Nike Supplier Cuts 1,800 Jobs in Tangerang After Quality Failures, With More Layoffs Possible

Returned exports put thousands of jobs at risk

PT Victory Chingluh Indonesia, a major contract manufacturer for Nike in Tangerang, Banten, has laid off about 1,800 workers after exported products failed quality requirements and were returned. As of November 2, 2025, further cuts remain possible, with unions challenging the decision and employers warning about the cost of keeping factories in the area.

Management initially identified roughly 3,000 positions for possible downsizing. Union representatives say hundreds more workers are still going through the termination process. Information reported in late October also indicated a possible second round affecting 2,804 additional workers at the company's Pasar Kemis factory, while another facility in Cikupa was described as operating normally and meeting quality requirements.

KASBI, the Congress of Indonesia Unions Alliance, argues that workers are losing their jobs because management failed to maintain the production system. Employers in Tangerang point to a broader squeeze involving regional minimum wages, uncertain fees and levies, and difficulties finding people with the skills factories need. Business representatives are urging local authorities to prevent a complete relocation to Pekalongan in Central Java, where labor and overhead costs are lower.

Indonesia is one of Nike's main manufacturing bases, alongside Vietnam and China. Industry and government officials say Indonesians account for roughly 30 percent of the factory workforce serving Nike and Adidas worldwide. That figure concerns workers making products for the brands, whose production depends on suppliers such as Victory Chingluh.

The immediate problem is rejected footwear, but the consequences reach beyond the production lines. Workers need clarity about compensation and possible further dismissals. The company needs to restore acceptable quality and protect orders. Tangerang faces the prospect of losing both factory jobs and the spending that supports nearby businesses.

How quality failures disrupted production

Company executives have cited mass returns of exported products that failed to meet brand standards as the reason for the downsizing. For a contract manufacturer, which makes products for another company's brand, a returned shipment creates several problems at once: money remains tied up in goods, repairs or disposal add costs, and future orders can fall.

Footwear inspections cover stitching, bonding, glue lines, midsole alignment, color accuracy, labels and packaging. Bonding is the process of joining parts of a shoe, including attaching its upper section to the sole. An error repeated across thousands of pairs can cause an entire shipment to be rejected.

Minor defects may be repairable. Structural problems, or faults spread across a large share of the shipment, can make repairs more expensive than producing replacement shoes. Missed delivery deadlines add another difficulty because buyers need products within agreed schedules.

Several failed batches can upset a factory's production timetable and staffing plans. Factories can try to negotiate discounts, repair allowances or new delivery windows with buyers. If those discussions fail, the manufacturer absorbs the loss. In a business with little room between revenue and costs, repeated failures can lead to fewer shifts, less overtime or the removal of entire production lines.

Quality problems can grow when workers frequently leave and replacements need training, when production schedules are compressed, or when materials and component suppliers change. Cost reductions that weaken supervision, gaps in training and strained maintenance routines can also increase stitching and bonding failures. More complicated product ranges make those safeguards especially important when budgets are already tight.

Unions blame management and seek voluntary departures

Unang Sunarno, chair of KASBI, says the production system is management's responsibility and rejects unilateral dismissals that place the burden on employees.

We oppose the unilateral layoffs because this is no fault of the workers, but rather a problem with the production system. Workers should not be made victims of management failures.

Andi Kristiantono, KASBI's secretary general, also attributes the problems to how the company has been managed. His argument is that reducing the workforce is the wrong response to failures rooted in production processes.

The current problem is not purely the workers' fault, but a result of the company's mismanagement.

KASBI has pressed for a voluntary separation scheme instead of unilateral terminations. Recent discussions between the union and management included full legal entitlements and, for workers choosing to leave, severance equivalent to double the standard calculation under Indonesian labor law.

Union leaders also want clear communication about which factories and production lines are affected. They have warned management against using difficulties at Pasar Kemis to pressure workers at other sites, particularly where production is continuing normally.

What the layoff figures mean for each factory

About 1,800 workers have received termination notices, according to union representatives. That is around 60 percent of the roughly 3,000 positions initially identified for possible downsizing. Hundreds more remain in the termination process, and the union says further losses could depend on an internal audit assessing whether defective goods can be repaired.

The possible second round involving 2,804 additional workers concerns the Pasar Kemis factory. Cikupa, another facility in the group, was described as continuing production with acceptable quality. Conditions can vary between factories because they make different products, serve different clients and receive different audit results.

