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Is Vietnam the Next China: Myth vs. Reality

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Is Vietnam the Next China: Myth vs. Reality

The ongoing US-China trade war has brought a renewed urgency in recent months resulting in my crisscrossing this tiny nation from the northern capital of Hanoi to the country’s economic epicenter to the south, Ho Chi Minh City – formerly known as Saigon, and every stop in between. Once viewed as an emerging market with potential, Vietnam today is considered the hottest “go-to” sourcing destination as supply chains uproot from China and President Trump and President Xi continue to work out their disagreements.

However, despite logging thousands of miles of travel and spending days upon days conducting factory audits in the remotest corners of the country, I’ve discovered Vietnam’s manufacturing industry and export products may not live up to the hype as China’s best alternative.

Myth #1: Vietnam manufacturing is on par with China.

One striking difference I noticed immediately is that Vietnam’s manufacturing is at least 10-15 years behind China. On my factory tours, I witnessed outdated machinery, lack of modern equipment and saw few signs of the latest supply chain best practices, including LEAN certification standards and supply chain manufacturing principles in action. In my daily research on vetting manufacturers, I consistently come across poorly designed websites- if I am lucky to find one at all, sales pages listing professional contacts using Gmail and Yahoo accounts, and often encounter few staff members who can converse or speak English well. These deficiencies contribute to the challenging task of sourcing products meeting global export standards.

Myth #2: Vietnam’s pricing is cheaper than China.  

With labor about one-third of China, the cost of living and land is much cheaper than its northern neighbor, many falsely believe that Vietnam-made products automatically translate into big savings.

There are three contributing factors:

1. In nearly every industry, Vietnam lacks quality raw materials and must import them from China, thereby, increasing costs

2.  As new foreign direct investments set record highs, industrial park land costs have increased dramatically to coincide with this boom

3. Manufacturers (well aware that the US-China trade war has put American buyers in a corner) have raised their prices accordingly.

These all contribute to the drowning out of any major cost savings. In my experience, several times North American buyers have responded that my Vietnam price offer is wildly off the mark and not competitive with their current China suppliers, China tariff included. 

Myth #3: In Vietnam, you can expect to find everything as in China.

In the world of manufacturing and supply chain, I constantly hear: “Just start sourcing from Vietnam.” That would be all fine and dandy assuming an apples to apples comparison, but Vietnam is anything but China. Over the past two decades, China has perfected their manufacturing and supply chains to the point of employing robotics and automation churning out sophisticated products by the millions. Just take a trip to the hugely popular Canton Fair or attend one of the hundreds of trade shows and expos throughout the year; you will find every product imaginable, in every variant and color, too.

Furthermore, China has the most up-to-date and modern infrastructure—from container ports, highways, railways, and warehouses—to deliver goods globally. In contrast, Vietnam only in recent years has started to emerge onto the manufacturing scene, known mostly for light furniture, textiles, sewing, and electronics parts. 

Exasperated by the US-China trade war, Vietnam’s manufacturing industry has been red hot, however, it’s not an equivalent replacement for China. Buyers can expect less-than-stellar quality products and choices than what China offers, met with challenging business practices and frustration due to the lack of manufacturing transparency, data, and information. While Vietnam might be a manufacturing dream destination for many of your gains, it might be just that in the end: a pipe dream. 

Intermodal Expo

Intermodal Expo Brings the Best in Business and Expertise

September 15 marked the first day of this year’s IANA Intermodal Expo in Long Beach, California. This is no ordinary expo, however. While more than 125 exhibitors and 60 plus intermodal experts in attendance, this conference covers all bases for three days each year, leaving no unfinished business. It’s no wonder why some are referring to the paramount event as “all-encompassing” while addressing all tiers of business.

Whether you’re interested in learning about the latest and greatest in intermodal solutions or seeking the expertise from an industry expert on strategic planning, IANA’s Intermodal Expo undoubtedly provides a clear view of where the industry stands while navigating the current landscape.

