market research (asking third parties such as logistics, specialist quality labs about reputation) and client references (word of mouth) can be the best way of getting this level of insight.

Find the Best Asia Sourcing Company.

Don’t skip any of these important questions if you really want to find the BEST Asia Sourcing Company. Having a great partner in manufacturing that understands your needs, is people-oriented and provides a high level of visibility in everything that it does will make a tremendous difference to your sourcing requirements.

At ET2C we are always looking to understand our clients and deliver flexible solutions to address their needs across Asia. For more information, please contact us at contact@et2cint.com.

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Reverse Auctions. We found the right tool for your business.

Industry Insights / admin / business, procurement, reverse auctions

Reverse auctions in brief

Reverse auctions have been around since the late 1990s. They are a proven negotiation method that invites your vendors to compete to provide products or services to your business. Vendors place lower bids throughout the auction until the lowest bid wins your contract. Reverse auctions are excellent for products where price is the main differential; such as stationery, uniforms, consumables, packaging, and much more.

The obvious choice for smart buying

Recently, an exciting new online negotiation platform has been created to give procurement professionals a competitive edge when buying most goods or services. eTrade Procurement aims to keep your business’s purchasing functions simple and effective, and your negotiations easy. Through this platform your procurement process can be streamlined, saving valuable time, and your team can achieve significant cost reduction, all while having reporting and analysis directly at your fingertips. With minimal investment, this innovative reverse auction webapp makes this possible.

Online Auctions made simple, effective and accessible

Andrea Saunders came up with the idea to create a user-friendly negotiation platform to support procurement professionals in their purchasing activities. With her years of buying experience, Andrea spotted an opportunity to bring this powerful tool into a modern procurement space. By combining the accessibility and efficiency of online platforms with the commercially prudent reverse auction strategy, eTrade Procurement combines two proven methods to give your business another tool for its buying toolkit, giving you a commercial advantage.

This negotiation platform allows vendors to compete for your business in a transparent way for buyers and vendors alike. Your procurement team can effortlessly announce their specifications to any number of vendors(as an RFQ), prior to commencing an auction. The auction participants see the negotiation taking place in real-time so both buyers and vendors see that the best price is achieved, all as it happens. By using one of our reverse auctions, your business can move away from non-competitive, stale contracts, and achieve real savings – fast!.

Find the best reverse auction method for you

eTrade Procurement offers four auction methods to best meet your specific needs:
• Ranked auction: you nominate your opening price. vendors can only see their ranked position, based on their bid in relation to competitors’ bids. Vendors can place as many bids as they like
• Open auction: you set your opening price for the auction. Vendors can see their own bid, as well as their ranked position, and other participants’ bids.
• Sliding auctions: you set your opening price and, during the auction, the price will reduce in set increments, with vendors placing their optimal bid. The auction concludes when all participants have placed their one bid
• Tender auction: vendors place their single, best bid prior to your deadline date

Reverse Auctions. Why use eTrade Procurement?

Leveraging mobile technology, all this can be done anywhere, any time. Your purchasing team will require only minimal training to be able to run simple, efficient, transparent negotiations, thereby opening up new relationships, all while achieving the most competitive bottom line.

blank — eTrade Procurement is a user friendly platform that anyone can use. Watch the video to know more.

In summary, eTrade Procurement offers:

an intuitive and user-friendly webapp
an intuitive and user-friendly webapp
easy integration into existing practice with minimal investment
a process that is totally transparent.

Try eTrade Procurement now!

eTrade Procurement in the real world has resulted in average savings of over 15%. With training and real-time support throughout you are in safe hands. Having this tool as a part of your procurement arsenal will mean your business is well-equipped to simply and effectively manage your purchasing needs in 2020 and beyond.
For an obligation-free trial, and to discover how eTrade Procurement can best fit your business contact Andrea and her team today.

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How are trade tensions changing China sourcing trends

Industry Insights / admin / business, China, sourcing

Where once the mosaic patchworks of paddy fields and sugar crops dominated the landscape of Central Java, now sit a swathe of vast garment factories which produce apparel for leading retailers and brands. Similarly, 4,970 miles to the West, across the Indian ocean, rising out of the flat and baron plains of Ethiopia are large industrial parks (Special Economic Zones) likewise pumping out thousands of garments for international companies. These emerging industries are gaining ground on China, so long the factory of the world, and taking market share.

