Covid in Vietnam and a lack of electricity in China. The two big concerns are slowing down production of apparel and footwear. Transportation costs increased and is now almost a certainty that brands and retailers will have to face a lack of products when demand, specifically at the end of the year, will increase. The scenario, along with some statements, lead us to think that, a battle between Vietnam and China, is underway to secure foreign orders.
Covid
Let’s start with Vietnam, where some plants (among which are those manufacturing apparel and footwear), have been closed since July due to Covid-19. The consequence: at the end of September, Nike reduced its sales forecasts due to the issues with supply chain operations. The US-based multinational stated that, even if plants were to re-open (in the upcoming days, it would seem), they would be unable to get back to full productivity for a few months, reported CNN. Other US brands struggling with these conditions include Under Armour, UGG, Columbia Sportswear, Tapestry and Capri Holdings. But Adidas and Puma, and other retailers, all share the same faith. Those that don’t have enough stock for Christmas will likely experience a lack of goods to sell.
Lack of electricity
Meanwhile, Chinese plants are facing a lack of electricity continuity. The main cause is that Beijing would like to respect emission targets and objectives relating to the price of carbon utilized in thermal plants. The outcome is that the footwear chain has had to reduce (and in some instances) even stop activities. This could have impactful consequences on the footwear manufacturing chain of Vietnam as well, because they import materials from China. This hasn’t happened for now (reports Vnexpress), but the concern is that it might in the next few weeks.
Battle between Vietnam and China
The situation is blocking investments a far as moving production or adding new lines. The present context is leading to a confrontation between Vietnam and China. Lecourrier reported that Phan Thi Thanh Xuân, vice president and general secretary of LEFASO (Vietnam Leather, Footwear and Handbag Association) said that “the information according to which Nike moved production from Vietnam and China towards Indonesia, and that Adidas and Puma will do the same in November is false”. It may be, but tension is high.
Image from Shutterstock
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