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Hundreds millions of Nike shoes could not be delivered due to COVID-19
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Hundreds millions of Nike shoes could not be delivered due to COVID-19.
Millions of Vietnamese workers fled the factories, hundreds of millions of pairs of Nike shoes could not be delivered.
[Observer Network] Recently, the curve of COVID-19 cases in Vietnam has flattened, but the sudden outbreak a few months ago still brought a lot of aftermath to the local manufacturing industry. In the context of a weak global economy and unstable supply chains, this volatility in Vietnam’s manufacturing industry may stir a “storm” on the shores of the ocean.
According to the latest news from the American “Tampa Bay Times” on October 17, with the global spread of the COVID-19 epidemic, businesses and consumers around the world are deeply affected by supply chain instability. The most affected companies include Nike, a well-known American sports brand.
According to statistics, about three-quarters of Nike’s footwear products are produced in Southeast Asia, and more than half of its footwear products are produced in Vietnam. However, due to Vietnam’s previous strict factory restrictions in response to the COVID-19 epidemic, millions of workers have stopped work, and Nike footwear production has plummeted. Some experts estimate that during this period, Nike footwear production dropped by as much as 180 million pairs.
When Vietnam relaxed restrictions, employees did not return to work, but fled (exodus) factories in southern Vietnam to return home. The government estimates that more than 2 million workers may have been evacuated.
On the one hand, there are European and American consumers with strong demand, and on the other hand, the global supply chain is tending to collapse. When faced with this “perfect storm” in the supply chain, many world-famous brands, including Nike, are almost “powerless”.
CNN: Nike, Under Armour and other companies are facing supply problems in VietnamCNN: Nike, Under Armour and other companies are facing supply problems in Vietnam
Vietnam factory stopped production, expert: Nike shoe output decreased by 180 million pairs
According to Bloomberg, last year, Vietnam controlled the COVID-19 epidemic well. But after July this year, the delta variant began to spread throughout Vietnam, and the number of cases and deaths continued to rise. On August 27, the number of confirmed cases in Vietnam reached a record of 17,428. The industrial zone in southern Vietnam is one of the most severely affected areas.
Subsequently, Vietnam implemented strict restrictions, such as restrictions on going out to buy food and curfews. Some factories are required to set up staff accommodation facilities to allow employees to live in place. Some factories have chosen to close, and employees have fled large cities like Ho Chi Minh City and returned to rural areas to avoid the epidemic.
A Vietnamese female assembly worker named Le Thi My (Le Thi My, transliteration) recalled that after leaving Ho Chi Minh City, she returned to Tay Ninh Province on the border between Vietnam and Cambodia, but the COVID-19 epidemic there was also very serious. “Except for fear, we have almost nothing. I see many people in our community dying of COVID-19 pneumonia.”
Entering September, the curve of the COVID-19 epidemic in Vietnam has gradually flattened, and the number of confirmed cases has gradually dropped from more than 17,000 at the peak to less than 10,000. According to the latest notification from the Vietnamese health department, the total number of confirmed cases on October 17 was 3,193. The average daily number of cases in the past week was 3484. The Vietnamese government and factories are also informing workers to return to work.
However, the gradual improvement of the COVID-19 epidemic has not brought a sense of safety to the Vietnamese people, and has even exacerbated the phenomenon of workers fleeing. The Vietnamese government estimates that more than 2 million employees may have been evacuated.
A tailoring employee named Tran Thi Hoa (Tran Thi Hoa, transliteration) said that she has ignored these notices so far and has no intention of returning to work in Ho Chi Minh City for the time being.
As the mother of two children, Chen Shihua said: “I cannot take my family back to the city now because it is still too risky. As the head of the family, I must first consider my family.”
Even if some companies are willing to provide free lunches and salary increases, they are still not enough to attract workers back.
According to a data reported by Ho Chi Minh City, as of October 6, about 57% of workers in Ho Chi Minh City’s industrial parks and export processing zones have returned to work, which is higher than the 24% before the relaxation of prevention and control restrictions, but it is still not enough to support a lot. Full operation of the factory. Millions of workers are still shutting down or preparing to rework.
A screenshot of a video inside a Nike factory in VietnamA screenshot of a video inside a Nike factory in Vietnam
The lack of employees has already had a significant impact on the local manufacturing industry, and many big brands that rely on the Vietnamese manufacturing industry have also felt the power of the chain reaction. Among them, Nike is included.
According to a statistics from CNN, about three-quarters of Nike’s footwear products are produced in Southeast Asia. Among them, footwear produced in Vietnam accounted for 51% of the total, while footwear produced in Indonesia accounted for 24% of the total.
The production restriction and suspension of the Vietnam factory from July to September undoubtedly dealt a major blow to Nike. Financial services company BTIG analyst Camilo Lyon (Camilo Lyon) estimates that during this period, Nike’s footwear production alone decreased by 180 million pairs , and the subsequent impact is still unknown. “No one knows how fast or slow the increase in production will be.”