Of course, there has been the natural progression of China’s manufacturing sector up the value chain. This has allowed wage and margin growth but has increasingly forced the lower value add end of the manufacturing spectrum (particularly soft goods, and ‘cut & sew’) to look beyond China’s sprawling boundaries. However, there have been some sourcing trends in 2019 that have further exacerbated this movement out of China. In this context, what are the current China sourcing trends and how will China fit into any sourcing strategy going into 2020?

Sourcing Trends in 2019

‘Uncertainty’ and ‘Consumerism’ are broadly the two main drivers of these trends. However, with more choice of where products can be manufactured, there has been a trend to ‘de-risk China’. In essence, not put ‘all your eggs in one basket’ and with the Chinese economy slowing down it makes sense where possible to have alternate locations to manufacture your products (albeit this may bring additional challenges in some cases).

Uncertainty

Clearly, the highlight of this past year has been the US/China trade war. The unpredictability of the discussions and the imposition of punitive tariffs has led to US companies scrambling for alternate supplier-hubs. China is out as far as Trump is concerned in his high stakes game of poker with his Chinese counterpart. Undoubtedly, there have been Chinese moves on currency and slack on price with incumbent Chinese suppliers to mitigate the impact. But other markets around South East Asia have certainly been willing beneficiaries of American dollars. Conversely, should a deal be done later on this year as is anticipated (in some guise), expect this trend to at least slow down rather than stop altogether.

There has also been uncertainty in most retail markets as the threat of recession has led Buyers to lower volumes but work through quicker reordering cycles. This has been further compounded in the UK with the quagmire of ‘Brexit’.

Consumerism

We have previously discussed at length the impact that the new generation of consumers is already having on incumbent supply chains. One of the main consequences has been the need for more agile and flexible production. Therefore, having an ability to manufacture products closer to your local market (“Near Sourcing”) has been one solution to address this need, particularly when complemented with larger volumes from Asia.

Customisation and personalisation have been sourcing trends in 2019 that continue to enhance the level of engagement with customers. Whether it be a mix of colours, some embroidery or a label, the capability to in some way personalise the product to an individual or business provides a unique proposition. Suppliers are therefore needing to invest in technology and stock planning to make this a possibility.

Lastly, and one trend that has been increasingly prevalent this past year, is the need for sustainability. There’s a growing movement of Brands across the retail spectrum looking for sustainable stories around their suppliers, products and packaging. There may be varying degrees of engagement with this piece depending on the ultimate consumer and their needs. But there is little doubt that it is changing the sourcing landscape for the better with the imposition of high ethical standards on many factory sites and also driving innovation through the products and packaging to meet company and consumer expectations.

Where Does China Fit in Then?

Yes, the outsource manufacturing sector is in a state of flux. China has certainly lost its almost complete dominance in manufacturing that it wielded some 15 years ago. Wage inflation and currency appreciation have reduced its competitive edge. But taking a step back and looking at the facts paints a slightly different picture.

Clothing and footwear

To take clothing and footwear – the industries most impacted by domestic cost increases – over the past five years, China has only lost 6.6% of the relative share of global exports. The main beneficiary has been Vietnam at 5.1% growth, followed by Bangladesh at 0.9% growth. China still makes 57.5% of global shoe production and the US makes over 80% of its shoes (even with the tariffs already in place) in China’s factories. There is a trend away from China. However, capacity and scale cannot be ignored or replicated that easily.

Furniture and household

Away from soft goods, another example is furniture and household fixtures. In fact in these sectors, China has gained 1.6% relative market share of global exports over the past 5 years. It still sits in a strong position even when you include alternate markets that can compete but perhaps do not have the capacity currently to take a significant share of exports. In addition, manufacturing wage gains in the lower-cost countries (albeit from a lower base). One just has to look at some of the protests in countries like Cambodia and Bangladesh around minimum wage demands.

Automation

Lastly, China is automating its manufacturing base and the rest of Asia is slow to follow. That does not mean there are not some excellent new factories being across South East Asia that have state of the art machines in situ and are well placed to address ethical standards. The difference with China the Government drives in part this investment in the lead up to ‘Made in China 2025’.

As a global producer, China will maintain its relevance for the foreseeable future.

