Supply chain management of vietnam’s garment products and sustainable supply chain issues in the garments industry

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FINAL REPORT
Supply Chain Management of Vietnam’s
Garment Products and Sustainable Supply Chain
Issues in the Garments Industry

Hanoi - 2022


Contents
Introduction.................................................................................................................1
Chapter 1 . Vietnam’s Garment Supply Chain: The Case of Viet Tien Garment
Corporation Supply Chain Management..................................................................2
1.1 Vietnam's textile and garment export market in the context of Covid-19..2
1.2 Overview: Supply chain of garment export products................................3
1.3 Viet Tien Garment’s supply chain management during Covid-19.............4
1.3.1 Company Overview.........................................................................4
1.3.2 Procurement management................................................................4
1.3.3 Manufacturing management............................................................6
1.3.4 Distribution management.................................................................7
Chapter 2 . The Benefits to Improved Sustainability of Garment Supply Chain...9
2.1 Sustainable Supply Chain Issues in the Garments Industry......................9
2.2 Benefits to improved sustainability of a garment supply chain.................9
Reduce environmental pollution.............................................................10
Increase consumer satisfaction...............................................................10
Cost optimizations..................................................................................10
Chapter 3 . Challenges Facing Vietnamese Garment Supply Chain in Improving
Sustainability.............................................................................................................11
Chapter 4 . Barriers Restrict Recycling or Remanufacturing of Garment
Products in the Practice of Vietnam........................................................................13

Conclusion.................................................................................................................15
Reference...................................................................................................................16


List of Table

Table 1.1 Vietnam's textile and garment export market......................................2
Table 4.1 Barriers to implementing circular economy practices in the fashion
industry....................................................................................................................... 13

List of figures
Figure 1.1 The supply chain in the garment sector.............................................3
Figure 1.2 Viet Tien’s logo.................................................................................4
Figure 1.3 Raw materials storage at the warehouse............................................6


Introduction
The Vietnamese economy's deep integration into the global economy has opened up
favorable opportunities for Vietnamese enterprises to promote supply chain activities, expand
consumption markets and improve the competitive force. Despite the disruption of supply
chains as a result of the Covid-19 pandemic, the garment sector is still strongly rising up and
has the second-largest portion of revenues in total exporting products in Vietnam.
With outstanding experience in manufacturing garment products, Viet Tien Garment
Corporation is one of the leading brands in the office fashion industry in Vietnam over the
past 30 years. Such success is largely due to Viet Tien's efficient supply chain management.
Therefore, to broaden the understanding of supply chain management in the garment
industry as well explore the benefits of using a sustainable garment supply chain in Vietnam,
I choose the topic “Supply Chain Management of Vietnam’s Garment Products and
Sustainable Supply Chain Issues in the Garments Industry”, which include four chapters:
Chapter 1: Vietnam’s Garment Supply Chain: The Case of Viet Tien Garment

Corporation Supply Chain Management
Chapter 2: The Benefits to Improved Sustainability of Garment Supply Chain
Chapter 3: Challenges Facing Vietnamese Garment Supply Chain in Improving
Sustainability
Chapter 4: Barriers Restrict Recycling or Remanufacturing of Garment Products in
the Practice of Vietnam

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Chapter 1 . Vietnam’s Garment Supply Chain: The Case of Viet
Tien Garment Corporation Supply Chain Management
1.1 Vietnam's textile and garment export market in the context of Covid-19
2020 is a special difficult year for Vietnam's textile and garment industry when
the market has many fluctuations and unpredictable challenges. Under the impact of
the Covid-19 pandemic, the textile and garment industry is one of the industries that
suffer the largest losses along with the tourism, aviation, and footwear industries.
Difficulties come from the lack of raw materials and slowing demand from the EU
and the United States in the first quarter of 2020. Also, the change in consumers’
behaviors toward unnecessary products, made Vietnamese garment enterprises have
faced the decline of orders.
Vietnamese enterprises have turned around step by step to meet the world's
consumption demand, maintain production, export, and retain workers by switching to
production and increasing exports of necessary goods for preventing pandemic.
Generally, in 2020, Vietnamese textile and garment exports to most markets decreased
compared to 2019. A significant decrease must be mentioned in some markets such as
Tanzania, which decreased by 77%; Angola down 75%; Argentina down 44%;
Senegan, Philippines, Slovakia all decreased by more than 39%; some other European
markets decreased significantly such as the UK, Greece, Finland, Spain, Norway,
Austria, down from 28 - 37% (Bo Cong Thuong, 2021)

