Covid-19 Derails Supply Chain, Manufacturing Grinds to A Halt

The Covid-19 pandemic of 2020 has robbed millions of people of their lives, and the global economic crisis has led to various socio-economic impacts. Nearly all spheres of life are affected due to the spread of the virus. This global emergency has generated unprecedented economic shock, setting back the development of progress around the world. The pandemic has triggered enormous disruptions and vulnerabilities along the trade corridors, which are the arteries of any economy. This has shaken the countries that are entirely reliant on manufacturing and production sectors. This has entirely changed the landscape and is pushing companies to rethink their production processes.

Is This the ‘New-Normal’?

The lack of resources to meet the challenges posed by the pandemic has left the countries with the only option of lockdowns, trade, and travel restrictions. This further has derailed supply chains and brought manufacturing plants to a halt. As per the forecasts made by the United Nations Conference on Trade and Development, UNCTAD, there will be a reduction of 5 per cent to 15 per cent as there is a sharp decline in operations of manufacturing concerns owing to shutdowns.

Impact on Pharma Industry 

At present, China is leading the production and supply of active ingredients in pharmaceutical products, globally. The US's 13 per cent medical supplies and India’s 80 per cent pharma raw materials come from China. Though the pandemic has extended the capabilities of many pharma companies for the production of masks, ventilators, sanitizers, and cleaning products, however, restrictive trade has impacted the manufacturing units and made them suffer heavily. 

Impact on Fashion and Personal Care Industry 

Fashion brands are frequently canceling orders, thus, putting plenteous workers unemployed on the streets. A linen factory from Thailand, garment manufacturing companies in Turkey, Bangladesh, and various other countries have been shut.  As fashion companies face a decline in their sales and cannot make payments to their suppliers, a dark side of the fashion industry is exposed.

The industry producing personal care products like skincare, fragrances, hair care, has also witnessed a wide downfall and halts in operations both along online and offline channels of distribution. 

Impact on Food and Beverages Industry 

In the current market scenario, the consumers are worried about food shortages and thus stocking the supplies with them. This act has led to scarcity on food shelves disturbing the supply chain due to lesser workforce availability. As per the study by ANIA, a French trade group, the food and beverages industry has already suffered a revenue loss of around 22 per cent worldwide. 

The Sad Reality of This ‘New Normal’ 

The decrease in demands of non-essential products from end-users worldwide has stopped the production units for an unpredictable tenure. The saddest part of the pandemic is that workers are paying the price for the Covid-19 crisis. Trade unions and about 200 NGOs in Coalition are calling to establish the compensation of funds to provide financial safeguard to the affected workers in the manufacturing countries.  Herein, the producers will pay their workers a calculated fee based on the purchase value of their brands in a country. 

The countries that are reliant on manufacturing cannot negotiate on labour costs. The companies must behave responsibly and aid people with their living wages to better bridge such global emergencies.

Opportunities to Revamp- 

Though the manufacturing industries will face disrupted supplies and reduced demands, there exist opportunities for the countries to revamp by fostering companies to re-innovate and redesign. The companies can seek to – 

• Rationalize the product ranges and prices.

• Promote hygiene and habits of sanitation. 

• Change in the pricing of products based on consumer behaviour.

• Optimizing the distribution channels both online and offline.

• Manufacturers can also explore medium or full-scale automation along the edges of their processes to help reduce labor costs and make productions touchless. 

• Create new models to work directly with clients to share risks and rewards.

Besides, the governments can also bring changes in their labour laws to help improve the conditions of workers and their dependents.   

The author is Managing Director, Hula Global

DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.