China Sourcing Trends – Our Key Takeaways

There is no doubt that the sourcing trends in 2019 have eroded China’s dominance as the factory of the world. But, China’s current size and breadth of capability still present a significant advantage of some of its smaller neighbours. Some of the key points are:

A China + 1 sourcing strategy (invariably Vietnam) is still a compelling sourcing strategy
Other market opportunities will be dependent on product category, company and sales market
Look for China to ramp up investment in smart manufacturing
Partner with suppliers over the medium term to allow them to invest in delivering value
Flexibility & Agility will be key to identifying opportunities in new markets
US/China tariffs to likely drop off by end of the year

At ET2C, we look to partner with our clients to deliver sourcing solutions that work for them. With offices across Asia, we are well placed to help you identify the right suppliers and deliver value through to your bottom line. For more enquiries, please contact us on contact@et2cint.com.

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We Are Garden: Vietnam Sourcing Insights

Industry Insights / admin / Furniture, sourcing, Vietnam

Garden Products: Key Sectors and Strengths

ET2C’s Vietnam Sourcing Team has already identified opportunities within the Garden & Outdoor sector exclusively from Vietnam due to raw material availability as well as manufacturing capability already in situ. Combined with other political, social and economic factors, Vietnam presents an opportunity on the global stage.
Vietnam continues to attract business from US buyers due to the current tariffs imposed on Chinese products, which will mean costs rising by anything up to 25% later on this year (should the US and China not come to an agreement). In addition, many Vietnamese suppliers are investing in additional R&D to ensure they have a competitive edge by presenting new designs according to market requirements.

As your Asian sourcing expert, we highlighted some key sectors within this broad category including, Pottery, netting, garden tools, garden gloves, plant supports, arches and obelisks, hanging baskets, coco-liners and furniture. To build on our ‘We Are Garden’ initiative, we recently spent some time with a couple of suppliers. They provided some greater insight into their background, the industry and the opportunities presented. The first one to be featured is a furniture and decking manufacturer predominately for the US and EU markets.

Furniture Supplier

Forty-five minutes outside of Ho Chi Minh city, we turned off the main road into a vast industrial park. Unlike most industrial parks, we found ourselves pulling up beside a wooden house set within a lush garden, where we were greeted by the company Chairman (“Mr T”). This was of course a showroom and an oasis set aside the impressively well-managed manufacturing facility. Mr T has over 20 years’ experience in dealing with wooden furniture exports from Vietnam. During the years, he has seen the evolution of manufacturing capability first-hand. His factory is both FSC™ and BSCI certified and is set up to deliver against international expectations from an Asian sourcing perspective.

Interview

1. Which countries within the Asian Region do you see as your main competitors?

I see Indonesia and Malaysia as my main threats given the type of products that they manufacture, service level, and quality they can produce.

2. What does ‘Sustainability’ mean to your business?

Sustainability and eco-friendly was important for our brand from the very beginning. As a result, we have a strict process when it comes to selecting the source of raw material. Whether our wood comes from the US, EU, Malaysia, Paraguay, Brasil or even locally, it all must be FSC™ certified. We also comply with the protocol of using only non-formaldehyde compounds to ensure our products are as sustainable and eco-friendly as possible.

3. How do you continue to develop your export market and client base?

We have experience in dealing with large international clients. Therefore, we understand that executing against specifications, delivery dates and price are key-components in developing and retaining our client base. For instance, we put an emphasis on developing ‘partnerships’ that help us innovate and align with the client. In this way, we are always able to find the best possible options for our clients.

4. What are your biggest challenges as a business?

From an external perspective, with a number of companies recently moving out of China, we are having to often compete with pricing that has been developed over a long period of time with their previous suppliers and based on historical volumes. Of course, we understand that price is important. However, we also want to work with clients that recognize what we bring to the table which is broader than just price and recognize the quality we produce.
Internally, our biggest challenge is wage inflation and staff retention. Wage inflation is increasing at 3-5% per year. Our employees are central to our business and lead to our long-term success. Therefore, we have created a development program to help our staff grow and develop alongside our business.

5. What is the future for the Vietnam manufacturing base in your product category?

The furniture industry in Vietnam continues to develop and evolve with increased competition across Asia. There needs to be a shift to a greater use of technology and machinery to enhance efficiencies and maintain prices rather than solely rely on manual labour.
There is Government investment in infrastructure and manufacturing. Combine this with the experience of making furniture over many years in Vietnam, we are well-positioned to continue to grow this category of exports in the future. As a business, we are looking to reach new markets with different requirements who focus on quality, design, and sustainability.

