Supply chain disruptions hit Vietnam businesses

Companies in Vietnam are facing problems triggered by disrupted supply chains worldwide, placing the Vietnamese economy under pressure in its post-pandemic recovery.

In the export-driven economy, many apparel, shoe, electronics, plastics and other producers rely on Chinese raw materials, while China’s strict “zero Covid” policies have postponed shipments.

Viet Thang Jeans Co. in Ho Chi Minh City needs three containers of Chinese raw materials every week on average, but these shipments have recently failed to arrive in time. Therefore, the apparel maker is facing risks of disrupted production.

Honda Vietnam confirmed global supply chain disruptions are affecting the availability of some Honda scooters in the Vietnamese market.

VAMA, which represents automakers in Vietnam, has also said the prolonged global pandemic has hit the auto industry worldwide and, in the country, because production and parts supply cost more time.

Electronics manufacturing is in the same boat. At shopping malls and electronics retail centers in HCMC, the number of new products supplied has decreased significantly, pushing the price of televisions, washing machines, and refrigerators up about 3-5%.

A shift from Chinese raw materials to imports from India, Korea, and Thailand has also occurred among some Vietnamese companies though it is not easy, and a higher price is an obvious reason, while such replacements are not always enough.

Artificial intelligence and digital transformation in logistics are seen as proper solutions to the current supply chain disruptions. However, they require global expertise and lots of investments, creating real challenges for Vietnam’s economy.

According to Vietnam Logistics Business Association, just about 40% of domestic logistics companies are applying some types of modern technology, depending on their size and nature of service. For digital transformation, the cost can be from about $9,000 to quite higher levels – a big challenge for small and medium enterprises (SMEs). They also need suitable expertise and timeframes.

Experts are of the view that the Vietnamese government should soon complete the legal framework for digital transformation, work out specific and accessible support policies for logistics businesses, especially for SMEs.