Phuong Anh Nguyen Goes Behind the Scenes to Analyze The Vietnamese Garment Industry

The often secretive Vietnamese garment industry is not the easiest to explore first-hand. But Professor Phuong Anh Nguyen, Chair of the Department of Business Analytics at SEBA, has been working to try and map it out in order to analyze it from a business perspective.

Phuong Anh Nguyen

“My main goal is to look at continuous improvement practices. If it’s successful in Japan, in the U.S., can it be successful in Vietnam? Under what conditions?” said Nguyen.

The first, and most important element of Nguyen’s research in Vietnam has been to establish and cultivate ongoing face-to-face relationships. Because of the barriers involved, she is currently writing a research paper called “How to Do Field Research in Vietnam.”

According to Nguyen, academia has focused little research on management in Vietnam, nor on the actual process of doing management fieldwork there, aside from noting specific challenges. And few Americans have researched Vietnamese management practices, even though the United States is a major investor in Vietnam and its large export market. Researchers have been discouraged by the language barrier and the country’s culture of corporate secrecy, which make it hard to access reliable data.

Nguyen’s fluency in Vietnamese has enabled her to penetrate Vietnam’s secretive business environment by working with the FPT School of Business (originally Hanoi School of Business), the Vietnam Chamber of Commerce, and Industry (VCCI), and Better Work Vietnam. With their support she has been able to collaborate with business leaders, academics, and prominent members of the expatriate community for her research.

Studying the state of continuous improvement (or CI) in Vietnam—in particular the mechanisms that Vietnamese organizations use to improve their quality and productivity—has involved in-depth case studies at twelve of Vietnam’s leading companies, and interviews and conversations with over 400 business leaders, academics and expatriates who have lived and worked in Vietnam for over 40 years. In Vietnam, foreign-owned companies expect their enterprises to increase their quality through implementing CI practices. For example, Ikea, Adidas, and Honda have encouraged their Vietnamese suppliers to develop CI practices to help them achieve better product quality.

In addition to helping practitioners and investors, Nguyen estimates that her research can benefit society by suggesting how to enhance working conditions in Vietnam. Acquiring and deepening CI capabilities, knowledge, and skills will allow Vietnamese companies to build their human resources into trained knowledge-workers whose expertise and insights can enable the country to enter markets for high-value products and services. Furthermore, education and training in CI can provide employees the knowledge, information, and skills to meet their overall work and personal objectives.

One of the practices Nguyen has been looking at specifically in her research is lean production, often called simply lean, which looks at systematic ways to eliminate inefficiencies in operations for companies in manufacturing and service industries. She has focused on the Vietnamese garment industry most recently.

“It may sound trivial, but it is extremely hard to get in [to the Vietnamese garment industry]. You wouldn’t know who to talk to. All of these companies are guarded by security, with high metal gates. Unless you know people, there is no way to get in. We were very fortunate.”

According to a July 30, 2016 article in East Asia Forum, titled “Keeping Vietnam’s textile and garment industry competitive,” the industry is currently Vietnam's largest export market, with more than 2.5 million workers, constituting 25 percent of the labor force and generating 17 percent of Vietnam’s export revenue (US $27.2 billion in 2015). Generally, workers from rural areas are trained to specialize in cutting, trimming, and making garments, which account for 78% of the industry’s exports.

It’s widely accepted that Vietnam’s textile and garment sector could benefit from structural reform. The secrecy that shrouds the industry is motivated by both global competition and stigma.  “The garment industry in Vietnam in particular is invested in keeping jobs local. They know full well that the garment industry tends to jump from one country to the next in order to keep wages low. Vietnam wants to keep their high-skilled workers employed and working,” said Nguyen. “Like most companies, they want to improve. They have asked how they can improve their products, services, and processes.”