Nike Chief Financial Officer Matthew Friend said on the earnings call earlier this month that even if the factory restarts (Nike expects to restart in phases from October), it may take several Time of month. Company executives said on the conference call that half of Nike’s garment factories in Vietnam are still being closed.
Bloomberg believes that in the face of such a predicament, brands like Nike are almost “powerless.” Recently, Nike has drastically lowered its sales expectations, mainly because of the shortage of goods in Vietnam. Of course, Nike also has factories in other countries, but it takes months to train workers and assembly lines.
It is estimated that the current product inventory of Nike in the United States is the lowest in 30 years and can only maintain sales for about one month. At the end of September, due to supply chain problems, Nike has lowered its full-year sales forecast.
“From the source to the store, we have encountered problems”
Not only Nike, the supply of other fast-moving consumer goods and electronic products has also stalled due to the suspension of production in Vietnam.
Vietnam plays a pivotal role in the global consumer economy. From Wal-Mart’s furniture, Adidas’ sports shoes, to Samsung’s smartphones, Vietnam-made products cover various industries. According to data from the American Apparel and Footwear Association, Vietnam is the second largest supplier of American apparel and footwear, second only to China.
Vietnam accounts for one-third of the footwear and apparel production of sports brand Under Armour. Under Armour’s chief executive officer, Patrik Frisk, said on the latest earnings conference call in August that the company is closely monitoring the impact of local factory closures on its supply chain, saying that this is an “evolving situation. “.
A large part of Under Armour’s merchandise also comes from the screenshots of Vietnamese merchandiseA large part of Under Armour’s merchandise also comes from the screenshots of Vietnamese merchandise
The closure of the factory may also affect technology companies such as Apple, and the delivery of iPhone 13 may be interrupted due to the closure of component suppliers. Samsung Electronics’ subsidiary that produces household appliances in Vietnam said that if it can quickly resume normal operations, it is expected to achieve its export target, but not vice versa.
However, it will take time. Lyon estimates that it may take five to six months for the factory to resume normal operations after the lockdown in Vietnam ends. Moreover, whenever factories start, they will always face a shortage of personnel.
Lyon believes that the retailer’s production cuts in December will be particularly noticeable and will continue into the first quarter of next year. He predicts that Vietnam’s production will not return to normal until the middle of 2022. At present, the stocks of apparel and footwear companies with large operations in Vietnam have not fully reflected the impact of this turmoil.
But Nick Vyas, executive director of the Kendrick Global Supply Chain Institute at the University of Southern California, said: “From the source to the store, we have encountered problems. The bottleneck of the supply chain is gradually being exposed.”
The global supply chain refers to the commercial and operational networks required to build and deliver products to consumers. The links in this chain include the manufacturing of parts and components, the supply of labor, and the transportation of goods across national borders and oceans. Experts say that the biggest reason for the current difficulties in the supply chain is the COVID-19 epidemic.
In 2020, the epidemic has led to the closure of global factories, unemployment of workers, paralysis of production, and interruption of the supply of certain commodities. At the same time, consumer demand for many products has fallen sharply, causing the global economy to fall into a deep recession.
Driven by the rapid development of a COVID-19 pneumonia vaccine, high levels of government assistance, and changes in consumption habits, global commodity demand rebounded rapidly. However, the rapid rebound in demand has made it difficult for processing plants, manufacturers and companies to keep up with the growth in demand.
Robert Handfield, professor of operations and supply chain management at North Carolina State University, said: “We have a series of lingering problems that have existed for a while, and then the COVID-19 virus is like crushing a camel. The last straw.”
He believes that this is a “perfect storm of various factors”, leading to delays in delivery, product shortages and potential price increases.
On October 17, U.S. Secretary of Transportation Pete Buttigieg admitted that supply chain problems “definitely” will continue into next year. When asked if Biden is considering abolishing tariffs on Chinese goods, Buttigieg said equivocally, “Every idea is being taken seriously.”
In response to the supply chain crisis, US President Biden delivered a speech on the 13th local time, announcing that the two largest ports in the United States, the Port of Los Angeles and the Port of Long Beach, will implement a 24 hours a day, 7 days a week work system to solve the problem of port cargo congestion. , And allowed American cargo trucks to transport goods at night when traffic is relatively smooth, to cope with the tight supply chain.
At the same time, the United States has to deal with continued inflation and the wave of strikes. According to a report from the Bureau of Labor Statistics on the 13th, the US Consumer Price Index (CPI) in July rose by 5.4% from the same period last year. At present, about 100,000 union workers in the United States are on strike or preparing to strike; in the last two months alone, there have been strikes in nearly 40 factories across the United States, almost twice the number of the same period last year.
But the underlying reason behind this may lie in the monopoly of the COVID-19 vaccine by rich countries. Vietnam has one of the lowest vaccination rates in Southeast Asia, with only about 14% of the 98 million population fully vaccinated. The American Apparel and Footwear Association has lobbied the Biden administration to donate more vaccines to the United States.
“If someone in the United States can’t buy new clothes for her husband or children, I feel very sorry,” said Chen Shihua, who is as far away as Vietnam. “But I can’t keep my family here either.”
(source:internet, reference only)