Wolverine Worldwide is shrinking its footprint in China and started sourcing from Vietnam. However, Vietnam is not sustainable for them to source footwear
Wolverine Worldwide, Inc. is one of the world’s foremost marketers of branded casual, active lifestyle, work, outdoor sport, athletic, children’s and uniform footwear and apparel. And importantly with more than 90% of its production ‘Made in China’ back in 2011, is shifting its sourcing from other countries, mainly in Vietnam. However, Wolverine Worldwide.
In 2014, a representative from Wolverine laid out plans to move to manufacture from China to Vietnam at a conference led by the Vietnam Leather, Footwear and Handbag Association (Lefaso) and the Footwear Distributors and Retailers of America (FDRA) in Vietnam.
Scott Thomas, VP Global Sourcing at Wolverine Worldwide said at that time, the group had plans to cut sourcing from China to a third by 2020 and leave the rest to Vietnam.
“There’s really no labor availability to be found. Vietnam is unsustainable.”
Though the decision was taken long before the raising of tariff or Trump’s trade war, these recent turn of events has certainly fueled it, coupled with rising wages, and expected benefits from the incoming Transpacific Partnership (TPP).
“We started migration out of China seven years ago, not so much because we knew that Trump would be the President…but more because it wasn’t sustainable,” said Mike Jeppesen, President of global operations for Wolverine Worldwide, recently at the Footwear Distributors and Retailers of America’s Sourcing and Sustainability Summit in New York City.
Jeppesen informed that currently, Vietnam is the biggest sourcing country for Wolverine. And sourcing from China is less than 40% in 2018. And after this FY it will be 25-30% from China.
Till now increased sourcing from Vietnam has worked relatively smoothly as the wage is lower than of China. But Jeppesen thinks it is a temporary respite. As labor is scarce in Vietnam.
According to the General Statistic Office of Vietnam’s (GSO) latest survey of Vietnamese workers, the number of non-skilled labors still accounted for 77% of the total labor force, while university graduates only accounted for less than 10%.
“There’s really no labor availability to be found. Vietnam is unsustainable,” Mike Jeppesen added grimly.
Also as Wolverine has witnessed that lower productivity in Vietnam makes it up with higher labor cost in China. More importantly like other manufacturing nations, the labor cost will rise.
“Like any other growing nation, Vietnam will start putting pressure on the government for social benefits, for higher wages, so we’ll see the prices go up in Vietnam,” Jeppesen added.
As more and more brands are coming out of China, the question and concerns of footwear brands and manufacturers, ‘whether Vietnam has the capacity to take on more footwear production.’
In next year or so Vietnam could end up exporting 50% of the footwear imports into the U.S., though that may not be sustainable for the sector in the long run.
“I think we need to get that down to a more reasonable level of 30-35%,” he said. “I think Vietnam needs to be tapered off.”