Footwear producers overloaded with too may orders

Since the labour cost in China, the biggest footwear producer and exporter in the world, has been increasing, foreign importers now tend to place orders with Vietnamese producers.

According to the Vietnam Leather and Footwear Association (Lefaso), more and more foreign importers have come to place orders with Vietnamese producers since the beginning of the year.

Lefaso’s Chair Nguyen Duc Thuan said Vietnam’s footwear industry has never before been in such favourable conditions. In the first nine months of the year, the footwear export revenue reached $3.65 billion, an increase of 18 percent over the same period of the last year.

“In 2010, Vietnam planned to export $4.6-4.7 billion worth of footwear products, an increase of 13 percent over 2009. However, with the current favourable conditions, the export revenue may reach over $5 billion,” Thuan said.

The increase in the number of orders has been explained by the fact that the demand for footwear products has increased again in the world market in the post-crisis period. Meanwhile, the labour cost has been increasing in China, which has prompted foreign importers to shift to place orders with Vietnam, where the labour cost is lower.

David Jiang, Secretary General of the Taiwan Leather and Footwear Association, has admitted that at this moment, it is very difficult to place orders with Chinese producers, because China nowadays lacks skilful workers, while the labour cost in the country tends to increase sharply. Besides, the Government of China now asks footwear factories to move to remote areas, the thing that producers do not want. Therefore, many Taiwanese importers now place orders with producers from other countries, including Vietnam, India, Myanmar and Cambodia.

However, analysts have warned that it would be not easy to make a breakthrough in export revenue this year. Though there are many orders, the export revenue would not increase considerably due to the limited production capacity.

Dong Hung Footwear Company in Binh Duong province now has 3,000 workers and 11 production lines which have been running at full capacity over the last few months. However, the company still can not take on all orders.

Ha Duy Hung, General Director of Dong Hung Footwear Company, said orders are pouring in rapidly, the thing which rarely occurs in the last 20 years.

“We have to refuse many orders because of our limited production capacity,” he said.

Other footwear producers also say they cannot accept more orders. Tran Ngoc Luan, Deputy General Director of Thai Binh Footwear Company in Binh Duong Province, said despite great efforts, the production capacity of the company would only increase by 150 percent at maximum this year.

The young profuse and cheap labour force was once considered the biggest advantage of Vietnam’s footwear industry. However, the workforce has become the headache of production companies. In HCM City, many footwear enterprises reportedly have high percentages of labour changes of 30-50 percent. Luan said this has made it very difficult to increase the productivity.

In order to deal with the problem, Thai Binh and other companies have been trying to restructure the production chain. Simple works of the production chain, like the shoe cap production, are now being done in the workshops far from the main factories. After that, the parts of shoes are carried to the main factories to be fit together.

Analysts have warned that Vietnam’s footwear industry may face the same problem in some more years. According to Lefaso, among the five biggest footwear export countries in Asia, namely China, Vietnam, India, Bangladesh and Indonesia, the labour cost in Vietnam is now the second highest just after China and is much higher than that in other three countries.-Dau tu

Tags: Vietnam Footwear, Vietnam Footwear Exports