Vietnam is quickly becoming a global manufacturing hub in Asia replacing China. In fact, many apparels and textiles companies have been moving their supply chains to Vietnam. For example, Nike, 47% of its shoes have been manufactured in Vietnam since 2010. Lower labor costs and a prime location for shipping, become the two main reasons why Vietnam is an attractive alternative to manufacturing aside from China.
However, Vietnam’s competitiveness has waned in recent years following higher labor costs and lack of skilled human capital. Pandemic Covid-19 also forced the importers to diversify their manufacturing hub to prevent the same situation to happen in the future.
Therefore, many importers are now on the hunt for the next sourcing country to source their products. But this job is not as easy as it looks like. Sourcing from the wrong location or wrong supplier can lead to longer production times, higher costs, and more quality issues.
Indonesia is a great choice!
Moving your supply chain to Indonesia is a great decision because Indonesia has many benefits compared with Vietnam for the importers. There are several reasons why sourcing in Indonesia can be the solution for you, as follows:
Eco-conscious manufacturers
Sustainability is one of the hottest trends in the market today. As many people are more conscious of the “health” of the planet, companies tend to source more green products to sell. In Vietnam, generally speaking, environmental issues are still becoming the greatest problem. For example, deforestation and furniture that contain toxic chemicals are still significant environmental challenges in the furniture industry.
On the other hand, furniture manufacturers in Indonesia are mostly FSC and SVLK certified. This certification indicates that companies using sustainable and legal timber as the raw material of their products, that could minimize deforestation and illegal logging.
The Cost and Skilled Human Capital
Cost is one of the main considerations when importing goods. Material cost, worker wages, import duties, taxes, shipping costs, and sometimes several hidden costs, can affect the price of your products. According to Asean Briefing, Vietnam has lower labor cost, it ranges from $132 to $181. However, the availability of skilled labor in Vietnam is comparatively low and concentrated only in major cities, which is a limitation to businesses in niche sectors.
On the other hand, the average labor cost in Indonesia ranges from $100 to $200, slightly higher than in Vietnam. However, one of Indonesia’s greatest assets is its human capital. Indonesia is on the fourth rank of the largest population in the world. According to Indonesia statistics, the Indonesian population in 2020 is almost 271 million people and 70,72% of it is in a productive age (15-64 years old). This situation will bring several benefits for the manufacturer, such as a faster production time.
The raw material sources
Indonesia is well known for its natural resources. Furniture material such as bamboo, rattan, wood is almost unlimited in Indonesia compared to Vietnam which still imports its raw material from China. This becomes an added value for the importers who want to move their supply chain to Indonesia because they have nothing to worry about the raw material.
Product Quality
Quality becomes an essential matter when it comes to importing products. Low-quality products could affect your brand reputation and influence your sales. Moving your supply chain to Indonesia is a great decision. Product quality and supplier capability become two important things that you have to ensure before placing an order.
As an importer, finding a supplier who meets your standards can be quite challenging, especially for the first time you are importing from Indonesia. You have to make sure about every detail of your potential supplier, including the company profile, facilities, legal documents, labor, social and environmental commitments, and also its clients and experience including its trade history and quality control process. This is necessary to do to avoid a scam or wasting time with a fraud company.
Conducting Excellencial’s Factory audit in Indonesia will help you to know more about your potential supplier so that you do not end up working with a manufacturer that cannot meet your needs.
Contact us for more information about the Factory audit and other types of audits in Indonesia.