Summary

There are approximately 1,500 furniture exporters in Vietnam with 30% of these being a result of foreign direct investment (FDI). Certainly, one key advantage of this category is the flexibility that has been demonstrated with a pivot from the more traditional outdoor furniture lines to an increasing industry for indoor furniture (as with Mr T’s factory).
As a Vietnam Sourcing Company, on the ground for over 10 years, we have identified the Garden Product and Outdoor sector as a growth manufacturing sector in Vietnam. Where necessary, we have developed manufacturing capability at factory level to produce high-quality products at competitive prices. There is now a unique opportunity to source a breadth of products all out of Vietnam.

For more information, please contact us at vietnam@et2cint.com. We will help your business positively bloom!

We Are Garden: Vietnam Sourcing Insights Read More »

The Forest Stewardship Council™: A Step in the Right Direction

Company News / admin / FSC, sourcing, Sustainability

The Path towards a Sustainable Future

For most organisations, sustainability is a progressive evolution towards a more sustainable future. This can be focused on a range of different goals like eradicating hunger, clean water, gender equality or aspects of the environment. Any initiative around sustainability should centre on the organisation and what is pertinent to the stakeholders’ values and beliefs. This enables a better commitment and engagement to whichever cause or initiative is being undertaken. Importantly, be selective and understand the implications around each initiative; what they mean to your organisation, product and customer.

Little Steps

There is no point as a sourcing company, to move to chrome free leather production without assessing and understanding other dying processes and the environmental impact that these may have. Likewise moving from a synthetic material to a 100% cotton, although sounds a more sustainable option from a production perspective, discounts the environmental impact the production of cotton actually has (20,000 litres is the amount of water to produce one kilo of cotton).

Also, plastic is an amazingly adaptable, cost-effective and useful material. Therefore, removing it all together may not necessarily work but understanding its end-use may have a profound impact on the environment. For example, leading to reuse through recycling or other processes. The point is that there is no one answer. Any step, however little, towards a more sustainable future is a step worth taking.

FSC™ Certified Companies

Sustainability is a key pillar in the ET2C Ecosystem, and one of our sustainability goals for 2019 was to attain FSC certification. As a sourcing agent that manufactures and sells wooden products, we felt it important to support the FSC’s work on sustainable forest management. We achieved this certification on the 30th August 2019.

The global media coverage of the deforestation of the Amazon this past Summer has served as a reminder of the environmental harm being caused by unsustainable farming practices (mainly for rearing cattle). This Summer alone there were 26,000 reported incidents of fires. Certainly, this forms only a small part of the continual yearly reduction of the Amazon. Clearly, greater protections need to be implemented at an international level to protect already fragile ecosystems.

How Forest Stewardship Council is growing

It was actually at the 1992 Earth Summit in Rio De Janeiro that the concept of the Forest Stewardship Council was born. On the back of a failure to produce any agreement on deforestation, a group of businesses, environmentalists and community leads developed the idea and now the FSC has just celebrated 25 years! Today, the organisation has grown significantly, and through a set of principles and standards that ensure both sustainable forestry management and ensure the chain of custody of products using wood from these forests, steps are being taken to protect the environment. The FSC now has:

200,233,958 Certified Hectares
39,664 CoC Certificates
1,655 FM/CoC Certificates
1,127 International Members across 90 Countries

The Amazon rainforest is approximately 550 million hectares on its own and largely sits within Brazil’s borders. However, in the 9 months to April 2019, 217,000 hectares were lost, a 20% increase on the prior 9 months. The international community needs to address more directly the drivers for this deforestation. Moreover, they should potentially take measures in their own markets to lessen the attractiveness of beef as a commodity.

FSC and The Consumer

The Millennial and the Gen Z consumer are looking at sustainability when it comes to Brands and what products they are looking to purchase. The FSC™ label has long formed a part of the product proposition both on packaging and the product itself. Importantly, the FSC is now looking at innovations to further enhance this proposition to the end consumer with Blockchain. Blockchain can track any movement of goods with value between different trading parties. This means that it can efficiently pass along claims in a verifiable and trusted way. Certainly, this will further provide reassurance as to the provenance of the raw material used for any given product.

Summary

Certainly, the FSC Certification is one step forward for ET2C as we continue along our journey towards a sustainable future. Therefore, we are constantly looking at ways to improve our sustainable footprint and will continue to do so. For any queries on FSC certification or anything related to Sustainability, please contact us at sustainability@et2cint.com.

