Companies scramble to step up production

Wood producer Hiep Long Fine Furniture Company in the southern province of Binh Duong is scrambling to push up production to 70 percent of capacity to fulfill the orders it had received for the year.

Social distancing in the third quarter caused it to suspend most activities even as there was a 30 percent surge in orders from 2020, its chairman, Huynh Quang Thanh, said.

As Binh Duong and other southern localities started to allow factories to reopen in early October, Thanh’s company began to ramp up production.

"It is expected that sales for the full year will increase by 10 percent if we can complete our orders in the last two months."

In the neighboring locality of HCMC, the biggest employer, footwear maker Pouyuen Vietnam, is also rushing to complete orders while also looking for fresh ones for next year.

More than 38,000 employees, or 70 percent of the total, have returned to work, compared to just 20 percent in early October, its trade union chairman, Cu Phat Nghiep, said.

All workers have received at least one shot of a Covid vaccine, and the company is working on giving them the second.

To ensure things go smoothly, Pouyuen arranges buses to transport workers between home and the factory.

It also keeps workers separated to reduce contagion risk.

As the federal government relaxed Covid-19 restrictions and reopened the economy, companies are seeking to make up for the hiatus in the third quarter.

Nearly 200 Vietnamese contract manufacturers for Nike resumed production after a period of suspension, the U.S. company said recently.

Around 90 percent of companies in Binh Duong and Dong Nai have resumed production, and 84 percent in Can Tho.

In HCMC, 96 percent of companies in industrial parks and processing zones have resumed operations, and the rate outside is 90 percent.

Some 15,000 workers have returned to the city to work from their hometowns in the Mekong Delta and Central Highlands, according to the Department of Labor, Invalids and Social Affairs.

The purchasing managers’ index surpassed the 50-point threshold in October after four months of decline, indicating expansion in manufacturing.

Garment company May Saigon 3 has added an evening shift to its two day shifts as the number of orders surged.

It has been able to deliver millions of items to buyers in Japan and the U.S.

But there are challenges preventing companies from making a smooth recovery.

One of the issues that Hiep Long, for instance, faces is increasing transport costs.

Transportation of a container from Vietnam to the U.S. now costs US$12,000, six times up from pre-pandemic levels, Thanh said.

Dao Trong Khoa, standing vice chairman of the Vietnam Logistics Association, said increasing freight rates and a series of surcharges imposed by shipping companies have become a financial burden for businesses.

Labor shortage is another issue.

Food powder producer Intermix is struggling to meet a 30 percent surge in orders since its capacity is down by a similar rate due to lack of workers after they left the city amid the pandemic.

It only has 180 out of its 300 employees working now, founder Huynh Kim Chi said.

"We have been declining orders and asking to delay delivery," she said, adding it would take at least a month for the company to fulfill its orders.

Other businesses are suffering from a cash crunch.

Hiep Thang Furniture in the northern province of Bac Ninh is struggling to get loans to fund production.

"What we need most is capital to keep production going," CEO Nguyen Tran Hiep said at a recent forum, adding that banks should change their conditions to make more companies eligible for loans.

Thanh of Hiep Long said Covid testing and disinfection costs are still a financial burden, while the company also has to increase salaries to persuade workers to return.

"Although revenues are expected to increase, our business only hopes to break even. It will be very difficult to make a profit in 2021".