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PRODUCTIVITY IMPROVEMENT Mitigating risks associated with COVID -19 in manufacturing

May 12, 2020

With COVID-19 affecting the world in ways that has never been seen before, it is essential to understand the entire situation at-hand and the probable measures that can be considered by organisations to get out of it, without much damages. Axiscades, who offers Industry 4.0 and technology services throughout the automotive, aerospace, off-highway & industrial, defence, energy and medical devices, in this article, offers a gist on how various industries have been affected by the pandemic and the measures companies can take to alleviate the effects of COVID-19. - Sharadhi Babu, CEO, Axiscades

The effects of the coronavirus pandemic are increasing by the minute. The virus has affected everything in our lives, workplace, homes and our communities. It is virtually impossible to assess what the future holds for us, given the challenging manner in which the situation is continuing to unfold.

To counter the risk involved with the spreading of the disease, several countries have been placing quarantine measures on their people. Along with this, manufacturers and companies have rolled our work from home policies to prevent the risk of contagiousness in the workplace. These measures have led to the slowing down of businesses in several industries across the globe. Here are some direct impacts of the COVID-19 outbreak in different sectors across manufacturing.

Impact on industries

  • Aerospace: The aerospace sector has seen clear and immediate consequences. Approximately, a $200 billion loss of market value has taken place in the US aerospace industry alone. The Chinese aerospace manufacturing industry is a primary supplier of several components used in many aircrafts and was the first to feel the full blow of the virus.

  • Automotive: Automotive companies are staring at a $2 billion loss in revenue and 7.5 lakhs units in production as the factories and dealers have shut down. Companies are expecting to lose a third of the output by April.

  • Power: The power industry is one of the sectors affected. COVID-19 poses an unprecedented threat to strategic infrastructure above all the power sector. About 70.6% of electricity production in France is dependent on nuclear power, which has made it extremely vulnerable to the ongoing pandemic. In the renewable energy sector, the global supply chains are slowing down their production. The global wind energy sector is already facing logistical delays.

  • Construction: According to a report in Construction Dive, about 30% of the building products in the US are imported from China, which makes it the largest single supplier for the country. China's decreased manufacturing output can impact the construction industry in the US.

  • Telecom: The main issue in the industry will be with the delayed deployment in 5G technology. The reason being primary component suppliers are around Hubei and Wuhan province. Enterprise and consumer communication are being enhanced with the work from home policies.

  • Software & internet: An increase in globalisation and digital preparedness has helped this sector with remote working accessibilities. This had led to a spur in the demand for cloud-based apps and collaboration tools. Otherwise, the delayed execution of IPO plans can be expected for firms.

  • Consumer electronics: There has been an increase in the supply chain disruption due to the increased dependence on China for components. Smartphone companies will no longer focus on particular geographies and instead, muster their energy towards globalisation efforts. Many product launch delays can be expected.

  • Utilities: For the first time in a decade, the global oil demand is set to drop sharply. Prices of crude oil have already declined. This will lead to margin pressures and will force enterprises in the oil value chain to vie for globalisation efforts of IT and ER&D.

  • Medical devices: This field has been impacted as China is the largest exporter of medical devices in the US. This is coupled with supply chain disruption, revenue and shipment delays. Further, there will be delays in elective surgery. This is due to the increased focus on COVID-19, which has led to the decreased demand for elective surgery.

  • Healthcare: Demand for healthcare services will continue to increase as we are still in the process of finding a vaccination to prevent the spread of this disease as well as the treatment of affected patients. Hospitals will be taking the necessary steps to take care of the additional capacity. Sometimes, margins can be affected due to the amount put in to hire temporary staff and extra duty.

  • Pharmaceuticals: Due to supply chain disruption, there could be a surge in the price of active pharmaceutical ingredients. Nevertheless, companies associated with the vaccine and drug development will rise. Furthermore, there will be a new focus on AI-enabled drug discovery.

  • Industrial: There has been a severe halt of production and reduced demand from end-industries during this time. Several layoffs could occur due to a decrease in factory production. Investments across Industry 4.0 and automation initiatives will sour lower due to the doubtful future that lies ahead.

However, here are some of the actions that companies and manufacturers can take to mitigate the effects of COVID-19.

  • Reviewing the crisis and a continuity plan

    Most manufacturers will have a crisis or continuity plan. Unique plans need to be adopted to cope up with the specific challenges of a pandemic. We will have to ensure that there is enough technology bandwidth to cope with a large number of people working remotely at a time.

  • Evaluating the supply chain

    A good understanding of the supply chain will assist in exposing any potential vulnerabilities. This would imply, starting with the critical products and looking beyond the first and second-tier suppliers up to the raw materials. For example, if a product has a component which is supplied from a quarantined country, one should find a way to procure it from a secondary supplier.

  • Identify points of failure

    One should get a clear understanding of the teams and individuals on whom the critical processes or services depend. Also, one should make sure there are experts with the right skills who could take up critical roles if the situation demands. COEs and shared service centres are vulnerable areas if the virus continues to spread. Steps should be taken to contain the levels of human interaction, like various shifts and remote working.

  • Get the communication right

    The employers, without a doubt, are working hard to keep their workforce informed and to prevent any kind of misinformation or confusion during this time. The employees will be looking for reassurance from the employers that they are being protected and that there is business preparedness. From the company's POV, employees will look for consistency and accuracy. Reassurance from the top of the organisation will keep the workforce informed that their welfare is of importance.

  • Use scenario analysis

    COVID-19 has the potential to impact businesses for months as uncertainty is rife. During this time, scenario planning is of paramount importance to test the preparedness. The businesses must identify:

    1. Best case scenarios

    2. Worst case scenarios

    3. Is the business equipped enough to cope?

    4. What is the long-term impact of this situation?

Don’t lose track of the other risks

COVID-19 is not the only threat that is in sight. Most organisations are in their vulnerable state during such a time. Hence, cybersecurity should always be on top of the mind. We are also not very sure of what the coming days or months would bring with it. During this time, company heads should evolve a tech-led enterprise with the foundation being cybersecurity. The pandemic and its fallout are on a scale that we have never seen or experienced before. In the end, our health and survival are within our control. The anticipation of work and associated scenarios could be powerful tools to imagine a future. We must be prepared to tackle the uncertainties that lie ahead of us.

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  • Sharadhi Babu

    CEO

    Axiscades

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