Vietnam and China Outsourcing | The Legal Lunch Byte | Episode 20

Vietnam and China Outsourcing | The Legal Lunch Byte | Episode 20 – YouTube

Transcript:
(00:01) [Music] excellent must be the right time to start Dustin because our our uh computers both dinged at the same time uh really have everyone it’s great to have you uh on the legal lunch M today Dustin uh we’ve been friends for three or four years at least uh we share a lot of interest uh in languages we speak and places we’ve lived um really really happy to have you on the show today well thank you Jonathan um yeah likewise very happy to be here I appreciate the invite uh you know for for us the I I it seems
(00:37) the Topic’s going to be interesting to your listeners but I think for us it’s a pretty normal conversation so this should be but also very interesting because I I I know how your brain works and I know your your expertise is very complimentary to mine so it’s really fun to to hear your perspective what you’ve been reading and and what you’ve been seeing so let’s talk a little bit I mean you and I most recently were in uh we were in Southeast Asia together last summer visiting several countries um I
(01:02) know You’ had a a job switch since then um but let’s let’s back up to what took you to Asia and and a career there yeah no my pleasure um yeah so I I actually started my career um in China and I I I went to China before IID even graduated school so I i’ had um took Chinese just kind of spur the- moment decision back in 2008 2009 I took a gap Year from high school and I just I just dated myself of course but um I I I saw what was happening in the world right I’d always been super interested in international
(01:39) relations and history and I I you know saw the way the winds were blowing it’s not even not exactly expert analysis at that time to see that China is becoming more and more important um so I I decided to study Chinese I had no real connection to the culture or the country uh but had always been interested in Asia um and got to you know go over there throughout throughout my college Years but uh you know right when I was about to graduate from Colombia like I had one semester left I got an opportunity to do
(02:06) a sunore internship there and that summer internship was with a firm called DSA or doesen cheer and Associates that might may be familiar to to some listeners um and that summer internship turned into a job essentially because I got to do some really great things um so that’s what brought me to Asia you know I I came back just to finish my degree and got back over there as soon as I could um and I just fell in love with the dynamism the fast-paced nature of the business climate there um I got to see not only China but southeast Asia uh
(02:40) and how that was becoming uh more and more important and kind of more of a a prime moment to get involved in that region as opposed to China coming in as a young professional expat at a time when it was already quite saturated and things had started to to slow down so you know that’s kind of what brought me to this whole world this this sphere so to speak um and I’m lucky that you know I came back to the United States from Asia in 2018 and I’m lucky that since then uh whether it’s been and I think we’ll talk about this more but
(03:14) whether it’s been at the the World Trade Center Utah which was my my former employer where I got to head up our uh Global Business Services team and help Utah companies with their International expansion or supply chain needs at a very high level right um you know or in my current role as uh head of uh product and supply chain for a a beauty company here in Salt Lake called borboletta um We’re a leader in the the lash extension uh lash and ey care space um you know I’ve gotten to apply my background in
(03:45) Asia and and my experience and some of my contacts frankly um to stay involved but I get to see it from a lot of different sides right so I’ve had the consultant thing I’ve had the consultant you know slash um quasi public sector thing going on uh and then now I get total Brands side private uh so it’s been really great yeah such an interesting transition so let’s uh you know China’s fallen out of Vogue somewhat in the past five six years right it was it was even before you know president Trump got elected the trade
(04:20) War got started there there was always a lot of Rocky things in the relationship that a lot of people wanted to glance over anyway so let’s let’s focus on Southeast Asia because um we could talk all day but we really only have about 10 more minutes and we want to we want to keep this digestible for everyone so let’s contrast um China to Southeast Asia um what are the differences that you saw between China working in China and and of Southeast Asia more generally yeah no it’s a it’s a great question and
(04:47) because we don’t you know I wish we had more time but Southeast as is not a monolith right there there’s a lot of diversity within the region um you got Singapore and then you’ve got Cambodia right you know totally different levels of develop nothing against Cambodia of course um but you know what I felt I’d went to Vietnam uh first and then Singapore Indonesia so a lot of diversity but generally speaking among the big developing economies so Indonesia Vietnam lesser extent Philippines um even Thailand at times in Malaysia even
