Navigating Factory Shutdowns: Ensuring Your Packaging Supply Chain Remains Intact
Vietnam experienced significant factory shutdowns in mid-2021. What effects did this have on brands, and how can your company be prepared for similar supply chain disruptions?
In the summer of 2021, in response to a spike in COVID-19 cases, factories in Vietnam began to shut down. These shutdowns had a profound effect on companies who produce their goods in Vietnam and ship them to other parts of the world, and many brands scrambled to find alternate suppliers.
As of September 2021, Nike claimed to have lost 10 weeks of production due to the factory shutdowns. Even now, as production in Southern Vietnam is ramping back up to pre-shutdown levels, it is going to take brands a while to recover from the revenue they missed out on. According to analysts at BofA Securities, the repercussions of these supply chain disruptions will continue well into 2022, especially for retailers in the apparel and footwear industries.
Billerud Managed Packaging has team members on the ground in Southeast Asia. To get more information on how factory shutdowns and other supply chain disruptions have affected brands, we talked with Kevin Lam, Global Operations Director at Billerud Managed Packaging.
Lam has been in the printing and packaging industry since 1994. He joined Billerud in 2007 and started working in the Shenzhen office in 2008. In his role as Operations Director, he focuses on areas such as supplier management, safety, quality and compliance. He has extensive experience helping clients manage unpredictable packaging supply chain challenges.
Read the interview transcript to learn more about:
- How factory shutdowns affect packaging sourcing
- Tips for keeping your packaging operations running smoothly in the face of disruptions
- Major takeaways from the supply chain disruptions experienced in Vietnam
Navigating Factory Shutdowns: Ensuring Your Packaging Supply Chain Remains Intact
How factory shutdowns affect packaging sourcing
Q: Can you describe the recent factory shutdowns in Vietnam? What industries have you seen affected by these lockdown policies?
Lam: The industries that were severely affected by lockdown policies in Vietnam included logistics and tourism, accommodations, and food and beverage. The textiles, garment and real estate were moderately affected as well. The areas affected by lockdown measures in the southern manufacturing belt included Ho Chi Minh City, Binh Duong and Dong Nai.
As of November 2021, the manufacturing enterprises in South Vietnam have restored production and business activities. We estimate that most of our suppliers in South Vietnam are currently running production at about 60%-70% capacity. By the end of November, capacities should be over 90%.
The epidemic situation has decreased, but the risk of an outbreak remains. Therefore, businesses must strictly comply with the epidemic prevention regulations of local authorities.
Q: A lot of news stories covering the Vietnam shutdowns focused on how product manufacturing was disrupted. Beyond manufacturing products, how did the situation in Vietnam impact how brands obtained their packaging?
Lam: Due to social distancing rules, the circulation and transportation of goods between the provinces and cities of Vietnam came to a stop during summer and fall. Major delays on goods and raw materials forced many factories to suspend operation.
The major lockdown was concentrated in the Ho Chi Minh City area in South Vietnam. Most factories in lockdown zones faced a similar situation. Therefore, the entire production line for brands, including packaging producers, were impacted.
For OEMs that were not located in the lockdown zones, we were able to ship packaging from other areas such as North Vietnam or Central Vietnam during the lockdown.
What brands can do to keep their packaging operations running smoothly
Q: What challenges have your clients experienced due to the factory shutdowns, and how has working with Managed Packaging helped your clients navigate these challenges?
Lam: At Managed Packaging, we have a comprehensive sourcing strategy that undergoes constant reviews. Our network of production partners, which includes over 100 production plants, are able to provide support locally and regionally. Our account management team works closely with brand owners and collaborates with their local offices on any potential production shifts.
It is our standard practice to have two or more local plants supply the packaging for any given brand. In most cases, we have qualified plants that can act as backups in case of widespread supply chain disruptions.
Q: How do these recent shutdowns compare to disruptions that we saw in early 2020? Is Billerud taking a similar approach in terms of helping their clients shift suppliers?
Lam: Approaches are always going to be a little different, since no one can predict where and when COVID cases are going to occur. However, at Managed Packaging, we have started taking a “FACE” approach—which stands for Facts, Align, Collaborate and Execute.
First, we gather available facts regarding government policies and production needs from the customers. Next, we align with stakeholders to develop an action plan and assign resources. This often involves having several teams collaborate with one another. Once we have a plan in place, we execute this according to the customer’s objectives.
Each occurrence is unique, but our operation teams have increased knowledge and awareness based on our work earlier in the pandemic. Now, we are able to react to each situation much quicker and with more precision.
Q: In your opinion, what do brands have to gain by working with packaging partners who have connections and production capabilities across multiple regions?
From a supply chain and operations perspective, I would say working with a packaging partner allows you the peace of mind and convenience of having one point of contact.
We have the resources, infrastructure and experience to ensure that your packaging supply chains are stable during normal times, and that there are minimum disruptions during unpredictable times.
What brands can learn from the supply chain disruptions experienced in Vietnam
Q: Whether or not a company is manufacturing in Vietnam, what advice would you give to companies who want to ensure their supply chain is protected against future disruptions?
It really depends on the complexity of a brand’s products, as well as their supply chain maturity. In general, brands should be evaluating and simplifying their supply chain when possible. If there are aspects of your supply chain that are causing inefficiencies, identify these and look for ways to improve.
Furthermore, put a contingency plan in place, and review and test your plan frequently.
Q: What goes into making a successful packaging contingency plan?
Lam: It normally starts with risk assessment. You need to understand what your entire packaging supply chain looks like, and where the risk exists.
It’s important to make sure you are sourcing your packaging from a reliable and responsible supplier. This will help you create a reliable forecast for material and production planning, and you can adjust your packaging strategy accordingly based on consumer demand. Partnering with a global supplier who has the knowledge and resources to handle emergency situations can be a big help here.
Once you have your contingency plan, you should thoroughly review and test it, almost like doing a fire drill.
Q: All in all, what can brands learn from this experience of navigating factory shutdowns and supply chain disruptions?
Lam: This is the million-dollar question. It’s important to keep in mind that any breakage of a link within your supply chain could create a chain reaction that could disrupt the entire process. For example, currently, production in Vietnam is more or less back to normal, but there are still delays with loading and unloading cargo. So brands are still having to grapple with these challenges, even though production has resumed.
Ultimately, I think the best way to go about it is to have a good forecast in place, and to establish partnerships with your packaging suppliers. When it comes to dealing with supply chain disruptions, a long-term, trusted relationship is going to be more advantageous than simply looking for the supplier with the lowest cost.
An Experienced Packaging Partner Can Help You Respond to Disruptions
Working with an experienced packaging partner such as Billerud Managed Packaging can help you navigate supply chain disruptions. Our team acts as your single point of contact for your packaging operations. With our comprehensive network of suppliers across Southeast Asia, we can ensure that your packaging production runs smoothly, even in the face of factory shutdowns or shipping delays. To learn more about how we can help, reach out to a packaging expert today.