Table 1.1 Vietnam's textile and garment export market
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(Source: Bo Cong Thuong, 2021)
1.2 Overview: Supply chain of garment export products

Figure 1.1 The supply chain in the garment sector
(Source: Nordås, 2004; Stotz & Kane, 2015)
As seen in Figure 1.1, each step in the supply chain is so interconnected that
the flow of information, product, or capital works in both directions. However, it also
depends on the customer's preference for fashion trends and the simultaneous
emergence of "fast fashion". Based on forecast demand, textile plants will collect raw
materials and manufacture textile products for the garment industry. After that, the
garment sector will be in charge of cutting fabrics, assembling the garments, and
delivering the final product that meets the requirements of retail stores. Then, with the
help of distribution centers, intermediaries ensure a smooth flow of finished products
from the raw material collection to display in retail stores.

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1.3 Viet Tien Garment’s supply chain management during Covid-19
1.3.1 Company Overview
Viet Tien Garment Corporation (VTEC) was established in 1975. With the
mission of constantly improving customer satisfaction with the best products and
services, Viet Tien is now one of the leading enterprises in Vietnam's textile and
garment industry. From a state-owned company established during a difficult period,
Viet Tien surpassed the revenue milestone of VND 9,700 billion in 2018, becoming

the only garment company honored in both rankings as the Top 50 leading brands in
2019 and Top 50 most valuable brands in Vietnam announced by Forbes Vietnam and
Brand Finance (VnExpress, 2019). Viet Tien's presence in both of the above lists
shows the company's position in both domestic and international markets. This is also
the result of efforts to build a strong and reputable brand with consistency in not only
branding but also the supply chain of the company.

Figure 1.2 Viet Tien’s logo
(Source: Viet Tien Corporation Garment, n.d.)
1.3.2 Procurement management
Procurement is an indispensable activity in any business type and any size of
the organization. Purchasing costs usually account for a significant proportion of the
total cost of the supply chain. Therefore, the role of purchasing management in the
supply chain is extremely important, which is closely related to business performance
of VTEC.

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Choosing supplier
The procurement process of the company is implemented based on purchasing
sourcing, which have both domestic and international purchasing. Inputs materials in
the supply chain at VTEC include: raw materials (yarns, fabrics...), chemicals
substances for dying, equipment - spare parts and so forth. Domestically, Vinatex is
the main supplier of yarn for VTEC and also the largest supplier of many other textile
enterprises in Vietnam (Hai Yen, 2021). In addition, Viet Tien mainly imports raw
materials and accessories from China, which have large supplies with stable quality. In
fact, 63% of textile materials of Vietnam garment sector is imported from China, so
when the pandemic broke out in early 2020, the supply of raw materials from China
was disrupted due to the lockdown in Wuhan, making it difficult for VTEC in the

procurement process (Giap, 2021). In order to be proactive in terms of raw materials,
shorten production and delivery time, VTEC has invested in establishing Fabrics
Factory - Viet Thai Tech, a joint venture between Viet Tien Garment Corporation and
two strategic partners, Luenthai and Newtech (Ha, 2020). Besides, VTEC (Vietnam)
also cooperates with Tung Shing Sewing Machine Company (Hong Kong) to provide
and install equipment for the garment industry (Tung Sing Group, 2018).
Contract negotiations
The Company has applied the principle contract to the essential inputs for the
Company's main production activities such as some basic yarns. This is a type of
contract where the Company and the supplier are jointly linked and have clear
responsibilities such as: For the Company (the purchaser) will build up the purchasing
demand for the whole year, commit to receiving the goods on time as planned. agreed
and paid on time. At the same time, the supplier (selling unit) will stabilize the selling
price, always have ready stock of goods to meet the buyer's delivery plan as planned.
Stabilizing selling prices as well as finding the most competitive raw material
suppliers are very important in effective management of production and business
activities of the Company.

