As the fourth wave of the Covid-19 pandemic has affected supply chains of export categories like textiles and footwear, therefore, Vietnam’s businesses will face the risk of being canceled orders. They are now seeking solutions to overcome the difficulties, local insiders have said.

A spinning line at TCM's factory. Photo: TCM

Impacts from Covid-19

The complicated situation of the pandemic in the southern provinces and cities has been affecting the production plans and business results of local enterprises since July.

Thanh Cong Textile and Garment Company (TCM) earned a revenue of more than US$14 million in July, falling 3% compared to the same period in 2020. Post-tax profit only reached nearly $673,000, a decline of 47% over the same period last year.

TCM said the application of “three on-site” (work, quarantine and stay) production plans due to the complicated pandemic has led to a decline of labor productivity, leading to a lower gross profit margin than the same period last year. In the first seven months, it achieved revenue of VND2.2 trillion ($96.2 million) and post-tax profit of VND132 billion ($5.7 million), down 6%.

Similarly, TNG Investment and Trading Company (TNG) also reported July's revenue of VND595 billion ($25.9 million), down VND27.5 billion ($1.2 million) compared to June. It recorded a post-tax profit of VND29.5 billion ($1.3 million), in July and the accumulated profit of VND135 billion ($5.9 million) in the first seven months.

Enterprises in many southern provinces and cities, where the social distancing order is in place, have been facing the disruption of supply chains. According to the Vietnam Textile and Apparel Association (Vitas), 35% of factories have had to close, mainly small and medium enterprises as they can’t afford the “three on-side” production scheme to prevent Covid-19 prevention and control. 

In addition, obstacles including the rising logistics costs, the serious shortage of containers as well as the congestion of export goods at many seaports may directly affect the production activities of textile enterprises.

Nguyen Van Thoi, Chairman of TNG said that the shortage of containers and high international shipping rates has directly impacted its business results in July, with a decline of revenue by VND27.5 billion ($1.2 million) compared to June.

According to Vitas, the labor shortage is also another concern for the businesses as they had to reduce the number of employees on duty by 50-60% to ensure safe distance.

Truong Van Cam, Vice President of the Vitas said, the supply of raw materials is disrupted, and additional costs on implementing preventive measures such as testing and vaccination for workers are headaches of enterprises at the moment. 

He added, with such a complicated situation of Covid-19, the last five months of the year will be an extremely difficult time. The 2021 garment export target of $39 billion will be difficult to achieve. 

“If the pandemic is not controlled, the industry’s export revenue is likely to reach only $33-34 billion this year,” he said.

Workforce retention and vaccination – key factors

TNG's workers at its Dong Hy factory. Photo: TNG

Some textile and garment enterprises are considering moving production from the south to the north to avoid disruptions. However, experts have said that the businesses have to bear additional transportation costs while delivery time for clients is difficult to guarantee.

Nguyen Xuan Duong, Chairman of Hung Yen Garment Company, which mainly handles the fulfillment of orders from Europe and the US, said to stabilize production and speed up delivery, all the workers need to be vaccinated. 

In the current context, workforce retention and vaccination will secure production and timely delivery to the end of the year. This not only helps to improve the prestige of Vietnamese textiles and garments but also creates momentum for development and breakthrough in the post-pandemic period.

According to the Vitas, in the first seven months of the year, Vietnam’s textile and garment export turnover reached nearly $23 billion, an inter-annual increase of more than 50%, overtaking Bangladesh to occupy the second place worldwide, only behind China in terms of the export turnover.