Attempts made to minimise supply chain disruptions

It is critical for Vietnamese enterprises to create solutions to minimise supply chain disruptions in the face of global uncertainty and take advantage of overseas investment, participants heard at a Ho Chi Minh City event last week.

 

According to Frederick Burke, senior advisor at Baker McKenzie Vietnam, to mitigate disruption risks, enterprises must understand the potential risks to supply chains from making contracts, supplier delays, natural disasters, geopolitical conflicts, and more.

“They must be prepared for everything, especially as there has been a big shift in recent years from so-called just-in-time manufacturing to just-in-case manufacturing,” Burke told VIR at the side of seminar on supply chain disruption, organised by the Hong Kong Business Association in Vietnam on September 22.

Vietnam should position itself as a player integrating deeply into the supply chain as it is a friendly country with good relationships. The whole concept of onshoring can be expanded to friend-shoring if Vietnam makes friends with other countries and mitigates the risks, according to Burke.

“Vietnamese enterprises should approach technical, training, and capacity improvement programmes implemented by domestic and global advances. Small- and medium-sized enterprises must diversify their capacity and utilise all of those incentives to be more resilient,” he said.

Le Trong Hieu, head of advisory and transaction Services at CBRE Vietnam, said that with the current volatile geopolitical market, business policies needed to be more flexible.

“When studying the benefits of Vietnam, it is necessary to look deeper. For example, a certain trade agreement could be affected for geopolitical reasons, and Vietnamese enterprises must take advantage of other agreements to replace or reduce the risk,” Hieu said.

“The economic overview of Vietnam still has bright spots, but there have always been rising problems such as geopolitics, epidemics, natural disasters, and so forth. We must have a long-term vision, and at the same time be prepared and have backups in case problems arise,” he added.

When choosing an investment location, businesses must expand their options and avoid saturated areas where free space is limited. This will lead to high land leasing prices in second-tier locations where the land fund remains large with lower prices and more opportunities.

“The most urgent thing that businesses must ready for right now is to prepare for having a good enough market for their output. The potential market is constantly changing. There will be affected segments, but trade is going well in several segments,” Hieu added.

Although the pandemic has passed its peak in Vietnam, businesses still suffer a heavy impact from the disruption of supply chains when other countries still restrict travel, not to mention the indirect impact of the Ukraine conflict, according to Hieu.

These problems have forced businesses to reorganise and restructure their scale and production process, arranging appropriate human resources to ensure safety and comply with regulations on pandemic prevention and manufacturing.

Tran Thanh Hai, deputy director general of the Ministry of Industry and Trade’s Agency of Foreign Trade, said that supply chain disruptions not only cause damage to businesses but also cause wider economic consequences.

“Due to the lack of input materials, many businesses have had to reduce their production. The limited supply of goods has also led to escalating prices, especially for essential products and healthcare services,” said Hai. “The prolonged disruption of the supply chain also affects economic growth, reduces competitiveness, and affects foreign investment and the ability of Vietnam to integrate.”

To ensure sustainable long-term development, Hai said the supply chain needed to constantly adapt to achieve the best performance and limit risk.

“Businesses must actively plan and build appropriate business strategies, and adapt when the business environment changes. Businesses need to proactively take advantage of new trade deals to penetrate the global supply chain more deeply,” Hai added.

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