The Forest Stewardship Council™: A Step in the Right Direction Read More »

product development company

“Upstream”: The Key to any Modern Product Development Company

Industry Insights / admin / design, product development, sourcing

Market Overview

In the past, Asian factories have been over-reliant on their customers for design and development. There was always a greater onus on transactional outsource manufacturing rather than design and innovation. As the sector has evolved, particularly in China, design, and innovation have come to the forefront. This is the culmination of a natural progression of suppliers’ own internal capabilities on the back of investment in R&D and other factors such as competition and external drivers (for example, the recent US Trade War) that have ushered this transformation further forward.

A good illustration, at one end of the product spectrum, of how prominent innovation is now within the Chinese manufacturing base is that “Ninety percent of the world’s headphones are produced in China, 90% of China’s headphones are produced in Guangdong, and 90% of Guangdong’s headphones are made in Dongguan” as stated by SIVGA co-founder and product chief Zhou Jian (Bloomberg).

The likes of Amazon and other e-commerce platforms are actually taking this one step further. They are now working and collaborating with manufacturers on pricing strategy, ranging, logistics, warehousing, and delivery in foreign markets. Ultimately, they are affecting the cannibalization of manufacturing capacity whilst also potentially competing in the same markets as their clients. Certainly, something to keep in mind when identifying new suppliers.

The key to any product development company

The key therefore for any product development company is to leverage this expertise and innovation and develop an ‘upstream’ design/development capability. This means investing time and resources to work side by side with your partners in their sample rooms or developing mold. Where companies have Sourcing Offices then it is ensuring a local design/innovation capability to work closely with the manufacturers. Alternatively, and this is happening with some large brands, having the design teams spend months on-site at the factories.

To build on this, we have pulled together some tips so you can shorten your development cycle, access R&D, and take advantage of the many other resources available to you.

Tip #1: Save Time

Companies are always looking to shorten lead times and it is often the development cycle that is the longest and least efficient part of the entire critical path from concept through to delivery. Here are a few ways that as a product development company you can do just that by being on-site with your supplier:

Be present: Collaborate in real-time and in-person
Remove Waste: Samples made, adjusted and approved on-site
Innovation: Identify potential options, tests, and feedback immediately
Sustainability: Remove carbon footprint and waste

Tip #2: Use Tech

There will, of course, be times when designers and engineers are not able to be at the factory. It is important too, therefore, to think through the application of technology to minimize cost and increase efficiency. Here are just some of the ways you can cut time and money.

Additive/3D Printing: 3D printing used for sampling, functional testing and mold confirmation pre-investment
Photography/Imaging: Use photography, scanning, and imaging as much as possible to avoid multiple iterations being shipped. Rely on the final sample for sign off.
Software: Use of specialist software to make the development cycle more efficient. For example, design software that shows final garments on models prior to development, which aids the design process.

Tip #3: Pick the Right Partners

Whatever your sourcing strategy, as a product development company, picking the right partner is integral to being able to develop your products. If you are working with a manufacturer direct, then being able to collaborate with them closely and is a necessity. Alternatively, choosing the correct sourcing partner can make all the difference where there is a need to work upstream on development and you do not have sufficient resources to do so yourself.

Understanding: Your partner needs to know what your needs are and how to address them.
Capability: Your partner needs to have the upstream design/development capability.
Language/Cultural Barriers: It is essential that the communication channels are effective and there are no unnecessary misunderstandings that may lead to delays and additional costs.
Trust: In addition to standard contracts etc, you need to be sure that your partner is accountable and trustworthy. You do not want them competing with you in your market with similar designs (remember the ‘Amazon effect’!).

Summary

The world has become smaller whether through the availability of travel or technology. It is important that as a product development company you are leveraging what is possible in today’s age. This should drive down costs, increase efficiency and the ability to enhance the design/development process.
At ET2C, we have in-house capability across a range of products whilst also working with design partners in certain instances. For all inquiries, please contact us at contact@et2cint.com.