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Delivery and payment
After placing an order, due to having a long-term relationship with suppliers,
especially domestic suppliers such as Vinatex, the goods are quickly delivered. In
order to reduce purchasing costs, Viet Tien has cooperated with MS Shipping
(England)- a company specializing in the sea and air services business to support the
import and export procedures, delivery of goods abroad (Công Ty M&S VTEC
Shipping, n.d.). After the materials are shipped to VTEC, the company will check the
quality and pay according to the contract.
Storage

For materials with unstable supply and fluctuating prices, the company has
actively imported and reserved them. The demand for the reserve is planned based on
the production needs of the factories to ensure timely response to customer demand
with the most reasonable and economical amount of stock. In addition, for other yarn
materials with stable supply, the company only imports and stores enough to meet the
demand when there are orders from customers.

Figure 1.3 Raw materials storage at the warehouse
(Source: Viet Tien Garment Corporation, n.d.)
1.3.3 Manufacturing management
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Design
The characteristics of the garment market is the rapid changing to meet trends
in the fashion industry, and the short product life cycle. Therefore, clothing design is a
very important step in production process in Viet Tien in particular and the garment
industry in general. From the very first day of its establishment, the company
determined that it needed to have an in-depth design department, supported by
specialized software. Currently, the company has more than 300 designers and design
patterns are formed from three main sources: (1) from the creativity and ideas of the
design staff; (2) from catalogs and (3) from customer samples sent to the company.
Manufacturing
Viet Tien is the pioneer of applying new technologies as well as investing in
Lean Manufacturing technology. Viet Tien Garment Corporation has affirmed that
Lean Manufacturing helped the company grow 14% in 2013 compared to 2012. Spirit
of workers is better because they have more time to take care of themselves and their
families, which results in a productivity performance (Oanh, 2015).
Viet Tien has also invested in modern equipment in production such as
automatic plotting/spreading/cutting system, automatic production line system and

other modern specialized machinery and equipment such as surgical machines,
automatic bags, hand-tracing machines, programming machines... Besides, the
company also receives investment programs in equipment and technology of South
Island Group, of Japanese corporations such as Itochu, Mitsubishi, Maruberni,
Sumitomo, Sandra. As a result, productivity and quality are significantly increased,
satisfying the needs of customers and the market.
1.3.4 Distribution management
Intermediaries
● Manufacturers
Viet Tien Garment Corporation specializes in manufacturing and supplying
garment products. Viet Tien Garment has expanded and developed into Viet Tien
Garment Corporation, operating under the model of a parent company - a subsidiary
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company, managing 28 production and business hubs, including 8 affiliated units, 12
member units, 2 foreign joint venture companies, 2 units of business cooperation and
4 subsidiaries (Viet Tien Garment Corporation, nd-a)
● Agents
Viet Tien's agents have contributed significantly to the circulation of goods as
well as promoting a more flexible distribution process to consumers. Since 2009, Viet
Tien - with the brands Ttup, SanSciaro, Manhattan, VietTien SmartCasual and Viet
Long - has opened general agents in Cambodia, Laos, China,... in addition to more
than 1,300 stores and agents. distributed across the country.
● Retailers
Viet Tien's retail system is spread across the country with the number of nearly
1,400 stores and agents so far. In addition to the chain of stores and agents selling Viet
Tien's products, the company continues to expand and develop distribution channels,
put products in 48 shopping centers and coordinate with other garment stores to
distribute Vietnamese garment products to ordinary consumers more widely.

● Customers
Those who directly use Viet Tien's products. They create the company's target
market and are also the factors that directly affect the sales of intermediaries and the
company.
Distribution channel
Viet Tien Garment’s distribution channel includes a system of stores and agents
distribution system. Retail stores receive products directly from manufacturers and
then distribute them directly to consumers or distribute to agents. These stores have a
large proportion of goods consumption for Viet Tien in the entire distribution system.
This is also where Viet Tien can directly approach customers to collect feedback from
them.
Currently, Viet Tien is one of the businesses with the largest store system in the
industry, with nearly 1,400 stores introducing and selling products across provinces
and cities across the country, including 8 brands namely Viettien, Viettien
8


