Vietnam Supply Chain Congress 2012” was a platform for supply chain industry marketers and retailers to network, share insights and discuss best practices in the sourcing, manufacturing, distribution and retail disciplines. Spire was honored to be invited to speak on ‘A Successful Partnership Journey in Sourcing and Outsourcing’ at the event. Jeffery Bahar, Deputy CEO of Spire Research and Consulting, was one of the invited speakers at “Vietnam Supply Chain Congress 2012”. At the event, he presented his views on how to locate the right partners and alliances in Emerging Markets, and shared the factors that would make sourcing and outsourcing a success. Read more about the event coverage here: http://www.spireresearch.com/newsroom/events/spire-lends-its-expertise-to-the-vietnam-supply-chain-congress-2012/

1. A Successful Partnership
Journey in Sourcing and
Outsourcing
Prepared for:
Vietnam Supply Chain Congress 2012
Source.Make.Deliver
Prepared by: Spire Research & Consulting
Date: 1 October 2012
Prepared for: Vietnam Supply Chain Congress 2012 Date: 1 October 2012 Page 1

2. Agenda
Topic Page
i. Vietnam Facts & Figures 3
ii Key Industries, Case Studies, 5
Opportunities and Challenges
iii. The Sourcing Journey for 8
Partnership & Alliances
iv. Two Scenarios: 11
To Source
To Make
v. Concluding for Successful 13
Sourcing Journey
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3. Vietnam Fact and Figures (1)
Rising Export Trends Across Key Product Categories
Total Export-Import Export Breakdown By Category
Imports Export 40
Wood
2007 62.8 48.6 35 Products
30 Electronics &
80.7 62.7 Electricals
Billion. USD
2008 25
Billion. USD
20 Fishery
2009 69.9 57.1 products
15
Footwear
10
2010 84.8 72.2
5
Textile
2011 105.7 96.2 0 products
2007 2008 2009 2010 2011*
Exports and Imports increased by 33% and 25% respectively in 2011
The highest growth in the last 14 years
Trade deficit at the lowest level in the last five years
Source: General Statistics Office of Vietnam, 2012; Vietnam balance of trade, Vietnam Report, Spire Analysis
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4. Vietnam Fact and Figures (2)
Manufacturing Sector Continues To be Strong 2012-2015
Gross Manufacturing Output Breakdown by Sub Sectors
70
400
350 60
300 50
250 40
Billion USD
Bill. USD
200 30
150
20
100
10
50
0
0 2007 2008 2009 2010* 2011*
Food Non-metallic mineral
Fabricated metal Transport equipment
Gross output of manufacturing Industry Wearing apparel
Industrial Production Index (IPI) 2011 increased 6.8%
Manufacturing increased by 9.5%, the food sector is still the largest
Power, gas, water supply increased by 10%
Mining and quarrying reduced by 0.1%
Source: General Statistics Office of Vietnam, 2012; * Spire analysis and forecast
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5. What Are the Key & Upcoming Industries?
Six Key Industries To Source, Make and Enter
Joint development between
Vietnam and Japan recently
announced in electricity- Manufacturing & Food retail About 531
electronics, shipbuilding, Equipment supermarkets and 89
trade centers in 2011,
agricultural machinery with increasing foreign
players
Japan, Korea and Taiwan are
the major investors particularly
in textiles and heavy
industries Healthcare
Agri-food 76 FDI
20% of projects
worth
GDP USD1.1
2010 billion
Vietnamese
IT Software
20 food
processing
Food
Processing Vietnam IT market to
grow at a
companies 16%
from Japan
and South
CAGR
2011-2015
Korea have
presence
Source: Asia's Investment and market hotspot, Spire Research and Consulting, 2012
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6. Case Studies: Semiconductor
Semiconductor Industry Sourcing in Vietnam
Human resource-related strength,
investor-friendly policy attracts
many foreign investors
Semiconductor The Quang Trung Software City
Industry (QTSC) and the Saigon Hi-
tech Park (SHTP) are the main
Assembly, testing & packaging Semiconductor and Tech
centers in Ho Chi Minh City
Precision parts: precision motor
fans for computer, hard drives
QTSC: HP, IBM, Luxsoft,
Printed circuit boards, printers Global Cybersoft, GHP and
R&D centres, software development others have setup centers
SHTP: 53 projects with USD2
billion total investments,
five semiconductor projects
USD1.1 billion investment
Source: Semiconductor Industry Offers Great Potential, 2011, from Vietnam Economic News
The Rising Tiger in the Semiconductor Industry 2008
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7. The Ups and Downs
Factoring Opportunities & Challenges Into Your Sourcing Decision
Fastest-growing economy Deficits,
Workforce weakening
currency, inflation
Location
Weak infrastructure
Foreign
Investments Corruption
Strength Weakness
Threat Opportunity
WTO
membership
Labor unrest
Economic
Prolonged
reforms
macro economic
instability Infrastructure
Natural disasters Urbanization
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8. The Sourcing Journey of
Partnerships & Alliances
Prepared for: Vietnam Supply Chain Congress 2012 Date: 1 October 2012 Page 8

