In Vietnam and China, Manufacturing Is Changing

I had an opportunity to assess four shoe manufacturing sites in Asia in May.  Two were in Vietnam and two were in China. I was evaluating quality issues at all of these sites on behalf of my consulting client.  Although I have been to China many times and have seen dozens of factories, this was my first trip to Vietnam.

I was truly astonished by the sheer magnitude of motorcycles in Ho Chi Minh City, reminding me of swarms of honey bees around a hive.  They were everywhere and yet, traffic seemed to flow effortlessly through chaotic intersections with no stop lights.  “You have to just keep moving forward,” my driver told me.  “It’s the only way to get around in Vietnam. You cannot stop or hesitate,” he said. I was very glad my client had hired an experienced driver and car for me.

I felt a bit of the same beehive effect inside the Vietnam shoe factories.  Everything was continuously and consistently moving forward… the gluing stations, the stitching lines, the heat treat, the finishing lines and the lacing stations. It was a frenzy of activity in some of the largest factories I have ever seen. Shoemaking processes are still very manual with little automation, in some cases with 200 individual steps in the process. The pace is quick and unrelenting.

The workers in these Vietnamese factories are paid $200 per month, plus they have an opportunity to earn a 10% ($20) production bonus if they meet or exceed production quotas and quality standards. Working in non-air conditioned facilities, with high temperatures and humidity, these workers (mostly young girls) were heads-down for a full 8-10 hours per day.  But I also learned that Vietnamese workers prefer not to work overtime. They are locals and go home at night to their families.  They don’t want to work on the weekends.

Comparing Vietnamese factories with the factories in China, the differences were quite remarkable.  In Guangzhou, Dongguan and Shenzhen, Chinese workers are paid about 30% more than in Vietnam, plus they often work overtime hours. Weekend work is generally expected, especially during peak production times. Chinese workers are mostly migrants from the interior of China, coming to these factory towns to work a few years before returning home with their savings. They live in factory dormitories, are fed three meals a day, and work overtime to earn more. They are also more productive and are capable of working on more complicated processes. But these workers are also becoming global millennials.

As I wrote in my Chinese Millennials blog, young Chinese workers have started to exhibit millennial behaviors akin to American millennials. They talk about the quality of their lives. They want all kinds of consumer products like the latest mobile phone and branded clothing. They will quit their jobs for higher wages at another factory. The Chinese worker that we have become accustomed to reading about and seeing in factory photos, is changing.

Chinese manufacturing is maturing and low-cost, labor-intensive work is moving to other low cost countries like Vietnam, Myanmar and Indonesia while China takes on more advanced manufacturing.  What we are seeing are the results of China’s industrial revolution. With Xi Jinping’s “Made in China 2025” initiative, Chinese manufacturing will soon become world class.  The next industrial revolution will be in Vietnam.