Nike supply chain in southern Vietnam back to normal

Nike’s supply chain in southern Vietnam has entirely recovered from pandemic-indured disruptions, while its suppliers in the northern region are attempting to restore their production, the giant’s representative said on Tuesday.

The information was delivered at a meeting between the Ministry of Industry and Trade (MoIT) and leading U.S companies operating in Vietnam.

Previously, Nike and many businesses were remarkably affected by factory closures due to a new wave of Covid-19 outbreaks across Vietnam’s southern cities and provinces.

The fallout forced Nike to cut its full-year sales outlook in late September 2021 despite surging consumer demand.

Analysts of global financial services firm BITG estimated that the company lost a total of 160 million pairs of shoes during the 10 weeks of suspended production last year.

In 2020, factories in Vietnam supplied 350 million pairs to Nike, accounting for 51% of its shoe production and 30% of its clothing output.

BTIG experts expected that supply chain rupture could last until at least spring 2022, putting apparel and footwear companies at risk because “Vietnam has served as a strong manufacturing alternative to China in recent years”.

Nike stock fell 1.3% in the middle of September 2021, after the giant was downgraded by BTIG due to supply chain problems.

Despite the context, the brand did not relocate their factories out of Vietnam as there are no alternatives that could meet its requirements in terms of time, quality and evaluation system like its Vietnamese partners, Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association (Vitas) said.

Not only Nike was in trouble. A number of other retailers were also rattled by the supply chain delays as they waited for productions in Vietnam to resume.

Among the brands that were under pressure were Adidas, Under Armour, Ugg maker Deckers Outdoor, Columbia Sportswear, Coach parent Tapestry and Capri Holdings. Vietnam is the second largest supplier of apparel and footwear to the U.S, after China, according to Steve Lamar, president and CEO of the American and Footwear Association (AAFA).

However, as Vietnam has moved from the “zero-Covid strategy” to safe, flexible adaptation to the disease and effective control of Covid-19, enterprises started to reopen and recruit their workers, speeding up production to meet export orders.

At the meeting, Deputy Minister of Industry and Trade, Do Thang Hai, said the ministry will help ensure the supply of raw materials, assisting enterprises in restoring their production and maintaining orders, especially important manufactures.

On November 2, at a meeting on the sidelines of COP26, Nike’s Director of Sustainable Development, Nobel Kinder, on the behalf of the brand thanked Pham Minh Chinh, Vietnam’s Prime Minister, and concerned state agencies for their timely support in the restoration of socio-economic development.

He said Nike is committed to expanding its investment and production in Vietnam.

At the meeting, some leading U.S companies also said they plan to enlarge their investment in the country this year.

A representative of Ford Vietnam Co., Ltd. said the firm plans to increase its production capacity and recruit more workers this year. Currently, the company is applying for a license to deploy a completely new business form in the automotive field: an e-commerce site to maximize its support for customer experience to purchase online.

Affirming that Vietnam is an important market, a representative of ExxonMobil in the Asia-Pacific region said that the company is currently implementing a number of gas to power projects in Vietnam. ExxonMobil is also developing and applying advanced technologies and solutions to support Vietnam’s transition to clean energy, contributing to the implementation of COP26's commitments, the rep said.