9. The Sourcing Journey
With The Ultimate Goal: Strategic Partnerships & Alliances
“Sourcing is the process of finding and subsequently
managing a source for the input of production”1
Cost Management Supply Stability Risk Management
Reduce COGS Help build stable Identify and resolve
Maintain the ability supply partnerships potential problems
to price products Lead to quality quickly
competitively improvements Develop alternatives
over time for unforeseen
The Sourcing Journey
Reconfigure specifications
Leveraging: cross-departments, cross-business units, cross-regions
Rationalizing supplier base
Develop strategic partnerships & alliances
Source: 1 Mol, , Outsourcing, supplier relations and internationalization 2001.
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10. The Sourcing Journey
Do It Right From The Beginning, with Four Stage Approach
Systematic Processes for Strategic Partners & Alliances
Sourcing Strategic Supplier
Needs Partner
Sourcing
Selection Quality
Analysis Development Management
Analyze Develop detail Spire’s Implement
past, current sourcing plan four-stage new supply
and projected for strategic approach, include: structure
spending partners: Partner profiling Track results
patterns
Objectives Systematic analysis, and restart
Business Operational score cards assessment;
Requirement information Evaluation Audit continuous
Analysis Time-frame cycle
Short listing,
Supply Cost goals negotiating for Further
improvement
Market partnership
Analysis
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11. The Goal is To Source
Business Partners Selection Process
Set the specific requirements for your business partners
Selection
Criteria Scan comprehensively, exhaust all the sources:
Secondary sources, listing, directories
Experts, players, relevant parties
Identify On the ground observation
Partners
Complete data & profiles
Interviews potential partners, their clients
Qualify Evaluation audit
Partners Score card system on initial criteria set
Go direct, multiple phases
Contacting Use 3rd party facilitator, with strong local knowledge
Partners and language capability
Work With Develop reasonable objectives
Business Technology, capability and delivery enhancement programs
Partners Share supply chain management tools
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12. The Goal is To Make (Your Own)
Take a Holistic and Well-Rounded Approach
Large skilled & low-cost workforce
Working population, 50% under age of 25
LABOR
cost Competitive rental and
availability,
Political quality COST tax holiday for foreign
investors (e.g. up to
Social of 4 years I n SHTP),
stability Business
Proximity to
China & SE Asia, CONNECT
Location Market-oriented
good connectivity
as export base
Sea & air
connectivity,
Choice GOVT reforms
Privatization
Regulations
Impediments to logistics, & charges of SOE’s
foreign logistics rates Liberalizing
firms by 2014. sectors
INFRA
STRUCTURE
IT, Financial
SPEED
Services, Business
Weak infrastructure: Transport, Efficiency
roads, railways, ports Utility
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13. How Would You Like Your Journey?
A Successful Journey Begin With 5 Basic Foundation
A Successful Sourcing or To Make Journey
PRE-DEFINED QUALITY
Product quality must be defined.
Include performance measures, follow-through
Align
strategic goals
with partners
RIGHT PARTNERS, RIGHT JOB
Communicate Select the right sourcing partners
Clarify objectives, or alliances, to do the job is key.
clear expectations Addressing cultural issues is also
important
Time to market
is a very critical factor
in sourcing decisions
Source: 1Innovative Sourcing Strategies, Arthur D. Little, Spire’s Works and Consulting Experience With Our Clients
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14. Last Words
Spire Wishes You A Successful Journey
To Source…..
Four-stage approach for
business partner selection
To Make……
Holistic, well-rounded approach
Always Be The First
Timing is critical, do-it-right at first
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15. Visit: www.spireresearch.com
Email: vn.info@spireresearch.com
6th Floor, Phuong Tower, 31 Ly Tu Trong,
Ben Nghe Ward, District 1, HCMC, Vietnam
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