Opportunity to participate deeply in the global supply chain

The global supply chain is witnessing a simultaneous restructuring of the entire value chain from major powers in the world. This is both a barrier and an important turning point for businesses to seize the opportunity to participate more deeply in this always attractive and potential value chain.

Recently, D&N Food Processing Company Limited (Danifoods) has successfully participated deeply in the supply chain of seafood products in many countries around the world . Photo: KHANH HOA

Promote localization

Mr. Nguyen Tien Quang, Director of the Vietnam Chamber of Commerce and Industry (VCCI) Da Nang Branch, commented that the domestic manufacturing industry is facing a new situation in the global supply chain. That is when the US-China trade war, geopolitical fluctuations, and the wave of trade protectionism are creating a strong shift in the global supply chain.

Multinational corporations are not only looking for new sourcing locations, but also restructuring the entire value chain to optimize costs, minimize risks, and meet increasingly stringent environmental and origin standards from developed markets.

Da Nang ’s import-export turnover has seen strong growth in recent years. However, most domestic enterprises are concentrated at the low level of the global value chain, mainly processing, assembling, and supplying simple components.

High value-added stages such as R&D, design, branding, marketing, and international logistics are mostly held by FDI enterprises. While FDI enterprises play a leading role in key export industries such as electronics, textiles, footwear, and high-tech equipment, domestic enterprises are mainly second- and third-level satellites, and have not yet become first-level suppliers for large corporations.

The reality at 29/3 Textile Joint Stock Company shows that, in order to participate more deeply in the global supply chain, the unit must go through a 2-3 year process of restructuring the entire orientation of production activities, shifting from producing the main product of traditional cotton blankets which have a great impact on the environment to building green factories, ensuring criteria on protecting the living environment, increasing the localization rate to 5-6%.

“One of the most stringent requirements today is the localization rate and standardization of origin. The current trend for our textile industry is to sign small orders, orders received directly with fast production requirements, instead of warehousing as before. Thanks to meeting the above needs, we have retained demanding customers in Europe as well as some other countries,” said Mr. Huynh Van Chinh, Chairman of the Board of Directors of 29/3 Textile Joint Stock Company.

Huynh Duc Production, Trade and Service Company Limited specializes in manufacturing and processing industrial equipment, mold manufacturing, manufacturing and assembling automation equipment.

This is also a supplier of equipment supporting production activities such as: conveyor belts, tanks, tables, chairs, shelves, cabinets, carts, pipes, industrial kitchens, soundproof boxes, dust collectors, raw material drying cabinets...

Currently, the unit is a supplier partner of companies operating in industrial parks in Dong Nai, Binh Duong, Ho Chi Minh City, Hanoi, Da Nang... as well as a number of large foreign corporations and enterprises such as: Intel, Onsemi (USA); Mabuchi, Nok, Nidec, Yonezawa (Japan); Marigot, Groz-beckert (Europe)...

Ms. Pham Thi Hong Ly, Chief Accountant of the company, said that investing in technological innovation and increasing the technical content in each product is still the key for the unit to increase the localization rate to go deeper into the global value supply chain, and new generation free trade agreements are the gateway for manufacturing enterprises like Huynh Duc to take advantage of available advantages.

Making good use of new generation FTAs

With a highly open economy, along with a series of new generation free trade agreements signed, many opportunities have been opened up for domestic enterprises.

To capture this shift, businesses need to have solid internal capacity, flexible transformation capabilities, quality control and clear traceability. Initially, a number of businesses in Da Nang city have directly participated in high-value stages in the global supply chain.

In recent times, domestic manufacturing enterprises in general and in Da Nang in particular have always strived to overcome challenges when participating in the global supply chain.

With commitments from the Government, the business community and international partners through the signing of free trade agreements, Vietnamese enterprises are demonstrating their adaptability, to build the image of a green, legal, sustainable and responsible industry.

To participate more deeply in the global supply chain, it is necessary to have a strategy to promote cooperation between Vietnamese enterprises and FDI enterprises, especially multinational corporations already present in Vietnam.

This should be considered an advantage for domestic enterprises, because in addition to the general advantages, there is also the advantage of reducing logistics costs (one of the high costs in Vietnam); the advantage of ensuring the reduction of geopolitical instability factors that cause disruptions in the supply chain when Vietnamese enterprises are "placed next to" large corporations that are setting up headquarters and production centers in Vietnam.

Besides, investing in increasing the localization rate in textiles, footwear, electronics, etc. and developing logistics centers and smart seaports helps reduce logistics costs and increase competitive advantage.

Mr. Nguyen Tien Quang, Director of VCCI Da Nang Branch, said that it is necessary to focus on supporting businesses to exploit new generation FTAs, promote cooperation and technology transfer between Vietnamese enterprises and large corporations and enterprises in markets with FTAs.

Thereby helping businesses exploit the market, capital, technology... of countries that have FTAs ​​with Vietnam.

“In this “game”, our enterprises must proactively “offer” to large enterprises and multinational corporations. Not only promoting the connection between Vietnamese enterprises and FDI enterprises, but also promoting the connection between Vietnamese enterprises in participating in the global supply chain, to have a longer, deeper connection chain, larger orders, and at the same time, minimizing unhealthy competition that disperses resources and efficiency in participating in the chain…”, Mr. Quang said.

Source: https://baodanang.vn/co-hoi-tham-gia-sau-chuoi-cung-ung-toan-cau-3313711.html