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Flexible organization of production needed to overcome difficulties

20:00 | 03/06/2022

VCN - Mr. Than Duc Viet, General Director of Garment 10 Corporation, discussed with Customs News.

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Adapting to the 'new normal', businesses 'getting better' Adapting to the 'new normal', businesses 'getting better'
Mr. Than Duc Viet, General Director of Garment 10 Corporation.
Mr. Than Duc Viet, General Director of Garment 10 Corporation.

Recently, although there are quite abundant orders, many textile, garment and footwear enterprises are facing difficulties in the supply of raw materials, as China persists in applying its "Zero Covid" policy. What about Garment 10 Corporation, Sir?

Currently, the Garment 10 Corporation basically has orders until the end of August 2022. In vests in particular, the company has orders until the end of the year. However, the Garment 10 imports 50% of raw materials from China, so the company is very worried about supply chain disruption without knowing how long China's "Zero Covid" policy will be applied. If China applies for a short time, the company can solve the problem of input materials, but if China continues to apply for a long time, even orders signed until August 2022 will be affected in terms of delivery schedule.

In fact, stagnation caused by China's Covid-19 policy began to affect Garment 10 Corporation from the end of April to the beginning of May 2022. Fabric materials of the Garment 10 have a production time from suppliers of 35-50 days. In mid-April and early May, suppliers in China began to be blockaded and the company is affected in two aspects.

Firstly, with orders having finished production by suppliers, shipping will be affected. Garment 10 only has 2-3 weeks delay. However, if factories that are producing fabrics for May 10 in China stop production, they can delay it for a month or even two months. In May, the company can be affected until July or August, 2022 in raw materials.

Could you please tell me how China's "Zero Covid" policy and the influence from the Russia-Ukraine conflict have increased the burden of input costs on Garment 10 Corporation?

Garment 10 Corporation is facing a story of very high costs, and if not careful, the company could make more and more losses. When input costs increase, usually the selling price is not increased or if there is an increase, the growth rate of the semi-finished product price is always much lower than the growth rate of input material prices.

In the fourth quarter of 2021, the company believe that the textile and garment market will recover again in 2022, even better than the time before the outbreak of the Covid-19 pandemic. However, at present, Garment 10 Corporation is having to predict and change the market assessment of the third quarter and the fourth quarter of 2022 this year. The factory may fall into a vicious circle of rising input prices, leading to lower or no production, which means stagnation. The company is facing difficulties, but if prices continue to rise, it will suffer losses. In general, it is possible that the business performance of Garment 10 Corporation in the first half of the year is still good, but the second half of the year will face difficulties.

At the immediate time and in the long-term orientation, how has Garment 10 Corporation been implementing solutions to remove difficulties in the supply of raw materials?

Previously, Garment 10 planned to organize production in a month. In 25 or 26 working days, all lines were set up, raw materials and accessories were made under plan. However, during the Covid-19 period in 2020, 2021 Garment 10 has applied a flexible production method by day, even by session. Currently, the company is developing a flexible plan to organize production due to unstable raw materials and frequent changes. The company requires the production organization to fulfil each product code and fulfil the work of each day flexibility, shortening production by the day, by the week, instead of by month as before.

Besides, in the short term, the company accept other modes of transportation compare to before. For example, in the past, transporting raw materials by sea, now it can be transported by road. Going from Shanghai to Vietnam has turned into Hong Kong port to Vietnam. The Garment 10 also accepts that in certain situations, if the customer shares the cost, instead of shipping by sea, the company will deliver the goods by air.

The problem of changing the supply of raw materials is a story that the company have been counting on for five years. Currently, the Garment 10 is still expanding its supply outside of China such as India, Korea, Taiwan (China) and domestic supply. It is expected that this proportion will increase and the company will be able to proactively supply in the next 5-10 years.

Thank you, sir!

By Thanh Nguyen/ Binh Minh