The cavernous factory might be the size of several football pitches and hold more than 90,000 workers, but it’s hardly unique. Each year, the plant produces high-end running shoes for Adidas, Asics and Nike for export around to the world. It is just one of dozens of plants that make more than a million pairs of shoes every month.
Just another day inside the awe-inspiring economic engine that is China, right? Wrong.
The factory is located not in China but just outside Ho Chi Minh City in Vietnam, China’s upstart neighbor to the south. The company that owns the plant is actually a Taiwanese firm called Pou Chen Group, which is the largest shoe manufacturer in the world. This factory, and many others that produce garments for Western consumers, have recently moved to countries like Vietnam because China has become too rich to find the kind of cheap labor it takes to make affordable clothing.
This case of mistaken manufacturing identity can be found in several other nations across Southeast Asia, including Indonesia, Malaysia, Thailand, the Philippines and others. The e-commerce boom kicked off by China has spilled over its borders and ignited a new online logistics land rush. The movement is starting to have consequences. According to a report from the Footwear Distributors and Retailers of America (FDRA), although China increased footwear production volume to 470 million pairs of shoes from 300 million in 2014, its market share fell by 3 percent. Meanwhile, Vietnam has seen a double-digit rise in market share for two consecutive years, partially due to labor shortages in China.
“E-commerce is undoubtedly adding to demand for airfreight, as it has opened up markets across the globe and is one of the fastest growing segments. We expect e-commerce to continue growing strongly in the years to come,” said Morten Damgaard, CEO for the South East Asia region at forwarder Agility Global Integrated Logistics. Although freight forwarders are traditionally not set up to provide e-commerce solutions, they are playing a part in this online revolution, he said, by providing services such as warehousing and contract logistics services in certain areas.
While China led the e-commerce charge in Asia – both as a manufacturing center to support Western demand and also in the growth of domestic demand – the torch is being carried by Vietnam and other Southeast Asian countries, often at China’s expense. Perhaps it’s time for China, and the rest of the logistics industry, to sit up and take notice.
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