Rush to Vietnam creates tight labor market
HO CHI MINH CITY, Vietnam — The rush to Vietnam from China has resulted in one of the tightest labor markets here in years, a situation that is starting to play out for manufacturers in a host of industries, including furniture.
In fact, this manufacturing migration has been among the key concerns of factory management as they struggle to maintain quality and lead times for product shipped to the U.S. market. As many have seen firsthand, U.S. retailers can be unforgiving if there are any missteps in the process, ranging from inconsistencies in finish to delayed shipments.
But many are taking steps to be proactive in retaining workers amidst such high demand for talent. While none can guarantee there won’t be turnover, they believe they can curtain enough departures not only to maintain the status quo, but also to help grow their business through plant expansions.
Starting point: Pay
Many not only monitor pay in the industry, but also what other industries are paying to remain competitive. In addition, they must keep their pay on pace with government mandated increases in the minimum wage, which sources say have been around 10% per year on average.
The consensus appears that production workers earn about $300 to $500 or more per month, which includes overtime towards the higher end of this spectrum. This is not only above the minimum wage for the region, but it also competes with many other industries, sources say.
Many companies say they keep track of salaries in the area to make sure they stay competitive with other employers. This includes providing attractive benefits packages that include health insurance.
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“We are above average in terms of pay,” said Andrew Lien, general director of Vietnam operations for Wanek Furniture Co. “It is something we are very focused on. We do a lot of trending and watching the market for competitive wages, and we do our best to stay ahead of it. And in most areas we can.”
Wanek also tries to improve working conditions. For example, it estimates 60% of its Vietnam facilities are air conditioned, a rare perk in that country’s furniture industry.
While the company has seen some recent turnover of middle management supervisory level employees, Lien said this hasn’t been any worse than normal for Vietnam.
Geoff Hawkes, co-founder and CEO of upper-end case goods and upholstery manufacturer Rochdale Spears, said that his company also monitors pay in the region in order to remain competitive.
“We scour the market twice a year to make sure we are in the high range of payers,” he said. “We are paying at the higher scale in terms of wages.”
Still turnover can be an issue. Chris Bourton, vice president of operations, said that the company has lost some employees to other companies that have entered the marketplace.
But here too, he said the company is analyzing the situation to understand why those workers have left and what type of package they are being offered.
“And what we are finding is that we are quite competitive still to the new companies, and we are trying to ensure that we are a good employer. That is a good way to retain. So far we seem to be Ok.”
“We recognize that the labor market will be impacted due to a higher demand for skilled labor,” added Hawkes. “Those who are easily enticed by apparent gold rush opportunities will move to new organizations. Our mantra at Rochdale Spears is to invest in our people; we are building talent for the future. We employ people and they stay with us. You will always have staff turnover, however, we are pleased to say that we have not seen a significant increase.”
As in China, some of the turnover in Vietnam occurs right after Chinese New Year, when workers either return home or seek new opportunities elsewhere.
Accent, occasional and dining furniture specialist Inni Home said it lost about 15% of its workers earlier this year right after Chinese New Year. Officials attributed this to the increase competition for workers in the area.
“Many factories have moved here, and they raised the salaries,” said Linda Zhang, general manager, of the competitive environment. “It has gotten better, but we had to raise our salaries … so we can keep our experienced workers and the office staff. That has been quite a challenge. We have to hire new workers, and those workers need time to train.”
This, in turn, caused some delays in shipping times, as she noted it takes at least six months to train workers due to the complexity and skill required to produce items in the line.
“Our line is different because it is not mass production,” she said. “It is even more of a challenge for the workers because there is a higher (skill level) requirement for them. They need to catch up.”
Case goods manufacturer Starwood Furniture said it too has struggled to keep workers.
“The challenge is to get workers to work long term for us,” said Thomas Luk, president, noting that some other industries pay higher than the furniture industry. “It is very, very difficult for us to increase (wages) by even three or five percent.”
But he said that his manufacturing campus is in a good spot geographically as it is surrounded by a lot of neighborhoods, thus making the facilities easy to get to on a motor scooter or even a bike.
While pay and proximity to the plant are major incentives, culture and a sense of community is also key to retaining workers in Vietnam sources say.
