15 out of 30 Japanese firms have confirmed to move their factories to Vietnam from China. This is part of a plan to diversify Japan’s supply chain outside of China unveiled in April this year.
These firms are major in producing medical equipment, the others produce semiconductors, phone components, air conditioners or power modules. Still there are no official announcement about whether they will shift partly or completely from China.
With huge digital technologies achievements in the world, Japanese companies are expected to shape the new future of digitization for the domestic supply chain.
Japan efforts in supply chain heading towards digital future
According to the World Bank Logistics Performance Index (LPI), Japan ranked 5th in the world in 2018 for transforming its traditional industry in regard to supply chain applying digital technologies. This impressive achievement has marked the acceleration of 7 places from its previous ranking in 2016.
Japan has always proved itself as a pioneer in digital supply chain, especially in APAC region. The country has shown sympathetic attitude towards implementing digital tools and solutions in supply chain with an aim to boost productivity, lower deficit cost and more.
What changes can Japanese companies make to Vietnam supply chain?
Traditionally known as the world leader in supply chain with manufacturing bases in Southeast Asia’s countries and the capability to cope with crisis, what changes in domestic supply chain can Vietnam expect from Japanese companies? Especially when the 15 firms are about to move to Vietnam and transfer great inflows of FDI into the country.
Research has shown 6 important advantages that Japanese businesses may offer in supply chain sector when they operate in Vietnam:
1. More investment in supply chain resiliency and artificial intelligence (AI) in order to improve productivity.
2. More logistics business process outsourcing services budget to process automation, focusing on order, inventory and shipment tracking.
3. Procurement productivity to increase thanks to new focus on automated supplier and data analysis.
4. Huge demand for supply chain micro-application extensions regarding new technology investments in manufacturing and retail.
5. More robots and situational data analytics to engage in optimizing warehouse storage activities.
6. Service supply chain to have block chain leveraged and lower expedite costs.
Japan Successful Long-term Investments History in Vietnam
A report of Japan External Trade Organization (JETRO) in 2019 indicates that 66% of Japanese enterprises investing in Vietnam reported profits. And 64% of these revealed their ambition to expand their businesses activities across Southeast Asian country.
Until now, Vietnam has witnessed huge success of big Japanese firms in numerous large scale projects such as Toyota, Honda, Panasonic, Canon, FujiXerox, and Sumitomo. Meanwhile, Japanese FDI inflows in Vietnam has also increased with successful operation of retail leaders such as UNIQLO, AEON, Family Mart, Ministop and 7-Eleven.