It came it spread it conquered – part 4 – Production and Manufacture

It came it spread it conquered – part 4 – Production and Manufacture

It came. It spread. It conquered.

Ever since Wuhan reported its patient zero for the novel coronavirus disease 2019 (COVID-19) in November, 2019, the world has not been able to heave a sigh of relief. The virus has penetrated and continues to penetrate into receptacles of almost every country you can name – the burden being distributed asymmetrically. The streets have been deserted, flights and trains have been suspended, companies have come to a standstill, and the common man has been trapped inside the four walls of his own house – for a period of time that even the highest authorities are unable to state. Quarantine and social distancing have taken the role of those uninvited guests in our day-to-day life, who barge inside without a knock. Hygiene and sanitisation practices have taken birth as a new religion, while people all around are going frenzy over immunity boosting techniques. As healthcare and pharma giants worldwide struggle to find a potential cure, SMEs and start-ups are also joining forces and working round-the-clock amid this invisible battle – or rather microscopically-visible battle. Albeit, keeping the possibility of mass commercial availability of a viable vaccine at bay, let us break down and scrutinise the consequences of this pandemic on businesses – sector by sector.

Production and Manufacture

While the magnitude of the impact of COVID-19 may vary from sector to sector, there are some of them that have suffered more drastically than others, and continue to suffer. Production industry is one such victim. The production and manufacturing sector accounts for nearly 16 per cent of the global GDP, with China being a major stakeholder in this market. China dominates the manufacturing market with as much as 28.4 per cent share, because nearly 85 per cent of the total value of components utilized in smartphones and nearly 75 per cent in the case of televisions are imported from China. This includes all critical components, such as printed circuit boards (PCBs), mobile displays, LED chips, memory, open cell TV panels, and capacitors. As a result of the market-slaughter brought about by the pandemic, China’s exports fell to 17.2 per cent in January and February and Chinese vendors had to increase component prices by nearly two to three per cent owing to shortage of supplies due to factory shutdown; thereby negatively affecting the electronics manufacturing sector across the globe. The automobile manufacturing too sank a record 80 per cent. Additionally, having accused China of breaching, countries like USA, Germany, Italy, Spain continue to look for alternative manufacturing hubs outside of China. Casa Everz Gmbh, the owner of Germany-based healthy footwear brand Von Wellx, has already put forth the proposal of shifting its entire shoe production of over three million pairs annually from China to Agra, India with an initial investment of 110 crore INR. These acts will lead to China suffering huge losses in the coming quarter, and perhaps in the subsequent ones as well.

In Europe, most of the automobile companies and electronics manufacturers have temporarily closed their factories or minimized the production output, which results in loss to the global trade. For instance, Daimler and Volkswagen declared that they will temporarily shut down production of vehicle and engine at its factories in Europe due to the coronavirus outbreak. The initiative was aimed for the safety of their workers, nonetheless, the closure of factories by such major automobile manufacturers will result in a loss in automobile production, which in turn, will affect the automobile sector in Europe and the world.

The scenario in India is also not a pleasing one. Manufacturing in India has stopped, except for the rice milling sector where production has reportedly dropped by half. Prior to this, manufacturing growth had only declined in two specific quarters over the last 20 years.

To sum it up, countries which have been major exporters or importers are at the epicentre of this pandemic, resulting in collapse of major industrial operations. COVID-19 outbreak has derailed the supply chain cycle across countries and continents. Product manufacturing lead time has gone higher. Manufacturers are also affected, but since they work on a long-term inventory planning structure, they are better poised to face this crisis. This scenario will anyway cut the demand for the next six months to even a year – the coming days would be able to make us envision better.

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