The developments leading up to November 2 can be set out briefly:

• Management initially identified roughly 3,000 positions for possible reduction.
• About 1,800 workers received termination notices, with hundreds more still in process.
• In late October, a possible second round involving 2,804 additional workers at Pasar Kemis was reported.
• As of November 2, Cikupa was described as operating normally, while unions continued seeking voluntary departures and better compensation.

No firm date was given for the possible second round or the outcome of the internal audit. The next few weeks were described as critical for workers at Pasar Kemis, where the assessment of defects and negotiations over departures could shape the next decisions.

Keeping Cikupa running may help the group fulfill active orders while problems at the troubled plant are addressed. Management's position indicates that restructuring can be concentrated at a particular location while production is protected at a site meeting brand requirements.

Wages, recruitment and the skills dispute

KASBI leaders argue that factories producing for major brands in Tangerang have the financial capacity to comply with regional wage standards. They say blaming wages shifts attention away from avoidable quality failures and poor planning.

The Indonesian Employers Association presents a different view of the pressures facing factories. Its representatives in Tangerang cite higher regional minimum wages, unclear additional fees and levies, and social pressure to prioritize local applicants even when those applicants lack the skills modern production requires.

Employers say that gap raises training costs, weakens productivity and makes acceptable quality harder to maintain. Productivity means how much usable output workers and machines produce for the time and resources spent. A factory producing many shoes that need repairs can still struggle, because repair work consumes time without adding the same amount of saleable output.

Association leaders have begun coordinating with local authorities on training for unemployed residents. The aim is to match practical skills to factory needs, reduce the time and expense involved in preparing new recruits, and raise the share of products that pass inspection on the first attempt.

Why Pekalongan is part of the discussion

Business groups are urging Tangerang's authorities to improve local operating conditions so Victory Chingluh retains at least part of its production in Banten, even if it expands elsewhere. Their concern is that a full move to Pekalongan would deepen the loss of jobs around the existing factories.

Central Java offers lower statutory wages and cheaper land, alongside lower labor and overhead costs. Overheads are expenses involved in running a factory beyond the materials and direct work needed for each product. Logistics can be more complicated, however, so a cheaper location does not remove every operating difficulty.

Relocation decisions involve access to suppliers, trained workers, transport routes, export processing times and relations with surrounding communities. Companies must weigh those factors against the savings available from a new site.

The different situations at Pasar Kemis and Cikupa also matter. If quality failures are concentrated in one factory, management may restructure its lines while maintaining output at another. Employers' appeal to local leaders is therefore about keeping the existing operation viable as well as preventing jobs from moving elsewhere.

Nike's savings plan adds pressure to suppliers

Nike has set out a plan to reduce expenses by about $2 billion over three years, simplify its product range and accelerate automation to support profitability. Those changes form part of a wider environment in which demand for discretionary goods, purchases consumers can delay, has weakened in several major markets.

Inventory mistakes in earlier seasons left more products being sold at discounts. Competition has also increased as rival brands gained market share in running and lifestyle footwear. For suppliers, changes in a brand's sales and product strategy can quickly alter factory workloads.

A smaller product range can bring fewer orders for particular shoe designs, narrower runs of sizes, or later approvals for components while designs are revised. Tight schedules and rushed approvals can increase quality risks when staffing and training do not keep pace. Buyers seeking lower prices per pair or faster delivery add further pressure.

Factories need enough supervision and inspection capacity to match those demands. If costs are reduced while deadlines become tighter, a plant has less room to catch and correct mistakes before goods are shipped. Returned products then add another financial strain to an already demanding production schedule.

Tariffs and changing import rules add uncertainty to sourcing decisions. Global brands can redistribute orders among Vietnam, Indonesia and China or seek capacity in new locations. Suppliers benefiting from a particular product cycle or manufacturing location can receive smaller allocations when brand strategies change, increasing the incentive to reduce costs.

Government oversight and financial support

Indonesia's Manpower Ministry has been gathering information about the terminations. Local labor offices in Tangerang have also engaged company and union representatives, with officials monitoring compliance on severance, notice periods and social security contributions.

The Job Creation Law changed severance formulas. Separation packages are often presented as a combination of severance, payments reflecting length of service, and compensation for employee rights that have not been used. Those components matter because the amount owed depends on the applicable calculation and the worker's circumstances.

Voluntary departure arrangements can exceed legal minimums when the parties agree. In this case, the union's request for full entitlements and double the standard severance calculation forms part of its effort to replace unilateral terminations with negotiated departures.

