Introduction:
Vietnam is one of the world’s largest textile exporters, providing garments and shoes for some of the biggest brands globally. However, recent news reports show that Nike and Adidas’ manufacturing partner in Vietnam, Pou Chen Corporation, has announced a massive layoff of 1,200 employees. While the pandemic has taken its toll on businesses worldwide, this recent development begs a closer look. In this blog, we’ll delve into the reasons behind this move, the implications, and the future of the manufacturing industry in Vietnam.
The Reason for the Layoff:
With the pandemic-induced lockdowns and restrictions worldwide, retail sales have taken a hit, and the demand for apparel, shoes and accessories has slowed down. Hence, Pou Chen Corporation, which is the largest shoe manufacturer in Vietnam and relies almost entirely on Nike and Adidas orders, has drastically downsized its operations. According to the company’s records, it suffered significant losses in 2020, with a net profit of only VND 686 billion ($30 million) in comparison to VND 4.62 trillion ($200 million) in 2019.
Are There Any Silver Linings?
While the job cuts are indeed saddening and a substantial blow to the workers, it’s worth noting that both Nike and Adidas have plans to invest billions in Vietnam over the next few years. Therefore, it’s quite possible that these losses are temporary. Moreover, some analysts have argued that this move by Pou Chen Corporation could be a strategic one, designed to realign the company’s workforce and production lines to adapt to the ever-changing demands of the global fashion industry.
What’s the Future of the Vietnamese Manufacturing Industry?
While Vietnam is still seen as an attractive and considerable player in the global manufacturing game, the pandemic has highlighted the country’s vulnerability to supply chain disruptions. In response, major players in the industry are increasingly looking towards automation to reduce their dependency on cheap labor in Vietnam and other countries. Furthermore, as the Vietnamese economy, in general, moves towards automation and high-tech industries, the textile and garment sector may see a gradual decline in the future.
The Consequence on the Workers:
All in all, the job losses will undoubtedly affect the lives and livelihoods of thousands of people. The workers in Pou Chen Corporation plants receive around VND 6 million ($258) per month, which could be the only source of income for many of them and their families. Moreover, unlike Western countries that offer generous social security, unemployment benefits and support systems, the impact of layoffs for workers in Southeast Asia hits much harder.
The Way Forward:
In light of this news, the big fashion brands and manufacturers must take steps to mitigate the negative impact this news has on the workers. They must ensure that a fair severance package is offered, and adequate support is provided for finding alternative employment. Moreover, they should investigate establishing vocational and reskilling programs that can enable workers displaced by automation and downsizing to move into higher-skilled and more lucrative roles.
Conclusion:
The COVID-19 pandemic has exposed the world’s dependence on Asian manufacturing, and events like these layoffs in Vietnam are a reminder of the manufacturing industry’s effects on vulnerable people in these countries. As the world seeks to recover from the pandemic, global brands, and manufacturers must prioritize their commitment to ethical practices, and support workers in vulnerable communities. While these changes may indeed entail significant investments and changes in long-established supply chains, they are essential to ensure a future of ethical, responsible, and sustainable manufacturing practices.
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