Sharing difficulties to prevent supply chain disruption: experts

The Vietnamese Government, businesses, and brands need to discuss and share difficulties with each other and come up with solutions to restore production growth, local and foreign insiders said. 

An overview of the online dialogue. Photo: Phi Nhat

Due to the negative impacts of the Covid-19 pandemic, Vietnam is facing the risk of supply change disruption and losing incoming orders if the pandemic is not controlled, which will likely make buyers move to other suppliers in foreign countries.

A representative from a brand with 100 suppliers in Vietnam, who wanted to be anonymous, told The Hanoi Times that the country is the key supply chain hub, but the recent lockdown has shown the risks of being too dependent on one country. They are facing the risk of not delivering orders on time and increased costs due to air freight. 

“We definitely have to ship by air for delivering on time for the upcoming Christmas season. As a result, the cost is very high and we can only pay part of it our budget is limited,” the brand’s representative said.

The pandemic has caused industrial zones in Southeast Asian countries to suspend production. The social distancing regulations in recent weeks were implemented in the peak production season of the textile and footwear industry while the number of orders from traditional markets such as the US and EU has sharply increased. 

This has led to the delay in order delivery of nearly 50% of local textile and footwear businesses. Many foreign buyers have asked them for a 15% discount due to the delay, according to the latest survey conducted by the Research Center for Employment Relations (ERC).

“Although local businesses are allowed to resume production, they have still faced obstacles due to the disparity in the enforcement of each locality”, Do Quynh Chi, the ERC’s Director told the recent dialogue  “Coming together for sustainable recovery of Vietnam Garment and Footwear industries” held on October 8.

Do Quynh Chi, the ERC’s Director tells about the survey at the recent dialogue

For illustrative purposes, Nguyen Tuyet Mai, Deputy General Secretary of the Vietnam Textile and Apparel Association (Vitas) said while Bien Hoa City in the southern province of Dong Nai has applied the “three on the spot” principle for production, Ho Chi Minh City has still restricted travel to surrounding provinces, making it difficult for workers to move between the city and the neighboring provinces.

Being of the same mind, Phan Thanh Xuan, Vice President of the Vietnam Leather, Footwear and Handbag Association (Lefaso) said: “The complicated application of criteria for production resumption, including inter-provincial circulation, has caused great barrier for businesses to smoothly resume their activities,” she said.

Recommendations

Though recognizing that disease prevention in Vietnam is necessary, the American Chamber of Commerce in Vietnam (AmCham) and its member companies raised their concern that if the social distancing period persists, the longer business activities are interrupted and the longer it takes to recover, the more the entire supply chain would be affected.

Mary Tarnowka, Executive Director of AmCham expected Vietnam will ease production activities not only in the low-risk or “green” zone but also in the medium-risk or “orange” area. 

“Local authorities need to acknowledge that zoning can affect production activities and economic development. Production needs to be reestablished sooner in Vietnam,” she added.

“The country has great potential to be one in terms of sustainable production of textile and footwear products.”

Claudia Anselmi, Board Member of European Chamber of Commerce in Vietnam (EuroCham) said: “The biggest challenge facing Vietnam is reducing its ability to return to normal production. In particular, the situation of migrant workers returning to their hometowns will cause disruptions to the supply chain.”

She said partners, factories, and businesses need experts to consult as well as flexibility in policies will help restore the textile industry. This is the only way to ensure workers' return.

“It is important that we encourage business to be more responsible, ensure a more sustainable competition,” she added.

Tran Thanh Hai, Deputy Director of the Import-Export Department under the Ministry of Industry and Trade, said the textile and footwear sectors have greatly contributed to the export turnover of the country. The position also helps Vietnam enter the group of the five largest exporting countries in the world.

Currently, the Government is making efforts to prevent the disease, promote access to vaccines and drug sources to treat Covid-19. However, the different interpretations of government directives among localities have been a big shortcoming, he underlined. Recently, it was reported that HCMC’s authority had negotiated with each neighboring province on workers’ movement.  

As for brands, the Deputy Director affirmed: “Vietnam is a favorable place to converge supply chains such as geography, labor, cheap and reasonable inputs. Supply chain in textiles and garments and footwear is firmly established here.”

“We are urging buyers to strive to overcome difficulties left from the past period, restore production to the highest level, help suppliers and brands maintain and expand production,” Hai said.