And sometimes it’s the little things that mean the most.
Motion furniture manufacturer ManWah Holdings Ltd. has a great task ahead in that it has one of the biggest expansion projects on tap in Vietnam. It has added 2.5 million square feet of manufacturing that will bring its facilities to nearly 4.5 million square feet. This also will boost employment from 3,000 to 8,000 workers by next summer.
The company has the advantage of building onto an existing plant that already produced motion furniture and already had a skilled labor force to make that product.
But the company believes it will be able to recruit the additional workers not only with competitive pay, but it also has leadership that supports the local community.
This includes donating bicycles to local schools and also giving scholarships to local students. This sends an important message to the community, notes Kevin Castellani, company director of corporate communications.
“Acquiring new employees, that has always been an obstacle, but our owners have gone into the community, and they have contributed to the community,” he said. “We have become involved in the community and that has attracted employees to us. We also treat employees better, and we pay them better than most other factories. … We want long-term commitments from our employees, so our owners have made a commitment to treat our employees, better than they could be treated at other factories.”
The company also has created better working conditions such as improved ventilation and has built new dorms and a new cafeteria as part of its enhancements to the campus.
Jonathan Sowter, CEO of high-end furniture manufacturer Jonathan Charles, has lunch every day he is at the plant in the worker cafeteria. This, he said, lets workers know that he is one of them and thus part of the team.
Like all of his production workers, Sowter also is a furniture craftsman himself and knows how to do every job on the factory floor. In that respect, he has an even greater connection with his workers.
“I am a craftsman, and Vietnamese are great craftsmen,” he said. “It’s nice to be in a country where it is easy to train people, and they want to learn how to do something. They are very proud people, very hardworking but very proud. It is easy to be high end when the worker is proud and wants to do a good job.”
He also is married to a local Vietnamese woman and said that the workers can sense he loves the country, where he has resided for 25 years.
Noting that a quality workplace isn’t just about getting a paycheck, he said that generally the company doesn’t make a counter offer in order to retain workers.
“You end up getting into a bidding war,” he said. “Keeping people by being the highest payer isn’t always the best policy. We want to keep people by being the best employer.”
He said evidence of this is in how the company has treated its workers over the course of its 15-year history in Vietnam.
“We are quite proud of how we treat our workers,” Sowter said. “One of our proudest statistics, which is unique in this industry, is that we have never had a strike in 15 years in an industry and a part of the country where strikes are very common. … That means we are doing something very well, and I think the reason for that is that we have our ear very close to the ground.”
Describing the Vietnamese culture as very engaged in — and proud of — their work, some companies have also have created a culture that allows workers to help implement improvements to the manufacturing process.
“I think we are empowering people; that is one of the things we are doing in order for them to feel part of the company, allowing them to come up with ideas on how to fix the company rather than management telling them what to do,” said Bourton, of Rochdale Spears. “We have found that has made a contribution to (lowering) the number of strikes and the number of complaints.
“We have seen an immediate effect on that, but also it makes sure that people are trained better and gives them opportunities to move around the company. It is just treating them as they want to be treated.
“These individuals,” he added, “have become very capable masters in production. They remember things quite quickly, and they want to do a very good job. … Here, people also are very creative. I didn’t see that level of skill in China. I was very surprised to see it here. They quickly adapt and very quickly get it correct.”
While it pays competitively in the marketplace, including a merit-based pay system that provides incentives for piece work, Wanek Furniture also allows its workers to be part of the manufacturing solutions by inviting them to suggest improvements to various processes.
“Our Idea Network is something we promote to try to get employees to buy into the operations,” said Lien, of Wanek Furniture. “That helps us a lot in addition to the training we do to provide a sense of accountability and ownership with the employees. … They are graded on many different criteria — health and safety, cost savings, process improvements, machine improvements — the employees can submit anything they feel will help improve their environment or make their day go better. And then we evaluate and reward employees for those ideas.
“When employees start to take ownership in their job, you start to feel that sense of accomplishment.”
Creating that sense of accomplishment and an overall satisfaction with their work, could very well define who wins the war for employees in Vietnam moving forward.