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VIDEO: Fashion’s ‘Thin Ice’ Foundation Gives Way to Crisis for Vietnam Supply Chains Faced with COVID-19

In Vietnam, while some say the government’s efforts to slow the spread of coronavirus have been rigorous and effective, garment workers are nonetheless facing less work and less pay as cancellations from the brands and retailers they rely on in the West pile up.

It’s the same saga across much of the world’s manufacturing countries as coronavirus-prompted store closures have sales and revenue drying up on the demand side, leaving little to quench the supply side.

Things have shaken out this way, according to Sanjeev Bahl, founder and CEO of Vietnam-based denim manufacturer, Saitex, because the fashion industry was already on thin ice.

“The whole system was fractured, it was very fragile, it was built…on thin ice. Why? Because we all walked away from productivity to production, we went cheaper, cheaper, cheaper, cheaper. It was a very thin string,” Bahl told Sourcing Journal in its ‘On the Ground’ video series. “People were over exposed, and this fast-fashion thing—it just completely drew the consumer to a commodity world, and once you get into a commodity world, you’re not really adding any value, so there’s no way you can generate value.

“It just needed a tipping point or a catalyst like COVID-19 to crash this whole labor arbitrage game,” he added.

Now, while Saitex remains open, the factory has gone from seven days of production to six, and others in the country are operating just five days a week, and the working hours have been cut short, too.

While many brands have maintained their positions of seeing order cancellations through and not paying up for shipped goods, Bahl said cash flows are constricted and supply chains “are getting marginalized.” The partnership, or lack thereof, depending on one’s perspective only appears to be working well at the top of the supplier pyramid, he said, which is why suppliers in other tiers will suffer.

The state of the supply chain union, Bahl said, could put the industry’s future in jeopardy.

“That cord has snapped,” he said. “And if something snaps, then it’s really hard to fix it.”


Check out more in Sourcing Journal’s new ‘On the Ground’ video series, which will bring often unheard voices in the supply chain to the fore.