Among leading companies in attendance discussing the latest and greatest topics, business strategies, trends, and solutions in intermodal and supply chain include Loadsmart, Armstrong & Associates, SeaIntelligence Consulting, Canadian National Railway (CN), United Parcel Service, BNSF Railway, and many more.

Technology and automation continue leading trends as more companies continue to report increasing demand for the capabilities, efficiencies, and opportunities enabled through innovation

“There’s always a force in this space right now that changes everything and one needs to be cognizant of that force,” explained Jeffrey Leppert, Senior Vice President, Capacity Solutions, Redwood Logistics during the “Growth Strategies for Non-Asset 3PLs session.

Maintaining an advantageous position against competitors in an evergreen business landscape can be tricky. Hunter Yaw, Vice President of Product Management and Business Development, at Loadsmart addressed this topic head-on, leaving all apprehensions aside.

“We focus on what systems our customers are currently using and we integrate a lot with major TMS systems. We could ask folks to come  to us one way or another but, the reality is… we’re much better off partnering with the existing players in the industry and teaming with them to add more value within the current system’s framework rather than try to reinvent the wheel across the board.”

As the final day quickly approaches, Intermodal Expo will resume at 8 a.m. sharp on Wednesday with the Intermodal Safety Committee Meeting followed by the Operations Committee Meeting.

Global Trade Magazine will continue participating throughout the remainder of the conference at booth 812 ready to discuss your business goals for growth and expansion. Come by and see us for the final day of Intermodal Expo 2019!

Leveraging Licensed Spectrum and IEEE 802.16s for Mission Critical IoT Wireless Networks

Autonomous vehicles and trains are no longer figments of one’s imagination. Innovators such as Tesla have proven that we have the technology available today to build semi-automated vehicles. However, to make truly driverless cars, trucks, and trains a functioning reality on the roads and rails, it’s necessary to deploy communications networks and technologies that assure the requirements for mission critical operations can and will be met all the time, not just most of the time.

As we fast forward towards this new reality, it is important to understand that the U.S. Department of Transportation has started to build a loose framework of principals within its report, “Automated Vehicles 3.0: Preparing the Future of Transportation”. Further, the American Association of Railroads (AAR) and its members have established committees to create standards for automated train operations. Their efforts have prioritized operational safety leveraging a myriad of enabling technologies, software and infrastructure.

Another critical component of the analysis and evaluation is determining the communications infrastructure requirements that will enable these automated vehicles to operate safely, as well as how to responsibly introduce them to the roads and rails for coexistence with manually operated vehicles. This analysis brings to focus the need for control over these networks by the operators.  It also suggests the need for more private communications networks, optimized use of existing licensed radio frequency (RF) spectrum, and the possible need for allocation of more spectrum for licensed use and mission critical requirements.

While the conclusions from this analysis and evaluation aren’t complete, it is clear that companies with mission critical operations and applications, such as the transportation and rail industries, will need to have control over the design, operation and evolution of the communications networks. They are going to require data communications with the highest levels of security, reliability, and quality of service to support the rapidly evolving requirements of their operations. However, despite these requirements, the solution can’t be “at any cost”. The total cost of ownership for these networks must be realistic and not cost prohibitive. This strongly suggests the need for a standards-based communications technology that can be used across multiple industries with economies of scale in manufacturing and a vibrant ecosystem of developers and manufacturers.

Private Vs. Public Networks for Transportation

The transportation and rail industries use of private, licensed spectrum for mission critical control and signaling long predates the availability of the commercial wireless networks.  Even with the advent of the first cellular networks in the mid-1980s, industrial companies have maintained their critical wireless networks given that commercial wireless networks are designed for the consumer market and applications, and they lack the reliability, quality of service, security, and availability required by the rail and transportation industry.  Commercial wireless providers are unable to effectively prioritize traffic for mission critical applications or specific operations.  For example, on a commercial network, there is no way to prioritize a data signal being sent to prevent a train collision over an Instagram post or a video download from Netflix customer. These mission critical applications, control signals and critical data impacting safety and operation’s situational awareness need to be sent, received, and acknowledged with the highest level of reliability and without delay.

