State of manufacturing sector in post Covid-19 world order

Covid-19 has created huge disruption in the entire world. The entire manufacturing supply chain has been disturbed.  It has been estimated that pandemic has affected almost 94% of the Fortune 1000 companies. Manufacturing plants closure, extended lock-down and halt to flights & fleets has resulted in a halt to supply chain all over the globe. The domino effect of the closure of manufacturing plants has been felt around the global economy. According to a survey done by WTO, the global trade of goods will decline by a rate between 13% and 32%. Manufacturing sector gives Direct and Indirect employment to the millions of people around the globe. Corona outbreak led to sharp decline in FDI. As per UNCTAD (United Nations Conference on Trade and Development), Covid outbreak has caused the global FDI to shrink by 5% to 15% due to the downfall in the manufacturing sector as a result of factory shutdown. The negative effects are mostly felt in airlines, automobile and energy sector. These sectors are facing concerns due to non-availability of raw materials. Electronics, Consumer electronics and other segments have faced reduction in operations due to the delay in supply of components, thereby postponing the launch of new products. Sharp decline in electronic segment as China utilizes 85% of the total smartphone components produced and 75% of the total TV components produced. Components such as PCB, LED, Capacitors, Memory and Mobile displays are imported from China. Chinese manufacturers has raised prices up by 2-3% producing a negative effect on the electronics sector. Due to the epidemic, most manufacturers around the world have shut-down their factories due to the safety issues affecting the global supply chain. Pandemic has been a shot in the arm for Industry 4.0 i.e. increasing the level of automation in the manufacturing sector and upskilling workers for implementation. Pandemic has caused huge causalities in developed countries like USA and European countries as well as in major developing countries like India and China. In these economies demand was very high and pandemic have led to a sudden halt. It has been estimated that pandemic has affected almost 94% of the Fortune 1000 companies.

The greatest risk to the growth of manufacturing sector in the decade to come is the risk to supply chain. Supply chain resilience is what will lead the recovery

4 major threats to manufacturer’s growth are related to supply chain.

Implications post Covid scenario:-

• Covid will mark the start of de-globalization and countries will try to turn inwards to meet their domestic demand
• Demand will decrease, unemployment will rise further hampering demand
• Reverse supply chain needed to be improved as the shelf life of various items will be lost and these will be returned to the company
• Reorganization of workforce and suppliers needed to be taken place and almost a new supply chain has to be established
• Top CEO's of global manufacturing companies are saying that they will rethink their supply chains as they are facing pressure from the government as well as the communities to shift their production closer to home
• Most companies will look to diversify their sources to minimize risk
• In the years to come manufacturers will invest in technologies related to 4th Industrial revolution. Some technologies that manufacturers are looking to invest in the years to come are 5G wireless network, Artificial Intelligence, Virtual Reality, Drones, IOT and 3D printing.
• Most companies will focus on speeding up their digital transformation

 

The disturbance has led to new models of working, and at the same time gave companies a new opportunity to improve themselves and build new capabilities to prosper in an uncertain environment. More agile business models with high level of preparedness from risk factors needed to be adopted. Investment in people and technologies needed to be done to prepare for next major disruption. Comprehensive assessment of risk needs to be taken place based on the degree of threats.