Lack of management capacity holding back domestic supporting industry

The Vietnamese supporting industries have many opportunities to develop as several large foreign groups, such as Canon, Samsung, Huyndai, Nokia, Toyota and LG plan to increase localisation rates in Vietnam. However, few Vietnamese enterprises can adapt to these foreign groups’ requirements.

Notably, Samsung is researching and evaluating the quality of domestic enterprises and expects to have 41 component supplying partners in the future. It now has only four Vietnamese enterprises as first-tier and 28 as second-tier suppliers.

Manager of IJP Purchasing Dept.2 of Canon Vietnam Co., Ltd Nguyen Thi Kim Phuong said, “Canon has very strict quality requirements that very few Vietnamese enterprises can meet. Canon Vietnam currently has 120 components and spare parts suppliers, only 25 of which are Vietnamese enterprises. The figure is expected to increase to 30 by 2016 and 35 by 2017. Vietnamese enterprises manufacture almost exclusively packaging and simple spare parts only, we must import more than 90 per cent of complex components.”

Foreign investors comment that Vietnamese enterprises cannot compete due to their low management capacity.

“Being present in Vietnam for 13 years, Denso has plans to increase the localisation rate, however, it is very difficult to find suitable Vietnamese suppliers. Almost all Vietnamese enterprises have weak management capacities and, as a result, their products cannot meet our demands, especially in the areas of delivery time and precision. Thus, we have no choice but to opt for foreign or Japanese suppliers operating in Vietnam,” said supervisor of the purchasing section of Denso Manufacturing Vietnam Co., Ltd Vu Ba Tien.

“Several Vietnamese enterprises are investing in modern manufacturing lines to enhance their competitive capacity. However, innovating modern technology falls short if leadership teams have weak capacities,” Tien added.

“Being one of the main components and spare parts supplier for Honda and Panasonic, I know that it is very difficult to become the supplier for Japanese enterprises, in general, and the above enterprises, in particular. Besides investing in modern technology, I carefully studied their requirements, and, above all, built a professional leadership team,” said Nguyen Hoang Cong, business development director of Cosmos Industrial Co., Ltd.

“Although my company was founded only two years ago, we are confident to become a supplier for other Japanese enterprises as most of our staff used to work for Japanese enterprises, thus, we understand the Japanese work style as well as their requirements. Service quality and precision are two of the key factors that Vietnamese enterprises must adopt to build Japanese connections. Thus, Vietnamese enterprises need to change their mindset about manufacturing and workforce management,” said Le Hien Tuan, director of Tam Phat Electrical Engineering and Automation Joint Stock Company, which is supplying Toyota, Honda and Toto, among others.