The Need for Standardized Protocols

While transportation and rail have had their own private networks using private licensed spectrum for decades, the networks and the spectrum allocated to them use very narrow portions of radio frequency with limited data rates.  This was adequate for voice and low throughput data communications that rail and transportation (and other industries) relied on in the past. However, as we move into an era of increased automation, with higher throughput and greater volume of devices and applications which include controls, increased security, and mission critical applications like positive train control (PTC), the transportation and rail operators need to be able to utilize existing private, licensed spectrum they have been allocated, but also need additional bandwidth and more capacity.  More and more broadband spectrum is being acquired by the commercial wireless service providers who purchase spectrum at auction for billions of dollars, and whose primary purpose is to provide services to millions and millions of consumers. They have a completely different business model than what is needed by mission critical industries.

One of the challenges that transportation and rail operators face, as do other mission critical industries, is that until recently there has not been a viable data communications standard and related technology to increase data capacity in narrower channel spectrum. Most of the  standards work on data communications has taken place for broadband spectrum.  To that end, Long Term Evolution (LTE) requires a minimum of 1.4 MHz channels and IEEE 802.16 requires a minimum of 1.25 MHz channels. This means mission critical entities were forced into proprietary solutions. While proprietary solutions are purpose built to meet specific needs (e.g., privately operated, licensed spectrum, secure, reliable and low latency), they present risks as well, namely the risk of a company or product line being discontinued, or all costs of new development and product evolution being passed on to those relatively few customers who use a specific version of the product or service. Even if the company purchasing the products has done their due diligence and taken measures to protect their interests (i.e., put the intellectual property into escrow in the event of a product or company discontinuation), there is no guarantee that another manufacturer would agree to make the equipment or provide the service, especially if the same economic risks persist.

For this reason, the Electric Power Research Institute (EPRI), the Utilities Technology Council (UTC), leading electric utility companies and telecom manufacturers came together to modify the IEEE 802.16 standard to operate in narrower channel sizes than 1.25 MHz, thereby opening up many new licensed frequency options with greater throughput. The new standard, 802.16s, which published in October of 2017, is frequency agnostic and allows for operation in channel sizes ranging from 100 kHz up to 1.25 MHz with reduced network overhead for maximum throughput in narrower channels.

This new protocol is being used throughout multiple mission critical industries, including electric utilities, water & wastewater treatment, oil & gas, government/military and most recently is being tested for use in rail. It is the first standards-based data communications technology designed specifically for mission critical industries. Leveraging a standard creates an eco-system of manufacturers and industrial companies within North America and globally.

This also means a standard technology for private networks can be implemented and as more and more mission critical companies implement this solution, it will continue to drive down the total cost of ownership for these private networks.  This should begin to open the door for a number of new technology innovations and applications that require higher bandwidths and data throughput to be realized sooner, and at lower costs.

The Path Ahead

It’s not enough that a technology exists and can be programmed or employed to perform tasks or automate operations.  Where safety is the highest priority, and security is directly linked to safety, the potential for technology and automation can only be realized if safety and security can be assured.

Leveraging standards-based technology over private, licensed spectrum to bring a wide array of technical innovations is a way to increase safety and security assurance.  Deploying networks using standard technology is not only a responsible way to keep costs down, but also to ensure interoperability and the ability to build eco-systems that will ensure new innovation and advancements in the future.

We are excited about the path ahead for the transportation and rail industries and believe this combination of approaches to deploying next generation networks will allow these industries to accelerate the benefits from automation and innovation – and do it in a safe and secure manner.

 

Credit: Ondas