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RISING OF MANUFACTURING SECTOR The manufacturing sector rising above COVID-19

Jun 2, 2020

The COVID-19 impact has resulted in tighter credits and cash flow constraints. Manufacturing companies will have to take steps to recover after this challenging period and be ready to take a leap when the situation starts returning to normal. Many pundits have declared COVID-19 as the ‘Black Swan’ of 2020. Keeping this in mind, VDMA India recently hosted two webinars to deliver some understandings about how to get ready for the challenges and forthcoming necessities with this pandemic.

Along with an unprecedented human toll, COVID-19 has triggered a deep economic crisis. The virus has shut down production and disabled critical components of supply chain, as a result of which there are production halts. In fact, global trade is predicted to see a huge fall, ranging from 20%–35%, as per current projections of OECD. Many pundits have also declared COVID-19 as the ‘Black Swan’ of 2020, with global economies staring at one of their worst recessions ever.

In this context, VDMA India recently organised two webinars – the first — ‘CEO panel discussions on rebooting the manufacturing sector post lockdown’ and the second — ‘2nd CEO panel discussions on predictability in unpredictable times’, with an aim to provide some insights into how to prepare for the present challenges and future requirements.

The first panel discussion was moderated by Rajesh Nath, Managing Director, VDMA India, and the esteemed panellists were Rashmikant Joshi, Managing Director, Festo India; Vivek Bhatia, Managing Director & CEO, Thyssenkrupp Industries India; K V Suresh, Managing Director, ZF India; Sriram Kannan, Managing Director, CLAAS India and Nitin Vyas, Managing Director, Beumer India.

When the panellists were asked what the present scenario at their company and manufacturing units is, they mentioned that due to the lockdown presently, manufacturing is shut and the supply chain is disrupted, except in some essential cases. As for Thyssenkrupp, they are working on some orders catering to the power sector from one of their plants with necessary permissions. Also, Festo is working with skeletal staff, as they are catering to the essential sectors, like food and bio-pharma. Here, social distancing and necessary safety & health precautions are being followed. Otherwise, most of them are working from home and utilising this time for training sessions on products and technology to their customers.

Keeping in line with government guidelines

When asked how they plan to recover loss of man-days and what is their stand regarding wage payment to blue and white collared workforce during this lockdown, the panellists mentioned that they have been keeping in line with the government guidelines and have been paying the salaries to their employees. However, since it is perceived that liquidity is going to be a challenge in the time to come, some mentioned that they may ask their workers to work overtime, or on Saturdays, or to apply for earned leaves.

Giving way to more localisation

Another question put up was if the panellists feel that this crisis has given vent to the feeling that globalisation may pave the way for regionalism. They responded that due to supply chain disruption this is a possibility, however only for a short-term. Moreover, the crisis has taught them the risk of dependence on other countries and may thus, give way to more localisation.

The million-dollar question on everyone’s minds is how to reorganise and reboot post-lockdown. When the participants were asked how they are planning to take the organisation forward with reference to manpower, demand creation and cash flow management, they cited that the government here has an important role to play in demand creation. Investment in sectors like infrastructure will infuse demand in related sectors and subsectors. The impact of COVID-19, as mentioned by Nitin, is not going to be uniform across industries. Further, this can lead to the adoption of new technology and would give impetus to sectors, like healthcare, infrastructure, Information Technology, pharma, e-commerce, medical equipment, agriculture, food processing and packaging, amongst others.

Finally, Nath concluded the discussion by saying that every big crisis is a test of leadership. We must have faith that a ‘V’ shaped recovery is plausible. Hence, we should retain our confidence and communicate with our people & partners.

The second webinar was – ‘2nd CEO panel discussions on predictability in unpredictable times’. This discussion was also moderated by Nath and the revered panellists were Ajay Bhargava, Managing Director, Rittal India; Pankaj Vyas, Chief Executive Officer, Siemens Technology & Services; Harsha Kadam, Managing Director & CEO, Schaeffler India; Yatindra R Sharma, Managing Director, KHS Machinery and Dr Lovneesh Chanana, Vice President, SAP India.

The panellists were asked regarding the business strategy they would adopt post-lockdown. So, they talked about their strategies broadly divided into three heads — inventory management, overhead costs and vendor development/vendor contracts.

Health of employees a main concern

COVID-19 is forcing Inc to reassess its workplace. Companies will begin to invest in software and automation. The discussion went deeper to have an understanding of how large enterprises, like Siemens Technology, Schaeffler and SAP, have been able to adopt work from home and how they see the development post-lockdown. Here, Chanana mentioned that the employees’ health and wellness has been their main concern as they work from home. So, they have come out with an app to track their health.

The panellists were further asked to speak on creation of demand, where Pankaj mentioned that pushing fiscal stimulus is a way. However, rather than handing freebies in the hands of the people, pushing stimulus for creating jobs will lead to creating demand through creation in technology and innovation. When questioned about challenges due to supply chain disruptions, Sharma averred that some of their consignments are already stuck at the ports due to the lockdown and quarantine guidelines.

There are two perspectives to consider – health and economy. These cannot be considered as mutually exclusive as one impacts the other and vice-versa. The lockdown should have had a considerable impact on the COVID-19 ‘curve’ and in all likelihood, the curve should have flattened. This means that the chain of infections would have been broken and the increase in the number of new cases would stop following the exponential function. This would be a tremendous achievement – not only because India has a large population but the population density in some areas is so high, that social distancing becomes an oxymoron.

Dealing with people

A lot has been written already about the new normal. Pankaj mentioned that the new normal would be a shift toward more focused on logistics, communication – both internal and external with the customers and productivity.

“However, before we reach the stage where we start feeling the impact of these changes, there would be the big challenge of restarting the economic engine of India. This challenge would come in the form of liquidity crunch, logistics & supply chain smoothening and labour availability. Jump starting the economy, in terms of liquidity and ensuring quick and efficient ramp up of logistics, is in the realm of policy making, which we must trust our government to be competent to address. It is the labour situation that is going to require careful handling as this one deals with people and dealing with people is always complicated,” he explained.

Turning digital after the crisis

Looking six months down the line, when the panellists were asked their opinion about which industries would grow and which are expected to see a dip, Kadam mentioned that the automotive sector was facing a crisis even before the corona crisis. Moreover, the change in emission regulation standards was also said to bring a dip in the industry. The industries which will see a growth is automation, as productivity and safety demands will increase and digital infrastructure, as more people will tend to turn digital after the crisis.

Before concluding, VDMA India also conducted two polls with the attendees. One was to understand the top most challenge they are facing, to which 66% of the attendees responded that demand has been most adversely affected by the pandemic and 57% said that challenges in receipt of the customer payments is another big difficulty. The important question in mind of most of the attendees is business survival strategies for the next six to nine months. The panellists were asked to share their mantra of survival through a short statement. Almost unanimously, they mentioned that cash management, vendor optimisation and supply chain stabilisation are a few of the important strategies for them. The second poll was conducted amongst the audience to assess their feelings on the time to attain normalcy, to which a majority said it likely to be by the end of September, 2020.

A rebound is possible

Finally, Nath concluded the discussion by saying that a rebound is possible. Decisions taken now will determine the future shape of recovery. “We must ignite the fire of belief in us and face this adversary firmly armed with weapons of better hygiene, social distancing and survival strategy – knowing that some of us may fall in this battle but we have faith that we shall overcome,” he established.

Courtesy: VDMA India

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