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Manufacturing Sector Should Rethink Approach in a Post COVID-19 World
Sept 17, 2020
Business Manager, Decision Inc.
COVID-19 cannot take all the blame for the disruptions taking place in the global economy. The pandemic and resultant lockdown simply provided a conduit for highlighting the failings across industries in South Africa whether that is healthcare, public transport, education, or others.
While the impact of the virus has been different across sectors, the constant has been the almost singular disruption that has taken place. Healthcare, personal protective equipment, sanitation, and related industries supporting the fight against COVID-19 were significantly upended to meet increased demand. Frontline workers had to abandon their usual posts to meet the requirements of attending to an influx of patients.
Manufacturers of essential products experienced high demands before the start of the lockdown. This was due to consumers’ panic-buying fearing the unknown impact it could have on them. Manufacturers of non-essentials and other businesses suffered heavily at the hands of lockdown restrictions. Many of which were unable to generate the cash flow required to continue operations. This is a rare occurrence where resource availability, demand, and supply have been significantly affected simultaneously.
The manufacturing sector in South Africa forms 13% of the country’s GDP. The impact of COVID-19 has left it reeling, falling to an almost 40% decline over the past several months. Permanent closure of businesses, the temporary closure of ports, and a loss of jobs have placed the local manufacturing sector in a challenging position to recover from.
As the lockdown restrictions ease in some respects, the manufacturing sector is in the position to lift the economy. However, there are still significant challenges to overcome.
Most manufacturers will find it difficult to restart production while managing cash preservation, especially without earning revenue over the past several months while still maintaining operating costs.
A reduced workforce will limit production output. The social distancing regulations in factories are leading to the rearrangement of production lines. This will impact the optimisation and any efficiencies previously achieved. Curfews will have an additional impact on 24hr-based operations, thus the overall outlook is a 50% operating environment.
The low tech, high labour model in South Africa has been the hardest hit. Factories are not equipped for remote management or for remote workers.
Offshore models have also suffered from closed ports and no access to raw materials that they source internationally. The cost models must now change as margins have been negatively affected. Sourcing the raw materials locally might not allow manufacturers to meet high demands.
The government has put together a lockdown level structure to regulate business and social activities. Manufacturers are therefore dependent on the actions of millions who influence the directives from the government. This can either result in the easing or tightening of lockdown regulations.
While manufacturing companies are not solely responsible to lead the change, they do play a significant role. It is commonly said that ‘COVID-19 has led the digital transformation in almost all companies.’
The most prominent change is the enablement of remote working. This is possible through video calling and remote access to business systems. For manufacturing companies, the introduction to digital transformation takes on a different form. This becomes a possibility through smart factory or factory 4.0 technologies. As a result, we see the introduction of AI, IoT, and 3D printing, amongst others, into the operations of manufacturers. For their part, digital-savvy employees form a key part of driving the digital transformation further.
Low technology manufacturers will need to focus on digital strategies to provide short-term gains. Cloud-based solutions can play an integral part of this strategy. These solutions will allow remote collaboration, digital work instructions, and automated production lines to compensate for the distance between employees. They will continue to face a steep curve in bringing operations to a profitable state. While still managing to navigate customer demands and expectations for new products in more active industries. So, what is the way forward for manufacturing post Covid-19?
Manufacturing post Covid-19
Cloud ERP solutions with integrated sales and operations will be a requirement to manage demand planning. This gives the further rise to automated supply chains. Complete visibility through a digital platform to improve planning across production, supply, and logistics will help enable a lean operation.
Companies would also need to prepare the workforce to become more digitally aware.
This is a challenge on its own. Many of these technologies are still in their infancy in South Africa. Most companies will tread carefully before taking a leap of faith into the unknown. They are after all managing their finances and the erratic decisions from government.
The manufacturing sector will need more help from the government through easier access to funding and more stable lockdown guidelines to get operations underway. They should also look at collaborative efforts with similar and smaller manufacturers. This could pave the way for outsourcing parts of the production line as well as leasing equipment.
If manufacturers are to successfully navigate their way out of the pandemic, they must look at modernising operations. Simply put, companies will be forced to accelerate the adoption of more innovative remote working solutions over the coming year or two, while still closely analysing the return of investment provided.