The government has also announced a credit program worth around $1.3 billion for sectors employing large numbers of workers, including footwear, textiles, furniture and food manufacturing. The program is intended to help factories manage shortages of operating cash during weaker demand.

Credit can help a viable business buy materials, keep production lines active and avoid an unplanned closure while it waits for sales or payments to recover. For factories facing returned stock, access to finance could provide time to repair products, retrain teams and prepare for another audit instead of making an immediate reduction in staff.

Government officials continue to point to Indonesia's scale in sportswear manufacturing, including its large share of the workforce serving Nike and Adidas. The country also continues attracting new capacity from foreign investors. Its experience and expanding supplier networks remain advantages, provided factories deliver acceptable products on time while protecting employee rights.

The costs extend beyond factory gates

Tangerang's footwear factories support businesses that depend on regular wages and daily production activity. Shuttle drivers, food stalls, boarding houses, materials vendors and small repair shops can all feel the effects when a major manufacturer reduces shifts or employment.

Workers leaving a factory have less income to spend nearby, while businesses serving the plant may receive fewer orders. A reduction involving about 1,800 jobs can therefore affect households and enterprises beyond the employees receiving termination notices.

Adis Dimension Footwear, another major Nike partner in Tangerang, eliminated about 1,500 jobs last year during a cost reduction effort. Victory Chingluh's approximately 1,800 dismissals are about 300 more than that earlier reduction. The latest cuts also come amid a broader manufacturing slowdown that has produced thousands of layoffs in textiles and other consumer goods industries over the past year.

Local officials say Banten's footwear industry has faced weak orders, expensive logistics and a flood of imported goods. Together, those pressures leave factories less room to absorb quality failures. Plants that keep defects low and consistently pass audits are better placed to preserve employment when orders are scarce.

Training and repairs are central to the next steps

Local stakeholders have identified three practical priorities for keeping factories competitive: training linked directly to production work, lower operating burdens beyond wages, and stronger enforcement against illegal imports that undercut domestic producers.

Short, practical courses can help workers learn the operations factories need. Addressing permit costs and logistics bottlenecks can reduce expenses without relying solely on payroll reductions. Enforcement against illegal imports is another part of the effort to improve conditions for domestic manufacturers.

Inside a factory, restoring quality usually requires checking each stage of production for delays and inconsistent results. More line inspectors, refreshed training on critical tasks such as bonding shoe uppers, and stricter checks on incoming materials can help catch defects earlier.

Balancing production lines also matters. If one stage moves faster than the next can handle, work can pile up or employees can be pushed to rush. Adjusting the flow of work can reduce repairs and help teams maintain consistent standards. Better maintenance and supervision support the same goal.

Brands often send technical teams to help suppliers carry out such improvements because reliable production protects their delivery schedules too. The faster a factory restores acceptable quality, the better its chances of stabilizing orders and avoiding further severe reductions in employment.

Workers who have already lost jobs face more immediate needs: payment of what they are owed, help finding another job and training in skills they can use quickly elsewhere. Employers have discussed expanding training with local governments, while unions are preparing legal and other support to secure workers' entitlements.

Victory Chingluh's next decisions will depend on the condition of returned goods, the results of its audit and the negotiations over departures. Cikupa's continuing production provides some support for active orders, but Pasar Kemis workers remain exposed to the possible second round of cuts. Government credit reaching viable factories could help them pay for the time needed to clear returned stock, retrain employees and pass fresh inspections.

Key Points

• PT Victory Chingluh Indonesia has laid off about 1,800 workers in Tangerang after exported products failed quality requirements and were returned.
• Management initially identified roughly 3,000 positions for possible downsizing, with hundreds more workers still in the termination process.
• A possible second round involving 2,804 additional workers at Pasar Kemis was reported in late October. Cikupa was described as operating normally.
• KASBI blames management and production failures and seeks voluntary departures with full entitlements and double the standard severance calculation.
• Employers cite regional wages, uncertain fees and shortages of skilled workers, and want authorities to prevent a full relocation to Pekalongan.
• Nike's plan to save about $2 billion over three years, weaker demand and changing sourcing strategies add pressure to its suppliers.
• Labor authorities are monitoring the dismissals. A government credit program worth around $1.3 billion aims to support industries employing large numbers of workers.
• Indonesia remains a major sportswear manufacturing base, with Indonesians accounting for roughly 30 percent of the factory workforce serving Nike and Adidas worldwide.
• Practical training, better quality checks, lower operating burdens and enforcement against illegal imports are among the priorities identified for protecting local production.