Outsourcing to Vietnam: Operations Management - Essay Example

Outsourcing to Vietnam: Operations management assignment Introduction The field of operations management is a management area that concerns itself with designing and overseeing production processes as well as operations involved in production of goods and services (Almond, 2011:5). It incorporates responsibility based on ensuring that the company meets the requirements of customers and utilizes its resources effectively and efficiently (Greasily, 2009:21). Operations management is an extensive area of a business that covers managing of processes involved when converting inputs into finished goods. That is, it oversees and controls conversion of materials, energy, and labour into either goods or services. The Socialist Republic of Vietnam is number thirteen in terms of popularity in the world and eighth in Asia. As of 2011, it had over 90.5 million inhabitants. According to The Business Watch, this country has huge potential of operations management (Lewis and Slack, 2003:45). With that respect, this essay will seek to highlight the benefits of outsourcing to Vietnam by considering a number of factors. Costs Outsourcing staff in the operations management sector to a country like Vietnam calls for a number of considerable factors. Shifting to different country is very tricky and factoring out things like management and transaction costs is important (Almond, 2011:9). Moving to Vietnam, as an operations manager is one of the most exciting working experience one can ever have (Anil and Suresh, 2009:39). This is because, in this country, costs of things like transport, fixed, energy, and other costs involved in manufacturing are considerable and pocket friendly (Ray, Dragicevich, and Louis, 2007:36). Research based on operations management in this nation revealed that the costs involved in major aspects of running any business that requires operations management are considerable and thus effective for setting up firms here (Mahadevan, 2010:77). Given these advantageous factors, it is favourable for business people with potential to grab this opportunity and set up businesses or seek employment in this country. Labour characteristics With reference to operations management, every firm expects the manager responsible for this department to oversee production processes. As such, it is congruent for operation managers planning to outsource jobs in other countries to do a thorough research that can avail the relevant information regarding the sector (Klassen and Menno, 2006:54). One of the most important factors one should consider is the characteristics of that country’s labour market. In every country, there are variable levels of labour quality. Therefore, assessing the quality of labour is essential in order to determine the kind of people you will be dealing with in that foreign nation (Lewis and Slack, 2003:73). For instance, documented sets forth that the level of labour quality in Vietnam is high. This makes it a top priority to people hoping to work in this country as operations managers since employees are conversant with what they do. Availability of labour is another factor that is worth considering while outsourcing in a foreign country. Since Vietnam is an Asian country where Confucianism and its teachings emphasize on hard work, it is relevant and apparent that availability of labour is not a major issue (Anil and Suresh, 2009:51). People are hardworking, an aspect that makes this country to have part of the cognitive labour force availability in the world. Additionally, the rate of unemployment is low given the fact that means of creating forms of employment are in plenty in this country (Curry, 2009:25). Working in Vietnam as an operations manager is simple and advent as employees depend on aspects of culture that encourages values like dedication, loyalty, and hard work. Citizens of this country only expect rewards in form of hard work and commitment as opposed to notions of western countries where rewards may come in form of favours (Greasily, 2009:49). As regards these factors, outsourcing to Vietnam is a great chance for people who are daring or who like challenges. However, despite the fact that most people around here have jobs, this does not necessarily entail that there are no issues, which requires collective bodies that provide policies stipulating the correct measures for employment terms and conditions. There are a number of labour unions, which address the grievances of employees in this nation (Klassen and Menno, 2006:78). It is worth noting that, labour unions’ services in this country are available to members only. Presence of these bodies make working productive and motivating since employees are aware of their rights and what channels to undertake in case of any irregularities within their working environment. Vietnamese value their dignity highly (Curry, 2009:48). As such, they have the best attitudes and notions towards labour turnover and work, which makes this country encouraging working. Motivation of workforce management and workers is at most, in its best mood (Lewis and Slack, 2003:93). Particularly, companies use incentives and bonuses together