(05:22) though they’re more developed I would say that those countries have kind of the dynamism I felt in China in in you know the the late uh as the late 2000s um but more laidback the culture is much more laidback um you know more theyve they’ve got that interest in the outside world uh and embracing you know foreign ideas and from a business perspective you know again there’s a lot of diversity but there’s a boom but it doesn’t feel out of control uh but there are some things that are very similar
(05:55) for for people experience with China so Vietnam last year the end of last year and then into this year has had some uh major real estate market issues um that are Quasi political as well which are affecting the entire economy so so you know that is something which could easily exist in China um but you know the thing that hit me right away going to Vietnam was just you can use Google at that time you could could you could use Facebook you still can right but um there’s an openness that even being you know a one party dictatorship in in
(06:27) Vietnam specifically it’s still feels a little less stifled um so it’s a little looser which is which is great you know so there there’s a lot of things going for it uh and it’s an exciting region and I’m just kind of Lucky with the timing that I first got exposed to it I just came across a term recently called benevolent dictatorship and I thought that’s that’s kind of how I felt what Vietnam is doing what Singapore is doing a bit right yeah definitely Singapore yeah yeah that’s
(06:58) right awesome um all right so let’s let’s talk about something a little more technical then so China plus one is the strategy I often describe myself as a China plus one lawyer and then I have to explain to people what that really means um you know with supply chain moving uh still being largely based in China but then moving shifting a bit to uh other countries based on uh country uh companies wanting to diversify their supply chain risk right um so we know that especially with the US um and and you know to a large extent the EU now
(07:30) China China is struggling to to keep its friends in the same place right trying trying to I would say trying to trying to keep keep its friends as close as possible but I don’t I don’t know how well it’s working what do you see from your perspective in terms of um you know China’s success in keeping manufacturing centered there or um you know how much is draining out to Southeast Asia and other places yeah it’s a great question I I like we heard China plus one a lot in the common parlament um few years
(07:59) back prior to covid you know trade war and then right after covid as well um not that that that not that it’s diminished interest in it I I don’t think but I I I don’t hear it to the same degree as I used to um and I think it’s become just kind of a new normal it’s what’s it’s not a new idea anymore right it’s you kind of have to do it a lot of companies have had to look at over the last few years moving away from China not 100% right but maybe 7 % 60% 50% and so on and looking to supplement
(08:34) it with one country I the the the issue though and I just kind of made this mistake myself the issue I’ve always had with that term it’s not really plus one in my opinion it’s China and then many others there’s a basket of countries and especially if you are going to try to replace a large degree of your China business you know over 50% of what you sourced for instance um not one you can’t just have one country do it no country is going to be able to to fill that void it’s usually a collection uh
(09:03) but you know in terms of China keeping investment I they don’t want to keep everything or I should rather say they didn’t want to keep everything there were I recall when I was in Vietnam there were some activities especially in more developed coastal areas of China it was pretty clear the local government kind of wanted some of those activities polluting activities to go um and it was becoming more difficult but they want to keep some things for sure and I think they’ve lost a little more in those
(09:29) higher value ad areas than they maybe would have liked to um but a lot of us companies are you know accepting those industries that have strategic importance uh so what we’ve seen with chips and all that um but for consumer goods for for more more uh Le less controversial products let’s say um you know a lot of companies are going to find it really really hard to completely decouple from China so while I’ve seen the investment side um really you know generally get hurt the sourcing side to a much uh lesser degree because China
(10:05) still makes it so convenient so easy to Source compared with Vietnam or or um Indonesia for instance which I’m sure you see all the time with your with your clients as well uh that it’s just it’s hard to beat them on price and quality especially for for a small and mediumsized Company so um I’d say China’s been moderately successful to answer your question uh but it’s not it’s not necessarily because of what they’ve done it’s more just um the Dynamics of of of the economy uh
