"Tran Tien Phat, general manager of Datalogic Scanning Viet Nam also pointed out other supply-chain problems in Viet Nam like poor infrastructure and high cost of transport".— File Photo

HCM CITY (Biz Hub)— The capability to switch raw material sources and having a robust supply chain could help companies cut costs and improve competitiveness, experts said.

Speaking at the 2013 Viet Nam Supply Chain Congress, Mark Millar of M Power Associates, Hong Kong, said for firms that make and distribute products, the supply chain serves all aspects from procurement to output.

The spotlight is increasingly focused on Asia, he said, with multinational companies seeking alternative and additional sources of growth, revenues, and profits.

Besides outsourcing and off-shoring procurement and production to lower costs, companies are seeking to tap into the rising consumerism in Asia, he said.

But in Viet Nam, with its unconnected supply chain, companies face a series of problems like lack of raw materials and high inventory rates, and cannot find outlets for their products, he said.

He cited the country's textile and apparel industry as an example.

It is unable to source inputs as a result of which it cannot execute customers' orders in time and loses out on exports, he said.

Businesses that manage to source the inputs pay 10-15 per cent more, he added.

Tran Tien Phat, general manager of Datalogic Scanning Viet Nam, said there are obvious differences between Vietnamese firms and those from Thailand, Philippines, or Singapore that produce the same product.

The latter take the initiative in finding feedstock and intermediate goods, connecting with distributors and retailers, finding foreign partners, and others.

But Vietnamese firms find it difficult to do any of them, he said.

He listed two reasons for that: The close links in the supply chains of foreign companies make it hard for the Vietnamese to squeeze into, and Vietnamese firms are incapable of meeting foreign partners' requirements.

In the manufacturing sector, foreign-invested companies find only a few dozen firms in Viet Nam that can meet their requirements, while in other countries they find hundreds or even thousands, he said.

Phat also pointed out other supply-chain problems in Viet Nam like poor infrastructure and high cost of transport.

Dr Charles Guowen Wang, director of the Center for Logistics and Supply Chain Management at the China Development Institute, said poor supply chains hit a company's productivity, competitiveness, and profits.

He tabled a report based on a survey of 821 senior managers in a range of industries in China done last year, which listed four types of risks in supply-chain management: related to supply, safety, policy, and environment.

The unavailability of necessary raw materials, or supply risk, was rated as the top risk (81 per cent).

An enterprise seeking to survive and develop needs first to establish and improve a supply-chain setup and cultivate supply-chain talents and professionals, Wuang said. — VNS