Smartcasual, Viettien Kids, Camellia, Skechers, etc (Minh, 2021). In big cities such as
Hanoi, Ho Chi Minh city, in addition to retail stores on major streets, Viet Tien stores
are also located in large shopping centers such as: Trang Tien Plaza, Keang Nam,
Grand Plaza, Vincom Ba Trieu, etc.
Viet Tien's agent system is also present in 24 districts of Hanoi with 105 agents
(Viet Tien Garment Corporation, nd-b), although it does not have high sales volume as
in stores, it has the advantage of being flexible, easy to penetrate into the residential
area community and meet the needs of customers. In addition, from 2009 until now,
Viet Tien - with the brands Ttup, SanSciaro, Manhattan, VietTien SmartCasual and
Viet Long - has opened general agents in Cambodia, Laos, and other Asian countries...

Chapter 2 . The Benefits to Improved Sustainability of Garment
Supply Chain

2.1 Sustainable Supply Chain Issues in the Garments Industry
The garments industry is one of the main contributors to the world’s largest
pollution due to the tons of water usage producing excess carbon dioxide gas,
excessive use of energy to produce clothing, non-renewable materials for fibre, and
environmental pollution with harmful chemicals.
Vietnam garments industry with about 6,000 garment factories, provides
employment to approximately 2.5 million people (Chi, 2017), which is about 2.6% of
the Vietnam population, are currently struggling with environmental problems relating
to the manufacturing of textiles and garments. According to RMIT University
researchers, although Vietnam is among the top five exporting countries of textiles
and garments globally, the concept of sustainable supply chains is new to many
manufacturing players in the country (RMIT University, 2019). Therefore, reducing
environmental pollution and improving sustainability are the key factors for Vietnam’s
garment manufacturing industries to maintain their competitive edge.

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2.2 Benefits to improved sustainability of a garment supply chain
Building a sustainable supply chain for Vietnam garment manufacturing in
terms of design, manufacturing, and use of eco-friendly materials will bring the
benefits to the environment, consumer, and cost.
Reduce environmental pollution
Sustainable practices such as using materials that do not pollute the
environment in designing clothes will help preserve the environment from pollution.
Improving raw material sourcing with better recycling processes, reducing water
consumption, and replacing hazardous chemicals with safer alternatives are some of
the measures that can reduce fashion’s environmental footprint and help the industry
survive in the new business scenario (Fashion: from “fast, cheap and new” to
sustainable and eco-friendly, 2021). Producing carbon emission is inevitable in

distribution. According to H&M’s annual sustainability reports, it was estimated that
more than half of the carbon emission of the company are due to transportation from
factories to stores (Shen, 2014). Therefore, efficient and clean modes of transport
should be used in distribution logistics to reduce the negative impact on the
environment.
Increase consumer satisfaction
Using sustainable materials such as cotton to make the garment can also
provide a high level of comfort for those who wear it. Clothing made from natural
fibers is better adapted to the weather conditions of many countries. Therefore,
consumers will feel more comfortable wearing clothes made from natural fibers.
According to research conducted by Lundblad and Davies (2016), the consumers
would want to look good, comfortable, and feel confident when they wear the clothes
(Davies & Lundblad, 2016). In addition, in Vietnam nowadays, consumers' awareness
and concerns about environmental issues are increasing and they are willing to pay a
premium for socially responsible goods. As a result, many apparel companies disclose
sustainability information and see it as a way to improve their reputation in order to
attract customers and increase market share.
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Cost optimizations
Using organic cotton has saved a lot of money in sustainable production. When
we use the salvage and recycling methods, used materials could be used to produce
new products, which can also reduce R&D costs spent designing new clothes. In
addition, localized sourcing is not only more sustainable for the environment, but also
reduces the lead time and the costs of transportation and production of garment
companies.
It can be seen that once an enterprise is considered as having improved supply
chain sustainably, it will create added value to the entire textile and garment industry
of Vietnam. As a result, global clothing brands will then have a different look on

Vietnamese garment brands and may move more orders to the country as a result.

