Wood enterprise: Starve of materials and workers

Expectation turned dim

According to Mr. Le Minh Thien, Chairman of Binh Dinh FPA, thanks to the USA, EU, UK, and Australia markets enthusiastically importing furniture, from the beginning of 2021 until now, furniture manufacturer enterprises in Binh Dinh have strongly exported a wide variety of products through online channels. Binh Dinh's wooden furniture export turnover in the first six months of the year reached USD 453.2 million, up 37% over the same period in 2020.

However, in recent times, a number of localities in Binh Dinh have had to comply with the Government's Directive 16  for Covid-19 prevention and control. The restriction on the movement of citizens has forced many wood processing businesses in the area to stop operating due to the lack of labor.

Also, as shared by Mr. Thien, in the face of the above situation, in July, wooden furniture exportation in Binh Dinh has begun to decrease. In August, An Nhon town, Phu Cat district and some communes in Tuy Phuoc district implemented Directive 16, so the wood manufacturer factories located in those areas lost most of their workforce. Therefore, wooden furniture exports will further decrease by 15% compared to July.

If this situation persists, in September, furniture exports in Binh Dinh will continue to plummet by 30-40% compared to July, and the situation will be even more severe in October.

"The Covid-19 epidemic has disrupted production plans of businesses, especially from now to the end of the year. Their biggest worry now is that if the production chain is broken, they will not be able to deliver goods on time to customers, which means they will have to compensate for the contract.

Accordingly, enterprises are currently trying their hardest and focus on epidemic prevention, maintaining the workforce for production, and at the same time construct many scenarios to manage depending on the actual situation. Although production is currently stalled, businesses are preparing materials to be ready to push up production when the epidemic situation is under control", said Mr. Le Minh Thien.

A Covid-19 quick test is already more than VND 250 million/month

According to Binh Dinh FPA, over the past time, several furniture processing enterprises in Binh Dinh have implemented "3 on the spot" to maintain production. However, businesses can only sustain themselves for a short time. It’s because the costs incurred when organizing "3 on the spot" (expenses for food, replenishment, electricity and water…) are too large, not to mention their biggest worry while implementing "3 on the spot" is actually the cost for workers' Covid-19 quick screening test during working time.

Assuming an enterprise has 500 workers working "3 on the spot", each quick test will cost about VND 70 million. In one month, four quick tests will be done, costing that enterprise over VND 250 million.

Even so, with this option, workers still face difficulties when going through quarantine checkpoints. Many localities have become too worried and applied strict measures to prevent people from going to work in order to well manage the Covid19 prevention and control. It was until FPA Binh Dinh raised an opinion that localities loosened the restriction so that workers could go to work.

Raw materials are also lacking

Wood processing enterprises in Binh Dinh have to face another difficulty, which is that the supply of raw materials from the “furniture capitals" of Binh Duong and Dong Nai is now paralyzed, so the supply chain for enterprises in Binh Dinh was broken, leading to shortages in all direction.

In particular, imports of wood materials are slow and have a very high price. The reason explained by Mr. Le Minh Thien is that the raw material wood supply markets are also short of labor, so exploitation and processing activities are also stalled.

Moreover, the shortage of empty containers has grievously affected the signing of orders along with the delivery according to signed contracts.

In order to liberate inventory, wood processing enterprises in Binh Dinh had no choice but to pay more for renting containers and booking slots on ships, leading to higher input costs.

“For example, enterprises often have to prepare raw wood and other materials for wood manufacture such as metal accessories, chemicals, color oils, mattresses, and packages three months in advance to produce pillows. However, now that the price of raw materials has increased by 10-30%, the supply chains both from inside and outside the country are broken due to transportation congestion. This will certainly affect the production of the wood industry in the first months of 2022.

Now, all we hope is that the wood industry workers are given priority to vaccinate so that businesses can maintain production during the Covid-19 pandemic”, shared Mr. Le Minh Thien, Chairman of FPA Binh Dinh.