“Upstream”: The Key to any Modern Product Development Company Read More »

Quality Assurance at ET2C: Elaborate, Efficient, and Excellent

Company News / admin / quality assurance, Quality Control, sourcing

Quality Assurance is one of the biggest concerns that companies have when sourcing from Asia. Why? Over the years, a myriad of problems has occurred to entrepreneurs lacking effective communication skills when dealing with suppliers in Asian countries. Quality issues can cause the loss of hundreds of thousands of dollars or more.
These cases are not uncommon; the amount of inspection failures each year in Asia have been volatile the last few years, but still reaches high percentages.

However, there is a way to avoid becoming part of these statistics. Any company should look to ‘check before they buy’ their products. Having an upstream capability to do this in Asia is imperative to removing the additional costs once the goods arrive. Identifying issues at the factory means that they can be addressed, or worst case, they can be rejected.

Quality Assurance is an essential process in any industry hoping to ensure the well-being of their consumers.

Quality Assurance – step by step.

ET2C quality assurance processes are divided up into five different steps. Each step is an essential part of the quality control process to ensure the consistency and integrity of the product throughout all steps of production.

Raw Material Receipt

Here the raw materials of the product are laid out for our quality control agents to inspect. This ensures that from the very beginning, our suppliers are using ingredients that are conducive to your company’s specifications. This avoids many problems later in production. This step ensures that the products can handle the stresses of production, transport, or use.

Early Production Checking

After the raw materials are approved and begin the manufacturing process, they are checked once more in the early stages of production. This ensures that the right steps are being made so that any errors in production can be caught before the product continues into production, saving money and materials down the line.

In-Line Inspections

As the product moves towards the middle parts of production, it is inspected again on the production line. This is to continue to ensure the quality of the product at all stages of production. With these measures in place, it is easier and to pinpoint exactly where errors are being made.

Final Inspections

These inspections take place at the end of production and before shipment. This catches any errors in the product before they reach the customer, which make it one of the most important steps of the quality control process.

Quality Control Review, Authorization, and Release

The final step of quality control consists of condensing the information from all the inspections and the raw material receipt. First by reviewing the quality of the quality control processes, then authorizing that the information within the report is correct, and sending that information to our partners at the end. This step is extremely vital to the process. In this way, our associates can see into the course of their products’ production and are sure that their order will meet their specifications.

This can change based on a risk assessment and based on the level of engagement with the relevant factory. In fact, our aim is to implement processes that ultimately the factory can follow to facilitate a continual improvement methodology. The more eyes and processes that can be developed to eliminate defects can only be a positive development.

Quality Assurance – Our Operations Abroad

One component of quality assurance that most outsiders might not consider is how quality control is conducted in different countries. Undoubtedly, ET2C has an immersive supplier network. Because of this, we realize how to interact and ensure quality in multiple different areas of the world. Some of our biggest operating areas such as China, Vietnam, and India, vary in how quality control is viewed by suppliers.

China – trustworthy relationships and effective communication

To start with China, there are a few things for sourcing companies to keep in mind while conducting business in the middle kingdom. First, dealing with bureaucracy is a huge part of doing business in China. Because of the complex nature of government intervention in business, any manufacturing contract should be in Chinese with the specifications of the product clearly and specifically laid out and the producer company’s seal on it. This is to avoid potential legal headaches down the road. In addition, face to face conversations are absolutely crucial to producing in China. To know and to form a relationship with the supplier is a good way to ensure quality as well as effective communication of your specific production conditions.

India – the importance of independent quality assurance

ET2C’s expansive supplier network have developed the need for a comprehensive and transparent quality control process.
Next, production in India also has certain aspects that also require special attention. Like China, India has policies on quality control. Their Quality Council of India was formed to give India an edge for quality and allows for a government presence in ensuring QC. However, it is still important for a company to conduct independent quality assurance as well, since this bureaucratic arm is often stretched too thin to capture many details about the production process. This requires consistent quality management on the part of the customer, which can be done through a supply chain company like ET2C.

Vietnam – find reliable manufacturers

Vietnam, as a rising economy, is displaying many of its own unique aspects of quality control. As one of the newer developing economies, the lower cost of labor raises concerns over quality and reduced reliability. This is why it is essential to make sure that you are pairing with a reliable manufacturer. However, Vietnam has also shown itself to have a comparative advantage in producing garments, furniture and shoes. This has encouraged the government to look into methods of bureaucratic quality assurance to help encourage foreign business relationships.

Do you want to know more about quality assurance? If you have any questions or need assistance, please contact us via our website www.et2c.com

Quality Assurance at ET2C: Elaborate, Efficient, and Excellent Read More »

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