Although the Q2 GDP figures released recently provide some succour for the manufacturing industry — as against an obliteration of -39.3% in the first quarter, manufacturing grew by a meagre 0.6% in Q2 — it is still nowhere close to the revival the industry was expecting as compared to the slowdown in 2019. The coming months may help buoy manufacturing as the RBI expects positive growth in the remaining two quarters, but the overall outlook remains bleak.
Hopes for revival
However, despite the drubbing, many believe that the pandemic has made manufacturing strong, resilient & better prepared for future challenges. The temporary disruption, many believe, is not indicative of the lack of demand and may just be a lockdown-induced blip. Besides, companies have utilised this time to improve their organisation and streamline their processes. Sharad Malhotra, President – Automotive Refinishes and Wood Coatings, Nippon Paint India, avers, “We used this year to spread our risk by introducing distributed manufacturing, improving health and safety norms in the plant & elsewhere in the organisation, augmenting and indigenising our supply chain, introducing vendor financing & improving our batch cycle times, operational flexibility and lean manufacturing capability. We also cut down overheads by 20% and added more products to our portfolio by using this time to innovate and keeping our labs busy.” Meanwhile, companies, like Barco, have used this period to work towards restoring operations and building & reinforcing capabilities across all levels by leveraging automation and innovative manufacturing technologies & solutions. Their priority remains employee safety followed by operational efficiency, asset competence and product quality, delivery & service.
Disruptive actions & automated solutions
Digitisation and automation are expected to play an important role in augmenting the existing structures and solutions. According to industry reports, around 39% of the companies have applied a nerve-centre or control-tower approach, to increase end-to-end supply chain transparency. Rajeeva Lochan Sharma, VP — Operations and Special Projects, Barco India, states, “In the new normal, the industry leaders are investing in embracing Industry 4.0. The industry’s resilience and disruptive actions have been significant, enabling solutions that are helping companies transform their operations – be it efficiency in production to product customisation, market and customer outreach, service effectiveness and new-business model creation to name a few.” Zurvan Marolia, Senior Vice President, Godrej & Boyce, believes 2020 has certainly presented some hurdles but has also brought in opportunities as India has emerged as a global supply chain alternative to the Chinese. He emphasises that the competition is not between manufacturing companies but between the supply chains and informs, “We cannot afford to lose sight of the preparedness of our supplier partners particularly the MSME players, whom we have handheld through the pandemic and who are now responding as demand has started to show a healthy recovery.”
To address the growing demand, companies, like Voltas, have taken some key steps, like shifting stocking focus to high demand goods, penetration in more rural, less affected zones and increasing the manufacturing capacities. Pradeep Bakshi, MD & CEO, Voltas, asserts, “We are focussed on the R&D for product augmentation, growing our manufacturing capabilities to meet the persistent demand, improving our logistics & supply chain and growing our already wide network to ensure complete customer satisfaction.”
Myth exposing & adaptive planning
The pandemic has certainly debunked myths for engineering manufacturing companies who believed work from home wasn’t for them. Companies would still be required to shift from being reactive to becoming more adaptive to cope with an unprecedented crisis. PL Muthusekkar, Managing Director, Nord Drivesystems India & SAARC, advises, “We used to be reactive; now the only way is to anticipate and be prepared. Even if we look at this pandemic, what cost us more money and time were the preparations than the pandemic. Even with the considerable life losses during the guest worker transits, the everyday new announcements and real commotion, no one knew what is right and what is wrong; on many fronts, we were not ready. So, such a historic lockdown was required to prepare us, as we were only postponing the inevitable. In future, readiness for such situations will make lives and businesses easier.” Malhotra goes on to state, “We are an adaptive organisation, so we have coped well with this unprecedented crisis and used this pandemic to accelerate the pace of our planned developments, which otherwise would have taken much more time. Our business continuity plans are now more robust, our manufacturing is more spread out & flexible and our supply chain is more local than ever.”
Enterprise Risk Management (ERM) which was once a ‘nice-to-have’ is a ‘must-have’ and is no longer looked from a governance standpoint. Marolia, at whose organisation this is being practised for the last five to seven years, asserts, “Each year there is an iterative review, and that document is discussed and made more relevant. Eventualities, such as natural calamities and fires, have been a part of an emergency response plan from a point of view of the safety of life and property as well as with plans to restore normalcy within minimum time.”
To 2021 with optimism
The industry is viewing 2021 with great optimism. Bakshi ascertains, “The white goods market has been witnessing a steady return towards normalcy. Evidently, there is a clear demand for need-based products as consumers seek products to ease their daily lives in the new normal. We expect this demand to be high in the coming few months as well, owing to an increased need for automation of household chores due to the work from home culture.” Malhotra also concurs, “Overall, the growth will be in healthy double digits and we will give a good return to our shareholders. We are in a good space and expect 2021 to work out well in all respects.” Though there is a prevailing optimism, it is a good opportunity to ‘review & reset’ various aspects of one’s business because like the saying goes, “if you attempt to solve today’s problems using yesterday’s solutions, you are putting your tomorrow into question”. Marolia suggests, “We see a smart recovery of the economy and the market, though there will be different needs and expectations of the consumer which would need to be addressed. Certain aspects, such as greater acceptability of business being conducted online, will improve efficiencies as the travel time is cut and more work gets done within the working hours at lower costs.” While there is only going up from here according to the industry, Muthusekkar, alludes, “Expect the government spending on creating world-class infrastructures and through that more investments and jobs will happen. Now, it is the time for delivery from the government and industries. Minimum talk and maximum work.”
The sector must still brace itself for more challenges, especially as competing economies will also flex muscle by lowering tariffs. It’s vital that India stands ready to brace more competition.