The pandemic shut down manufacturing facilities and disrupted supply chains worldwide for an extended period. Vietnam, in particular, was affected severely in the early phases as it relied heavily on China, known as the “factory of the world”, for importing raw materials for its industries. Many businesses have been working at a reduced operating capacity to compensate for the slow input.
However, while manufacturing and tourism were heavily affected, Vietnam did well to contain the pandemic and reopen the economy compared to its regional peers. By diversifying trade flows, expanding exports to countries that rely on Vietnam sourcing, and improving competitiveness, the country has been able to push the economy from crisis response to recovery. For businesses, the main question now is how they can prepare their supply chains for future shocks.
How Can Businesses in Vietnam Keep their Supply Chains Resilient?
The pandemic has drastically changed consumer sentiments and accelerated new trends like e-commerce, etc. Going forward, businesses need to build secure and resilient supply chains instead of the current focus on cost management and efficiency. Let’s take a brief look at how businesses can expertly mitigate the effect of future shocks.
• Diversify Inputs
Many industries in Vietnam heavily relied on China for raw materials and were heavily affected when China went into isolation. The pandemic is a great opportunity for such businesses to explore alternative sourcing options to protect their supply chains. With demands slowing down, stakeholders can look at alternative geographical locations to come up with a contingency sourcing option.
• Explore Online Distribution
With more consumers choosing to stay at home, businesses need to invest in online distribution channels to improve last-mile connectivity. Traditional brick-and-mortar stores will need to maintain a physical presence but need to explore online channels to deliver their products and services directly to the consumers. Third-party logistics can alleviate some of the Vietnamsourcing demands, but a long-term alternative must be established.
• Monitor Supplier Performance
Businesses also need a deeper insight into supplier performance now more than ever. By segregating and rating suppliers based on their performance, businesses can renegotiate contracts to make cost-effective raw material purchases on a limited scale and ensure a healthy flow of working capital.
• Improve Risk Protection Measures
Shutting down processes entirely and starting them again is an expensive process and not a sustainable one at that. Stalling equipment requires regular maintenance and additional efforts to bring them up to speed once production resumes. Businesses across all sectors need to come up with contingency plans to keep their processes running at minimum capacity in the event of further lockdowns. A detailed cost to benefit analysis can provide better insights, which can be used to come up with better risk protection measures.
Nonetheless, the pandemic has forced businesses to innovate and will continue to do so. Organizations will need to prepare for the changing trends and new consumer demands. Businesses in Vietnam can use this opportunity to learn and prepare to ensure their long-term growth.