(10:36) regionally and the fact that you know they’ve created this industrial Powerhouse that no one country can really match India is trying I know but um it’s going to be difficult for for you know a usme to realistically you know decouple let’s say from China yeah what does borboletta supply chain look like right now yeah that’s a great question so we’re we’re interested that we have over 600 skews um and that’s the nature of the Lash business as I’ve learned um not that surprise surpris I
(11:08) didn’t know a ton about the Lash business when I first came here it’s not a lifelong passion of mine but I’ve grown to really love it by the way um so our our supply chain you know we Source mostly from East Asia which is a nice for for me in my background so a lot from Korea a lot from China a lot from Vietnam uh looking at countries like Indonesia um we Source some from the EU as well and then a lot of here made in the United States so uh because we have so many skews and and borot you know like availability along with quality uh
(11:39) and culture Community that’s a core value of the company so that’s a lot of times on me and my team to make sure the products are in stock and having over 600 SKS that’s hard to do um but I would say that you know I was surprised how how hard it was for me to justify move moving a lot of products away from China when I came in and looked at what we did right um I would say a lot of our Chinese suppliers are wonderful to work with and sometimes even with tariffs uh even if there’s a 25% punitive tariff it still might not
(12:14) make sense in in every situation so um yeah it’s it’s uh it’s an interesting complex supply chain to to run and and it’s a fun to apply what I’ve seen on the outside as the consultant for a long time here with with one firm yeah that’s really interesting so let’s dive back into the concept of Southeast Asia not being a monolith I mean aside from language geography governance structures um what do you see as as some of the strengths and weaknesses of of the countries that we hear about I mean you know top of
(12:46) mine for me is is countries like Vietnam um Malaysia Indonesia you know India the countries that really have a huge population base a lower um you know not as advanced as as China let’s say so their uh their labor costs are going to be lower which is something you know one reason why a lot of companies are looking to to move things out of China as well what do you see just kind of top of mind some of the uh you know some of the strengths and some of the weaknesses in the various markets in in South South
(13:17) southeast Asia it’s a great question and and a really important Point um it’s not a monolith so Indonesia um I love Indonesia it’s a great country to visit it can be a very good country to manufacture and do businesses um it’s always I think punched a little under its weight in terms of capacity never quite reached the full potential Indonesia does really really well obviously putting aside natural resources though in um garments textiles in in shoes um they they are big in my industry actually in in lashes which I
(13:49) came to learn about um they they are relatively cost competitive but um there are some cultural issues and quirks idiosyncrasies that can be very lovely but can also make doing business there especially if you’re used to China where everything’s very fast-paced uh sometimes feel challenging uh Vietnam is what I would call like a middleof the road generalist which does pretty well on everything um that everything that you would normally Source from Southeast Asia now they’re trying to move up the
(14:20) value chain it’s kind of like a mini China in that regard 15 years ago um but they do great in garments uh light manufacturing consumer goods they’re getting into Steel so anybody familiar with China uh would would recognize a lot in Vietnam Malaysia is going to be good for electronics some higher value ad activities Thailand’s going to be great for automotive it has a huge Automotive sector Electronics again but in and around bangcock wages can be high everywhere else in the country wages are lower um and the Philippines too the
(14:51) Philippines has a lot to offer I was talking with a company that makes uh uh bags and backpacks there there the other day um you can find a great deal in the the Philippines if if you’re willing to look but again it’s just not so easy to find the right local partner or to understand the way their different economics Z incentives work so it it’s a it’s a varied varied Bunch um but what I would say is for sort of your first stop I think Vietnam often makes a lot of sense if you’re a mix of labor intensive
(15:22) and you have China Centric Supply chains that you’re trying to move away from because it’s it’s more easily integrated with existing China uh Supply so if You’ got inputs coming in it’s convenient for that that’s great Dustin well we’re at time 15 minutes goes quickly and and when we’re trying to jump all over southeast Asia uh it’s been excellent to have you though thanks really appreciate you sharing your perspective fun to hear about what barbalet is doing and and certainly looking forward to to talking
(15:51) again in the future well thanks Jonathan it’s been a pleasure appreciate it