Chapter 3 . Challenges Facing Vietnamese Garment Supply
Chain in Improving Sustainability
The majority of companies involved in the apparel supply chain formed by
global fashion brands have adopted sustainability requirements in their production,
such as implementing corporate social responsibility, being friendly environment
friendly, and reducing emissions. However, these companies also face several
challenges as part of a sustainable supply chain. Challenges and conflicts exist around
achieving greater sustainability and profitability at every stage of the supply chain,
including material production, apparel production, transportation/distribution,
consumer education and retail.
The first obstacle to local garment businesses is in terms of
implementation of sustainable development criteria because these criteria
require huge investment and personnel. However, in the long run, according to
head of the Sustainable Development Board of Vietnam Textile and Apparel
Association, the credibility and brand value of the business in question will be better.

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Furthermore, such a business may later receive support from global clothing brands,
international organizations and financial institutions (Hung, 2021).
Lack of eco-literacy may be a challenge to the garment supply chain in
Vietnam since it caused a downfall of stakeholder involvement. Although the
awareness of environmental issues are being improved in Vietnam, the number of
organizations working on the recycling or upcycling of old clothes is very low. As a
result, many of the old and rejected clothes also end up in landfills, which causes
serious environmental concerns in Vietnam. Extensive training and seminar program
about sustainable supply chain management can be a potent tactic to educate the

stakeholders and urge them to participate in the sustainability movement for
economic, societal, and environmental gain and confirm the generations' wellbeing
(Karim et al., 2021).
One more challenge may be the lack of top management's commitment to
enhancing the sustainable responsibility to the whole organization. It is reflected
in the inconsistency of the organization’s philosophy, mission, and vision. To
overcome this barrier, top management from all companies in the garment supply
chain must simultaneously launch and adhere to sustainability initiatives. Top
management must demonstrate its commitment through active participation to
facilitate the acquisition of new resources and validate stakeholder engagement.

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Chapter 4 . Barriers Restrict Recycling or Remanufacturing of
Garment Products in the Practice of Vietnam
Table 4.1 summarizes some barriers that keep consumers away from circular
fashion (de Aguiar Hugo et al., 2021).

Table 4.2 Barriers to implementing circular economy practices in the fashion
industry. (Source: de Aguiar Hugo et al., 2021)
Since the raw materials to manufacture garment products are one of the main
factors that cause environmental pollution, the decision to reduce, reuse, and adopt
organic materials in the production of fashion items represents a challenge for
companies that do not yet see them as strategic priorities. Moreover, as clothing is
made of different fabrics and accessories with different types of raw materials, solving
waste clothing becomes a very complicated problem for garment companies.
One other barrier is reduced consumption of slow fashion practices. The
economic sustainability of slow fashion is still questionable since companies that
employ slow production and small quantity practices cannot compete with companies

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that use economies of scale, such as fast fashion companies that create multiple
accessible fashion identities (Jung & Jin, 2016). Moreover, although consumers have
high consciousness of the social and environmental impacts of their clothing
consumption, many of them still look for the attributes of traditional fashion products
when shopping. (Park et al., 2017).
The high costs associated with recycling processes are also a factor limit
the advancement of recycling and remanufacturing, as these processes are often
not financially viable (Stubbs & Sandvik, 2019). The separation and recycling of
garments is subject to system costs and inefficiencies as well as a lack of supporting
infrastructure to collect clothing from consumers, which can make it difficult to
produce recycled garments. In addition, low-quality fast fashion garments mean that
large quantities can only be partially reused due to the high cost of shredding or
material handling (Freudenreich & Schaltegger, 2020).

4.1.1

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Conclusion
Properly building and effectively applying the garment supply chain
management model brings many benefits to Vietnamese businesses, especially in the
context that Vietnam’s economy is integrating deeply into the global economy.
Recognizing the importance of supply chain and sustainable supply chain, in recent
years, many enterprises and managers have paid great attention to this field in order to
improve competitiveness, quickly adapt to market changes as well maximize benefits
for customers. Although the concept of sustainable supply chains is quite new to many

manufacturing players in the country, the benefit it brings is worth for Vietnamese
garment enterprises to pay attention and have long-term implementation.
Lastly, I would like to express our heartfelt gratitude to Ms. Binh for giving us
useful and practical knowledge of supply chain management. I could not have
accomplished this report without your guidance and instructions.

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