Aug 2, 2021

S&P Global: Vietnamese Supply Chains in Trouble

Supplychain
S&PGlobal
riskmanagement
APAC
Delta variant spikes throughout Vietnam are closing ports and putting company supply chains at further risk of collapse

APAC supply chains have been hit hard in 2021. Now, rising COVID cases are forcing Vietnamese ports to turn away ships and reefer cargo. In Ho Chi Minh, the Cat Lai Terminal has stopped accepting cargo through at least mid-August—and most ports are operating with 50% of their workforce intact. What’s more, the Vietnamese government is now locking down the port of Quy Nhon in central Vietnam and potentially Haiphong in the north. 

Here’s what you need to know. 

Why The Sudden Spike? 

After controlling the pandemic for most of 2020 and 2021, Vietnam is dealing with a spike courtesy of the Delta variant. Since April, in fact, the country has been struggling with new infections. In the past month, it recorded 85% of its total 137,000 cases. In other words, ‘the Delta variant is destroying all anti-pandemic achievements’, said Vietnamese Health Minister Nguyen Thanh Long

How Will This Affect The Supply Chain? 

We could throw the usual ‘disruption and delays’ duo at you, but those phrases have grown overused over the course of this summer. So we’ll use a concrete example: Nike. In Q2 of 2021, S&P’s Global Market Intelligence supply chain research unit announced that three of Nike’s Vietnamese factories had shut down because of new COVID infections. The result? Nike could run out of its Vietnamese-made sneakers. No more running shoes shipped across the ocean. 

And it’s not just Nike. According to Rich Duprey in The Motley Fool, everyone from Apple to Walmart relies on Vietnam for goods. Now, suppliers for Apple, Nestlé, Kumho, and Tetra Pak have started to require their employees to live in their factories for two-week periods to halt or at least slow infection rates. 

How Can You React? 

If APAC production slows, keep in close contact with your suppliers. Local suppliers will help you keep track of when emergency measures will likely be lifted and when ports will reopen. In return, logistics and supply chain experts on your team can work with local suppliers to help them report delays, adjust production, or contact alternative shipping and freight providers. 

Dropping an APAC supplier might seem like a prudent decision in the short term. But if you’re trying to build a global network of shippers and suppliers, it’s not worth it. What you want to do is invest in your relationships—even if it takes some extra work. Fundamentally, trust, accountability, and communication emerge not when the waters are smooth, but when they’re choppy. So take advantage of it

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