Client Context
Our client, a multinational manufacturing company with significant production capacity in China, faced escalating operational challenges. Wage inflation in major Chinese manufacturing hubs, tightening environmental enforcement, reductions in export tax rebates, and sporadic labor unrest were eroding cost advantages. At the same time, regional competition for manufacturing investment was intensifying, with Southeast Asian countries actively positioning themselves as alternative production bases.
The client sought a comprehensive evaluation of Vietnam as a potential secondary manufacturing location within a China+1 strategy. The objective was to determine whether shifting specific product lines to Vietnam could improve cost efficiency, reduce risk, and maintain access to regional and global markets without compromising quality or operational reliability.
Our Approach
We structured the engagement into three core analytical modules:
Comparative Country Assessment: We benchmarked China and Vietnam across critical dimensions, including labor availability and cost structures, workforce skills, land lease rates, tax regimes, bureaucratic processes, environmental regulation, logistics infrastructure, and domestic market potential.
Primary Stakeholder Insights: We interviewed executives from companies that had relocated operations from China to Vietnam, including global players in textiles, furniture, footwear, electronics, and IT. These conversations provided first-hand accounts of Vietnam's opportunities and operational challenges, ranging from government relations to supplier base maturity.
Sector Fit and Opportunity Mapping: We identified which industries and production profiles were most suited to Vietnam’s current capabilities. We analyzed case studies from firms such as Texhong, Foxconn, and Li & Fung, assessing investment timelines, localization strategies, and integration with regional supply chains. Special attention was given to labor-intensive production lines, where Vietnam’s wage advantage and government incentives could generate substantial savings.
Impact
Our market intelligence provided the client with a clear, evidence-based foundation for relocation planning:
· Cost Advantage and Incentives: We quantified labor cost savings, identified relevant tax incentives, and outlined the impact of Vietnam’s “Project 30” initiative to reduce administrative hurdles for foreign investors.
· Risk and Challenge Profile: The research highlighted infrastructure bottlenecks, higher logistics costs for specific export markets, and a less mature domestic supplier ecosystem than China.
· Strategic Implementation Guidance: We recommended a phased approach—relocating labor-intensive product lines to Vietnam while retaining complex, high-value manufacturing in China to leverage established supply chains and management capabilities.
· Industry-Specific Insights: We identified priority sectors for Vietnam entry and detailed operational best practices from early movers to the market.
Equipped with this analysis, the client was able to develop a balanced China+1 strategy that preserved their ability to serve global customers reliably while lowering costs and diversifying geopolitical and operational risk.its ability to reliably serve global customers