with other morale boosting elements in order to keep employees feel more motivated hence perform better. Working in this country as an operations manager attracts many benefits especially if you are a foreigner since Vietnamese are eager to learn new things (The National Assembly, 2003:7). Sell of manufactured goods in Vietnam Infrastructure Infrastructural development is one factor might attract many people to work in Vietnam than in even other countries in Europe. Selling manufactured product in this country can enjoy great presence of existing modes of transport. Vietnam has many airports and airstrips, which makes its air transport channel clear and convenient (Klassen and Menno, 2006:91). Furthermore, due to their number, air transport business is competent hence; its services are of high quality and cheap. Other modes of transport that manufactured goods can enjoy in this country include railroads, seaports, and roads (Barnes, 2008:43). Vietnam has many seaports that facilitate both local and international transport of manufactured goods. Presence of first class roads is a factor that makes transportation a major contributor towards attraction of foreign investment (Greasily, 2009:63). Road transportation tends to be the most attractive mode of transport in this country with long and large trucks that transport manufactured products from industries to different counties in this country. Air transport in Vietnam is reliable and of good quality to competition among private and public airlines as well as international cargo planes (Mahadevan, 2010:101). As an operations manager, you can be whenever you want to be anytime of the day or night regardless distance since passenger airlines are reliable and operate throughout with trips to even the most remote parts of this country (Curry, 2009:61). Sell of manufactured goods in this country can have tremendous results due the fact that, there is reliable and efficient supply of power and energy to facilitate movement of goods and services through the railroads (Anil and Suresh, 2009:73). The relevant authorities make the right efforts to ensure adequate and continuous supply of water and facilitate waste treatment making the system of utility management quality and reliable. Benefits of opening a new venture in Vietnam First, as an operations manager, you will enjoy the best telecommunications systems in the world in this country. In addition, the proximity to suppliers is imperative since the quality of supply is magnificent. There is also presence of alternative suppliers who occupy the market gap upon the reluctance or exit of the common ones (Klassen and Menno, 2006:105). Opening a new venture in Vietnam will be a successful move because market or customer proximity is favourable (Ray, Dragicevich, and Louis, 2007:52). There is demand for manufactured products and the size of the market that a manufacturer can serve with his manufactured products is large. Given this factor of customer and market proximity, an operations manager can have swift time focusing on demand sales of the venture’s manufactured products (Lewis and Slack, 2003:132). The expenditure of customers is potential and the existing manufacturers depend highly on indigenous customers (Curry, 2009:74). However, opening a venture that can manufacture products that are appealing to both the locals and foreign investors can result to enormous benefits. As illustrated, the state of infrastructure is exemplary and reliable. Thus, responsiveness and delivery of the manufactured goods to markets takes the required time, which makes it respond accordingly to nature of variance of demand and populations trends (Barnes, 2008:59). If a firm located in Vietnam opts to import labour, the government has set rules and regulations that govern that procedure of acquiring personnel from overseas. One of the rules and regulations stipulated is proximity to parent company facilities (Thou, 2006:4). An operations manager in this country enjoys government regard since it requires employees dealing with the most sensitive areas of an organization to be at close proximity to the parent company (Almond, 2011:13). Competing companies do not open ventures at close proximity. Hence, there are minimal competitors at the place of the company’s location. Reasons to offshore to Vietnam Since operations management is a field that aims at redesigning and controlling of processes that production f goods and services undergoes in a company, off shoring to Vietnam enjoy advent quality life (Thou, 2006:6). This is because, the quality of environment in this country is high and the community has positive attitude towards manufacturing industries and businesses since they derive satisfaction from the existence of these firms (Greasily, 2009:79). Even though offshore to Vietnam might enjoy benefits of loyalty and responsive attitudes from the surrounding communities, it is still important to consider benefits that come along with this move (Ray, Dragicevich, and Louis, 2007:75). If benefits outweigh disadvantages, then it is agreeable to offshore to this nation. Other industries that can facilitate off shoring to Vietnam include better schools, a number of churches