Vietnam’s garment industry also has been in the spotlight for working conditions that have historically been less than ideal. In 2014, the minimum wage in Vietnam was averaging merely 52 cents per hour. As of 2016, labor rights requests have only helped increase minimum wage to 65 cents per hour. The Worker’s Rights Consortium (WRC) Executive Director Scott Nova has described worker’s rights struggles in Vietnam in the past, identifying Vietnam as one of the worst countries in the world in terms of factory working conditions. The U.S. Labor Department added garments from Vietnam to its official list of products made with forced and child labor. Only seven countries in the world have been pinpointed as having these types of conditions. This includes lack of freedom of association and collective bargaining, gender discrimination, health and safety hazards, non-enforcement of labor laws, precarious work, excessive working hours, and inadequate wages.

In order to gain entry, Nguyen  worked her way through many hoops when she started cultivating her Vietnamese relationships in 2007 for her dissertation. She reached out to local universities and organizations for support of her research. She connected face-to-face with business leaders and knowledgeable individuals in the industry to get through tightly protected channels and into the factories themselves.

“The problem that I’ve heard in the past is that local consultants may not have the expertise to help firms implement lean, which affects the perceived quality and applicability of their services to employers. While foreign consultants have extensive knowledge of lean they may not understand the business environment and culture in Vietnam to help domestic firms sustain lean. You can always implement it, but how long can you sustain it?  What factors have to be in place for continuous improvement practices such as lean to be successful in Vietnamese organizations?”

Vietnam, expressed Nguyen, is hierarchical, and is a culture that moves very slowly. But in order to keep jobs local, they need to move fast to learn business practices that will keep the work in the country. “The Vietnamese culture values harmony and favors consensus-oriented decision making, so people rarely take independent action and usually conform to avoid conflict. One thing about lean is you are asking front-line employees to come up with improvement ideas that implicitly suggest that management has not done its job. This bottom-up approach goes against the grain of traditional Vietnamese thinking.”

The prime example Nguyen has seen in her studies on lean is the success of Toyota Motor Vietnam (TMV). Why is it successful? “TMV attributes its 20-year success in Vietnam to human resource development and continuous improvement, which permeates the organization, encouraging members to come up with ideas to improve their skills, teamwork and efficiency. The company has received over 260,000 employee improvement ideas with an implementation rate of 97 percent. This is in line with global best practice and demonstrates that continuous improvement, in particular lean, can succeed in Vietnam, said Nguyen.

 In addition to wanting to help improve working conditions and promote best practices, Nguyen’s research is tied to a long-standing desire to become more familiar with her homeland. “I always wanted to go back and see where I was born. We spoke Vietnamese growing up—My dad wouldn’t answer me at home unless I spoke it,” said Nguyen. “Many of my relatives still live in Vietnam. If they make 80,000 Vietnamese Dong—that’s less than $4 US dollars per day— they are happy. Because I’m Vietnamese, I want to help the country where I was born.”

She first left Vietnam as a child in 1979, escaping with her family when she was 5 years old. “I was one of the boat people,” she said, referring to the famous throngs of refugees who fled Vietnam by boat and ship after the Vietnam War starting in the late ‘70s.

While traveling, her family was attacked by a Thai pirate ship.  “The captain was part Chinese, but spoke Vietnamese,” said Nguyen.  He pleaded with the pirates to spare the lives of the passengers.  “He said, ‘I’m not going to do this. If you want to kill them all, I’m never going to go with you. You have to spare them.’

“They spared our lives, but took all of our gold and cash.” she said. “We ate and cooked on the boat for several days. They dropped us near shore. Those who were able to swim, swam, but two ladies, my dad, and I couldn’t—we had to hold on to a tank in order to float to shore.” Nguyen and her family stayed in a Thailand refugee camp for six months before they spent six months at another camp in the Philippines. Eventually, they were sponsored to go to New Orleans.

When she was first attending college at UC Berkeley as an undergrad, Nguyen also wanted to major in business. Her father talked her out of it because he wanted her to become a doctor; she received a BA in molecular and cell biology instead. She didn’t pursue a career in medicine though. “My heart wasn’t there, so I decided to talk with my dad,” she said. “It was the hardest thing to do. He was really upset.”

