by Resuming full operations will depend on factories and suppliers getting their employees back, new workers trained and steady flow of raw materials
HO CHI MINH CITY, Vietnam – Vietnam furniture operations are not expected to reach their full operations for another three to six months, according to an official with the Vietnam Administration of Forestry.
For retailers, this means probably not to expect a consistent flow of goods until next spring or well after Tet, the Vietnamese Lunar New Year that starts Feb. 1. Noting that this could mean the second quarter at the earliest, one well-known furniture executive speaking on a webinar panel urged Vietnam officials to act sooner versus later to help get people back to work throughout the region – versus treating surrounding districts as individual entities. Anything else, he suggested, could be disastrous for a furniture industry that relies on exports.
During an Oct. 8 Handicraft & Wood Association of Ho Chi Minh City webinar called “Vietnam Furniture Supply Chain Recovery Plan,” Bui Chinh Nghia, deputy director of the VAF, said it would take one to three months from now for furniture factories to reach at least 70% of their operations pre-shutdown. He added that it would take three to six months for them to reach 90% of their pre-shutdown levels this past summer.
He said the industry has seen a 30% drop in revenues during the month of August, with another 30% or more decrease expected during the month of September. This follows double-digit gains each month since the start of the year through July. (Note: You can watch the full program below).
After the industry reaches near full capacity, it is expected to grow once again, up to 15% in the second quarter officials predict.
A key to restoring manufacturers to their normal operation is getting the population fully vaccinated. This will allow workers more freedom of movement in and outside of “Green Zones” or areas that have fully contained the Covid-19 epidemic.
In the central Ho Chi Minh City district, 100% of the population has received one dose of the vaccine, and another 69% has received the second dose as of Oct. 6, according to the Vietnam Trade Promotion Agency, or Vietrade. However, the rates are lower in four surrounding districts where most of the area’s population people live and work.
In the Binh Duong and Long An provinces, 100% of the population is said to have received the first dose, while only 31% of the population in Binh Duong and 51% of the population in Long An have received the second dose. Meanwhile, 91% of the population in Dong Nai and 44% of the population in Tay Ninh have received the first dose, while 10% and 7% have received the second dose respectively in Dong Nai and Tay Ninh.
While vaccination rates are rising and many factories have begun to reopen since the start of October, there will be challenges in resuming operations, which also explains the amount of time it will take to get back to full production.
Factory executives who spoke on a panel moderated by Home News Now Editor-in-Chief Thomas Russell (panel discussion starts around the 1 hour 40 minute mark) explained that while employment may reach, say, 50% of their pre-shutdown levels, the capacity is actually lower — perhaps 30-40%. This is due not only to the time it will take for more people to get back to work, but also the ability to receive materials on a consistent basis.
Nguyen Hoai Bao, vice general director of outdoor furniture manufacturer Scansia Pacific, said his factory was still operating under the “3 on site” policy that allows workers to work, eat and sleep at the plant.
“We have 30-40% of the workers compared to the prepandemic level, but the actual capacity is probably 20-25% because the productivity will be lower with less people and when you are not running a full line,” he said.
Harvey Dondero, chairman of case goods producer H. Nicholas & Co., said that his factory, too, has been operating under the stay on site policy since early July.
“But I must say it is getting very difficult to do,” he said during the panel discussion, noting that the backlog has gotten quite large and that the plant is now operating at about 50% capacity, a recent positive development. “We don’t have the luxury of a lot of space.”
To get back to full operations, factories will also have to recruit and retrain new workers they have lost during the shutdown as many have returned to other provinces or areas of the country during their time out of work.
The supply chain faces similar challenges, which will determine how quickly the furniture plants will be able to receive much needed raw materials, from wood and components to finishing materials.
Ernie Koh, executive director of sales and marketing at case goods and upholstery producer Koda Ltd. said that its production in the Long An province has 50% of its labor, but that it is not yet at not 50% capacity. To return to full capacity will rely on any number of things working in its favor, including the supply of raw materials.
“There are four provinces for furniture but they are all actually interrelated somehow or another,” Koh said during the panel discussion, adding that materials cost increases is another issue. “We have suppliers in different provinces, we have components and different things coming up from these different provinces. So when we have our labor in place, we may not have our materials. Moving forward, I think the challenge is to balance up whatever is available in terms of materials and whatever manpower is available to drive the different lines within our factory.”
Dondero urged the government to take a different approach to help the country get back on its economic footing.
“It has made it a very difficult time for us,” he said of the pandemic. “The time horizon of three to six months to get back to 90% is going to be very very disastrous for the furniture industry in Vietnam. The government and the associated offices have to move faster than that. Again to remind everybody – Vietnam is a country of contract manufacturers. There are very, very few of these factories that market their own brand and that can make decisions on what is made in their factory. That is 100% the decision of the customers, and I am speaking primarily of the export customers of course, and our markets are mainly in the U.S.
“So those people cannot continue to lose sales, they cannot continue to look at time horizons that stretch out into the second quarter of next year, which is what six months from now is,” he added. “We really need to get more of a unified approach to getting this done and stop treating Ho Chi Minh and Binh Duong and the other provinces which compose the manufacturing super area (as different entities). We need to treat this as one so that the supply chain, the labor and the factories can work together.”
