Manufacturing always have a special hold on one country’s economy. In Vietnam, the transition from Agriculture to Manufacturing is still on its way. On the other hand, the pace of changes that manufacturing companies need to face is continuously increasing. Chemical, oil, gas, pulp & paper, steel and metal processing companies are rethinking, reorganising and reengineering their businesses so they can outperform their competitors and become more profitable.
However, despite the lower costs compared to China, Vietnam is still a little behind its neighbor in terms of productivity, according to the surveyed companies (GatePoint Research, 2013). Furthermore, increased volatility of commodity prices, environmental regulations, and globalisation of sourcing are also adding into the operational challenges that foreign-based as well as local manufacturers in Vietnam market has to overcome.
Additionally, many manufacturing companies have seen an increase in operational complexity, in customer demand and in pressure to manage operational cost. Therefore, only leading companies which are able to out-perform their peers despite the challenging climate; and able to achieve agile and lean operations by addressing operational complexity through operational optimisation, can reach the goal of growing revenues and cutting costs to enhance the company’s growth. However, for Vietnamese manufacturers to gain these values, there’s a long road ahead.
Here are 5 key priorities from top manufacturing executives in 2013’s GatePoint survey to overcome these operational challenges for success.
1. Taking advantage of revenue opportunities
Increased competition from emerging countries such as Cambodia, Laos, Indonesia, etc... is a challenge to Vietnam manufacturing in the future because most foreign companies turn to Vietnam, instead of China, due to lower costs. Moreover, increased compliance requirements and the volatile costs of raw materials in Vietnam also pressure Vietnam manufacturers to deal with external changes while keeping the internal productivity up.
71% respondents in GatePoint’s survey cited that investing in product innovation, to take advantage of a new growth wave. Similar to that, 51% is expanding to other markets to get new business opportunities. Only one third stays focus on domestic markets.
Other opportunities to increase revenues is to prioritizing new product introductions, with 42% of respondents, and other 35% prioritise on tightening the production, operation and manufacturing areas. Moreover, according to Jack Bullock, senior vice president and GM at Infor, manufacturers can extent revenues by providing added-services, or leverage current information system to successfully identify new business opportunities, increase collaboration with customers and suppliers and ensure supply inventory.
2. Tuning up operations and processes
Challenging economic conditions and tough competition make production errors and waste unacceptable. As the complexity in the supply chain and distribution channel increases, the need to tailor reporting systems and metrics is becoming more important. This enables them to identify potential issues and adjust their processes to prevent them from turning into real problems.
According to the survey, an overwhelming number of 74% list optimising production process as their top priority to improve operations, and other 42% say they want to shorten the supply chain, but only 28% is reducing the number of supplier they’re working with.
Additionally, 93% respondents indicate they are currently using ERP to manage their production processes. ERP spans and links all the key functions and departments, enables manufacturers to integrate their supply chain and manufacturing processes to reduce lead time and increase productivity.
This is the first 2 key takeaways from GatePoint survey of top manufacturing executives to help enterprises overcome operational challenges to increase revenue and profits. Stay tuned to our next post for the remaining 3 key takeaways! Or you can read the full analysis of the survey now by downloading our full paper "5 key factors in optimising complex manufacturing businesses"