Southeast Asia: The World’s New Factory?
By Rachel

The topic of reducing manufacturing costs by relocating supply chains away from China to Southeast Asian countries, including Vietnam and India, has been ongoing for years. The escalating Sino-U.S. trade war is accelerating the pace of these discussions and migration.

Vietnam and India have made some of the most significant strides in developing the infrastructure to support global supply chains. For this reason, many industry professionals look to Vietnam and India as the new “world’s factory” in place of China. The sharp rise in foreign investment in these countries supports this view.

Some importers, however, remain skeptical of supplier’s ability in these areas to provide the same level of infrastructure and industry expertise offered in China. Despite the value of lower labor costs, buyers must also consider the ability of factories to manufacture at acceptable quality levels and time frames that meet your requirements.

Manufacturing Expertise

Importers looking to shift production from China to Vietnam and India should weigh the risks associated with a workforce that is relatively inexperienced. While factories in these regions currently produce a wide variety of products, many are newly established and lack sophistication with the export market. Production line workers also lack deep experience with quality control principles and processes.

The Cost of Quality Control vs. China

Many importers sourcing in these regions engage a professional third-party quality control provider to conduct product inspections. They are finding the costs of such services can vary widely depending on factory location, and other factors.

If your third-party QC provider does not operate widely in Vietnam and India, you will face higher QC inspection costs and reduced technical capabilities. Many inspection companies in China don’t have a global presence. However, with a view on expanding into these regions, some outsource their services to local people creating additional issues that may affect your products.

Some of the issues include:

  • Reduction in direct oversight and control
  • Dilution of technical capabilities
  • Reduced accountability
  • Higher travel expenses for inspectors not based locally
  • Longer lead times for scheduling inspections
  • Integrity issues due to a lack of centralized ethics and operational policies

Conclusion

As can be seen, there are many factors to weigh when considering a shift from China to other countries in Southeast Asia. Some have done it successfully, while others have struggled. The key is to find the right partner to assist you in the process, and to ensure the benefits offset the risks.

About HQTS

At HQTS, we have long supported our customers throughout greater Asia, with operations offices in Vietnam, India, and other 20 countries in the world, aside from our many China locations. We provide a wide range of quality control services, including quality control inspections, factory audits, supplier evaluations, supply chain, testing, production control and management, and quality assurance consulting. HQTS is your best choice for a quality assurance partner.