for absorbing Christians, health facilities are of high quality, and there are recreational opportunities for both children and staff (Anil and Suresh, 2009:109). Research results regarding security depict that, the rate of crime in Vietnam is average due to intensified government approach towards setting up effective education system. As people study both locally and internationally, the standards of living are at middle stage (Seah and Nair, 2005:102). This gives opportunities to people wishing to outsource to this country since they will enjoy limited competition (Nguyen, 2007:74). Civilians here depend highly on face value and indigenous modes of manufacturing goods. The skills and knowledge of operation complex machines is only available to a few who might have had the chance to study abroad. These factors put this country at a potential state of outsourcing (Curry, 2009:95). The legal and regulatory framework of Vietnam has structured procedures that when followed to the latter, employees and firms can never incur loses due to irregularities caused by effects of rogue dealings. Elaborations of this points out that, there are set laws that regulate cases that involve compensation as well as laws requiring insurance or assurance. To avoid environmental degradation, the government has set agencies that preserve and regulate laws regarding environmental conservation (Curry, 2009:112). All these factors act in favour of operating in this country as an operations manager, dealing with manufactured goods and services, and setting up of business ventures. Moreover, it is encouraging to off shore to this country, as there are legal systems that regulate industrial relations. As a result, transferring or venturing directly into this country’s market is achievable with much ease because government support. The requirements involved in setting up local corporations are not complex (Barnes, 2008:72). Vietnam business industry provides one thing, which is of paramount importance to all business kinds. This country has relaxed regulations towards joint ventures, mergers, and very interesting regulations concerning the transfer of earnings out the country (Curry, 2009:124). Moreover, the economic factors of this country are encouraging since the government has set procedures that regulate and gives incentives as well as providing tax structures to business (Seah and Nair, 2005:151). According to a report released by the State Bank of Vietnam, the rate of inflation in this country is always at a regulated margin. The bank also, with directives from the government’s financial ministry, provides financial incentives to firms operating as manufacturers and processors (Lewis and Slack, 2003:143). Following many efforts that the government exerts in order to facilitate trade both locally and internationally, custom duties and tariffs are favourable, a factor that facilitates transfer of goods and services from one area to another at an average cost (Stevenson, 2003:11). Being part of the Asian continent, Vietnam has one of the best business climates as opposed to some other parts of the world. Climate itself is a warranting factor towards working in this country (The National Assembly, 2003:12). Other economic factors that work in favour of this country include interest rates charged by banks, controls and regulations regarding exchange services, and growth of the country’s Gross Domestic Product as well as income per capita (Nguyen, 2007:129). Research findings established that, commercial banks in Vietnam charge considerable interest rates to savings, transactions, and other banking services. Further, the country earns a competitive amount of money from its continuous growth of GDP (Mahadevan, 2010:147). It also enjoys high income per capita, which acts as a favourable element towards either investing in the operations management sector or working as an operations manager in this country. Risks and benefits of going into Vietnam Benefits The government of Vietnam holds a record of economic stability in terms of continued venture into new markets and intensification of the existing fields. After isolation upon ending the Vietnamese War in 1975, this country resolved to integrate its economic policies with those of the western countries whereby in 2000, it was one of the highest economic growing countries in the world (Stevenson, 2003:18). By 2007, it joined the World Trade Organization, which transformed its economic policies by integrating transitional reforms aimed at encouraging foreign investment. With this continued growth, benefits that an operations manager can gain are attractive in this country (Anil and Suresh, 2009:127). Other benefits include government policy consistency and structure as well as encouraged inward direct investment. International companies expanding to Vietnam It is agreeable Vietnam’s business environment comprises of exceptional advantages that are extinct in many other parts of the world. For instance, there are very competitive companies such as K&G and CyberSoft operating in this country’s Information Technology industry. According to the Chief Executive Officer of K&G, this company opted to outsource in Vietnam mainly due