Payment of penalties to foreign clients and lack of personnel. These are the cause behind the crisis of the leather and footwear industries in Vietnam. According to collected data, 68% of companies in the month of September suffered contractual penalties due to delays in deliveries. Additionally, other clients have cancelled their orders and demanded their down payment back. The difficulties in getting production up to speed again is also tied to the lack of personnel: many companies are enow working with 50% their maximum number of employees.
Delays, cancellations and penalties
According to data published by Vietnam Leather and LEFASO (Footwear and Handbag Association), over 68% of companies in the segment paid contractual penalties. As reported by fibre2fashion.com, 12.2% of companies had some of their orders cancelled and has had to pay reimbursements for contract violation. 21% had their orders cancelled with no other demands advanced by companies. Companies have blamed it on delays caused by Covid-19 on production, as well as the price increments of logistics and shipping costs. For example, during the block, it took 80 days to ship goods to the USA, rather than the normal 40. Due to the costs increment, over 65% of apparel and footwear companies chose to stop activities in September.
Lack of personnel
According to bloomberg.com, many manufacturing segments, including leather goods and footwear, lament the lack of about 50% the employees needed after Covid restrictions were gone. Specifically, according to data from the government, apparel manufacturers lack 49.2% of the employees needed, leather goods and footwear 51.7%. About 2.1 million workers of industrial districts want to return to their birth province, said the government when citing data from the public safety ministry.
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