She started working for Paychex right out of college, as a payroll specialist in charge of 240 accounts. She thought the best thing to do, since she didn’t have that much training in business, was to get a master’s degree at Cal State East Bay, where she would become a TA for one of her professors. After receiving an MBA in production and materials management, she looked into a PhD in operations management, and talked to her professors for recommendation letters. Yung-Jae Lee, associate dean now at SEBA, taught advanced operations management at CSU East Bay at the time.

“I was getting ready to graduate from the doctoral program at the University of Massachusetts Amherst, and I saw there was an opening at Saint Mary’s. Yung-Jae happened to be the search committee chair at Saint Mary’s at that time. I thought, ‘I know him!’”

Nguyen started her research in continuous improvement during her dissertation, for which she looked at 12 companies. Two of the companies, which happened to be garment companies, were interested in having people give them feedback on how they were doing. A few years ago, a contact invited her to participate in a lean seminar in Vietnam. “Vietnamese companies have a hard time implementing and sustaining lean. They either want to implement lean or need help to sustain lean,” said Nguyen. “In exchange for that seminar, we were able to visit five garment companies in the Ho Chi Minh City area.

Garment factory located in VietnamNguyen continues to visit Vietnam each year—in collaboration with the Vietnam Chamber of Commerce and Industry (VCCI) and Better Work Vietnam (BWV)—to expand her training and research into best practices. BWV, as an organization, specifically aims to improve workers' lives, as well as business competitiveness.  

Since its establishment in 2009, Better Work Vietnam has reached nearly 300,000 workers in more than 200 apparel factories. 70% of the BWV workers send money to family members, who spend this money on food, clothes, education, farm tools, debt, education for children or siblings and family health care. Nearly 60% of workers who send money annually send 4,000,000 Vietnamese Dong per year (USD 192), an amount that represents approximately 15% of gross national income per capita in Vietnam.

“My collaboration with BWV is a wonderful way for me to practice the College’s lasallian traditions and concern for social justice. The initial focus of the program is the apparel industry in Ho Chi Minh City and the surrounding provinces. This sector is the largest formal employer in Vietnam, providing jobs for more than two million people, of whom over 80 percent are young migrant women from rural areas,” said Nguyen.

BWV operates in one third of the total garment export factories, mostly located in the south of the country and is beginning work in footwear, with three factories currently taking part in the program. Three fifths of the program’s factories have expanded their employment, 65 percent have seen a rise in their sales and 75% have had an increase in the volume of their orders. More than 50 international buyers and retailers have subscribed to the program. But the program needs help to really achieve the success it is looking for.

Going into the factories was eye-opening for Nguyen. “Some of them were very well run; they were making garments for Brooks Brothers,Victoria’s Secret, and the German company Hugo-Boss. I saw Gymboree clothes being produced, and as I walked around thought, this is cool! That’s my kid’s clothing.”

After visiting five of Better Work Vietnam’s garment companies in May and June of 2015, Nguyen knew that her work with the organization would help factories improve their operations. Many of the companies have already made strides in providing a safe and comfortable working environment for their employees. For example, one of the companies has moved its factories to a rural area about four hours from Ho Chi Minh City closer to the majority of its workforce so that workers are not uprooted from their families and communities. It is also easier for the company to recruit employees because there are no other competitors in the area.

The factory visits also showed Nguyen that a number of issues remain. “The executives and managers I met during my visits have realized that they cannot compete on low labor costs because Vietnam’s minimum wage has increased approximately 10 percent to 30 percent annually since 2010,” said Nguyen. “To better compete, management must unravel the misalignment between management goals and employee goals so that all the company’s employees strive for the same ends.”

She believes that compliance and continuous improvement work hand-in-hand to direct everyone’s efforts to common goals. For example, as companies improve compliance, management will see other improvements as well including productivity and quality. “I hope that my work with Better Work Vietnam will not only help companies better compete in the global garment industry but also enhance working conditions for their employees.”

As a byproduct of her research, Nguyen has been able to learn more about the people in her native culture. “A lot of these garment companies approach human resources this way: They do good work, absenteeism is low, and turnover is low. You don’t learn these things unless you are able to visit. Face-to-face communication is a must,” said Nguyen. “It boils down to relationships. You have to be OK with that in order to do research in Vietnam.”