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Production in South Vietnam is struggling under the weight of a prolonged lockdown, with manufactures and logistics firms warning of mounting financial costs, labour shortages and supply chain disruption. Julien Brun, managing partner at supply chain consultancy CEL, said many factories in Vietnam had further slowed operations as they are missing critical supplies due to port congestion, delayed customs checks and a lack of shipping capacity.
Supply Chains In Vietnam Disrupted By COVID-19
Eighty-three per cent of companies in the physical value chain in Vietnam have been suffering from supply issues over the past two months due to the impact of the COVID-19 pandemic, a recent survey by CEL Vietnam, a supply chain consulting and training firm, has found. Of them, 47 per cent had issues specifically with China supplies and a large majority involved raw materials, it said.
Designing The Future Of Supply Chain Management
Physical distribution in Asia is surely more challenging than anywhere else in the world. So many people live on so many different and diverse bits of land. Just reflect on the disparities among the different countries comprising Asean. No single way is "best" for getting goods from supplier to customer, especially end consumers. You cannot do what we are going to do in a real physical space, as it would be too costly and time-consuming to try out various alternatives. How many distribution centres should we have? What is the best location? What are the best transport routes? What computer-based simulation gives us a chance to do is consider almost any possibility in combination with others and evaluate it in full. Now we have the means to explore and tweak in great detail, evaluate options and optimise. Challenges such as the one we are facing in Indonesia are the kind of thing that Julien Brun has spent a lot of time thinking about. The managing partner of CEL Consulting shared, "It seems we are getting close to start designing the future. Our crystal ball is a model. A model that, together, we have crafted with the best of our skills, passion and energy. A representation of a specific reality. Like Matisse used to paint his sunrise on Le Havre port and create a whole story and feelings from a limited number of colours and traits."
Evolving Demand And Supply Chain Norms
As people spend more time at home, household spend has both reduced and shifted. Consumers are generally more cautious spending given the lack of visibility on the mid-long term future. Business-to-consumer product companies are generally selling less of their goods. CEL Consulting found that companies operating in retail, distribution, and logistics services (excluding e-commerce and last mile delivery) report a loss of revenue against the target of 25 per cent in 2020’s first quarter and don’t expect to recover this loss this year.
Food Losses In Vietnam: The Shocking Reality
Food loss and waste is a major issue worldwide with deep socio-economic and environmental impacts. Vietnam is no exception, and it is actually ranked in the low performers in the South East Asian region. Latest figures from the CEL study will reveal that, on average, a quarter of the harvested food in Vietnam is lost before it actually reaches processing plants or distribution centers.
An Emerging Economy
Vietnam market in the coming years would be exciting, challenging and fast growing. Rural consumer base is another key driver for the future market as the urban market is becoming more saturated. While the supply of logistics facilities and developments of infrastructure is increasing, the quality issues, such as road safety and suitable configuration still persist.
Vietnam became the destination of choice for firms looking to avoid trade war tariffs, but the coronavirus has left many cut off from their suppliers. The Southeast Asian nation is more exposed to China’s supply chain than any other country in region, research shows, with companies across the board set to take a hit
Vietnam Lured Factories During Trade War, But Now Faces Big Hit As Parts From China Stop Flowing
Not The Strongest Supply Chains That Survive But The Most Adaptable
In Vietnam whereas there were categories where demand clearly surged, i.e. packaged food (+26%*), in dairy (+10%*), in personal care (29%*), the purchase baskets got significantly bigger as people started to visit markets and stores as less frequently. This surge in demand on specific items looked like more of a “just in case” purchase decision, a stock-up behaviour, not a healthy increase of consumption. It is obvious that some lucky companies in specific sub sectors are still trying to cope with much bigger orders than what they can deliver. But this rush on basic consumer commodities – toilet paper being a global symbol now – had biased our perception.
Some Countries Are Squashing the Coronavirus Curve. Vietnam Is One.
Julien Brun, Ho Chi Minh City-based managing partner at CEL, which advises multinationals on emerging-market investments claims Vietnam’s response to the pandemic so far is likely to further boost its credibility, given the fact that the country is already a top choice for global manufacturers looking to diversify out of China. Although factories in the country exporting clothes and shoes are currently reeling from massive cancellations of orders, more production across different sectors could move to Vietnam longer term, Julien commented...
Freight forwarders in Vietnam have seen cargo volumes down by up to 70% on pre-coronavirus levels, as their key markets remain under lockdown. And according to Ho Chi Minh City-based supply chain consultant CEL, the world has entered a consumer demand crisis which could permanently alter its supply chains. “As we speak, the American consumer is currently already reducing expenditure on shoes, phones, appliances, clothes, cars and tools, for example,” said CEL managing partner Julien Brun.