to its labour characteristics, state of the infrastructure, and the level of technology. Vietnam provides the best business environment in Asia in terms of business environmental culture. This means that, even if multinational companies expand their operations to Vietnam business culture remains incorporated into the business’ operations (Lewis and Slack, 2003:111). As a result, presence of diligent and bright European culture in the roots of this country makes it favourable for international companies to work in Vietnam. Given the speed at which technological advancements are taking place in Asian countries, the issue of competition is cognitively unimaginable yet decisive. Under this spectrum, with reference to market analysts, Vietnam exhibits a number of strategies that accord the manufacturing industry of this country a magnificent and competitive advantage. Most econometrics agrees on this issue, for any other country to compete healthily with China and India in the outsourcing sector, it will more that just determination. However, Vietnam has devised strategies that enable her to compete with these outsourcing giants. A recent study reveals that Vietnam has been able to fragment its outsourcing industry and gained the expertise and size needed to capture the largest international software projects, which are very congruent towards competing with China and India. Additionally, the presence of expanded business links with European markets and imported skills as well as expertise serves as stratagem towards withstanding competition (Barnes, 2008:101). Risks In every country, there are risks involved in business. Some of them have severe result that might even a whole company bankrupt, others are rigid, and their effects are deplorable (Ray, Dragicevich, and Louis, 2007:146). Thus, as you prepare to head to Vietnam as an operations manager, you should bear in mind in there are a number of risks involved while working in this country (Klassen and Menno, 2006:149). To begin with, there are social and cultural factors that comprise of different customs and norms, which make operations in this country rigid and risky. Vietnamese customs and norms are only understandable to indigenous people of this nation. As such, for a foreigner, these social factors affect the ability of an employee to perform efficiently (Barnes, 2008:88). As stated by the country’s cultural heritage, there are severe punishments that come along with failure to uphold cultural aspects. Language barrier is another risk that can affect adversely the performance of an operations manager due to inability or difficulty to speak, listen, write, and read (Lewis and Slack, 2003:186). Conclusion In conclusion, Vietnam is a vibrant business destination centre for outsourcing in the department of operations management. The most recent business prospects reflect crucial availability of space for future business expansion (The National Assembly, 2003:15). This gives light to outsourcing and competence in terms of employment and business venture. The attitude of the locals towards business location is another aspect that makes this country a physically conditioned place for ideal business operation (Greasily, 2009:93). The formal mission statement of this country aiming at encouraging outsourcing and business venture, there is advent availability of policies viewing to increase foreign direct investment and introduction of new skills with the power of discovering and revolutionizing Vietnam business wise (Barnes, 2008:135). In this paper, there is a clear and in-depth expansion and explanation of outsourcing in operations management in Vietnam. Additionally, this paper has all crucial and congruent factors that affect the place of doing business in this country as well as barriers that may make operations rigid. Bibliography Almond, A. 2011. The airport sector in Vietnam. Available from http://www.britishexpertise.org/bx/upload/Newsletter/Airports_Vietnam.pdf [Accessed May 13, 2012] Anil, K. and Suresh, N. 2009. Operations Management. Daryaganj: New Age International. Barnes, D. 2008. Operations Management: An International Perspective. New York: Cengage Learning EMEA. Curry, J. 2009. A short course in international marketing [electronic resource]: approaching and penetrating the global marketplace. Petaluma, CA: World Trade Press. Greasley, A. 2009. Operations Management. Routledge: John Wiley & Sons. Klassen, R. and Mennor, L. 2006. Cases in Operations Management: Building Customer Value Through World-class Operations. Thousand Oaks: SAGE Lewis, M. and Slack, N. 2003. Operations Management: Critical Perspectives on Business and Management. London: Routledge Mahadevan, B. 2010. Operations Management: Theory and Practice. Delhi: Pearson Education India. Nguyen, N. 2007. The challenges of transferring modern project management principles and methodologies to developing countries. Available from http://www.ndv-projectmanagement.com/pdf/PMI07.pdf [Accessed May 13, 2012] Ray, N., Dragicevich, P. and Louis, R. 2007. Vietnam. Maribyrnong: Lonely Planet. Seah, A. and Nair, C. 2005. Vietnam. New York: Marshall Cavendish. Stevenson, W. 2003. 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