How manufacturing has been impacted due to pandemic?

Covid-19 pandemic has disrupted every sector. Organisations which are serving technology, healthcare have experienced a surge in demand while those that manufacture tools for aviation, energy, and the automotive industry have experienced a slowdown. Manufacturing industry is the hardest hit segment due to Covid-19. India’s manufacturing sector output shrunk by 20% in the first quarter of 2020. Last year, the lockdown and restrictions completely halted manufacturing and derailed the global supply chain. The manufacturing sector is facing major disruptions in the areas of standard manufacturing processes i.e., production, demand, and supply chains. The impact of Covid-19 on the global manufacturing industry can be divided into distinct manufacturing i.e., machinery, automobile, electrical and electronics, metal, aviation, etc. and process manufacturing sector includes chemicals, power sector, compressor and medical equipment, etc.

Impact on various segments of manufacturing
The hardest hit sector in the manufacturing industry is Component manufacturing. Due to pandemic, the factories and production operations of power equipments, automotive, electronics, aerospace, and others, got shut. China, the hub for the supply of raw materials to produce all the industrial tools, impacted due to Covid. It also impacted the whole supply chain due to lockdown in the entire world. Followed by lockdown, the manufacturing plants came to a halt and derailed the supply chain of several companies.

Power Segment
India along with all other countries witnessed the reduction in demand of electricity during Covid-19 outbreak. Under the conditions of the strict lockdown, industrial demand and commercial activity dropped substantially that impacted the industrial segment which manufactures equipment and products related to power sector. In addition, imports of heavy machineries, and other relevant equipment on which the manufacturing and other industries are significantly dependent also saw a slowdown.

Automotive Manufacturing Segment
Every industry has been affected by the pandemic and globally integrated automotive sector is no different. Factory disclosures, supply chain disruption, and declining demand have all taken rise. Due to Covid, the industry almost had been at standstill. A sustained shortness of consumer demand has significantly affected auto manufacturers’ cash flows and revenues due to lockdown. Suppliers facing liquidity issues may capitulate to worsening market conditions, causing extensive disruption across the entire manufacturing ecosystem.

Compressor Segment
The COVID-19 pandemic has massively impacted the global industrial air compressors market owing to the lockdowns imposed in most of the countries across the globe since March 2020. Air compressors are one of the major components of heavy assembly lines in numerous industrial areas. Industrial air compressors find applications in almost all industries – Oil& gas, Food and Beverage, Textile, Construction, petrochemical, and automotive, etc. The demand for these products has been hampered temporarily in recent months due to the shutting down of businesses globally. However, the demand for industrial air compressors is projected to recover in the coming months and grow significantly in the long term. Moreover, the rising preference for the use of highly compressed air systems is likely to emphasize the market growth in the future. Recent development, government initiatives and investments in the construction, infrastructure, and manufacturing sectors in India are expected to provide growth opportunities for the manufacturers and suppliers of industrial air compressors.

The silver lining remains in the fact that the pandemic has urged businesses to build resilience and the government has opened many avenues for manufacturing to gain momentum with a view to restore economic progress.

Opportunities that lie ahead
India witnessed improvement in the manufacturing sector since October 2020 with businesses growing production. According to annual national income by Government of India, the gross value added at basic prices from the manufacturing sector in India grew at a CAGR of 5% during FY16 and FY20.

Companies are investing a lot into R&D and innovation to be prepared for the future demand. Manufacturers are working on robust plan for the betterment of business on short notice, prioritizing work force, implementing other measures to stay resilient during crisis and monitor potential collaborations. Many industrialists are also optimizing and streamlining their distribution networks. They are now building better crisis management strategies and emergency response plans. The pandemic has shifted focus from global to local. In this situation, manufacturers are trying to bring supply chains closer to home and are creating opportunities. Manufacturers are leveraging automation and digital technologies to foster growth. However, there is a need for manufacturers to revisit their sourcing strategies and alternate suppliers. This will create future opportunities for manufacturers who are currently utilizing industrial tools, such as cellular connectivity and technology hardware that will guarantee better ROI.

Along with other sectors, construction sector also witnessed the impact due to the onset of the second wave of the COVID 19 pandemic. However, it is imperative to note that construction sector in India plays a significant role as it contributes to around 60% of the total investments; so, it needs to come back strongly to support the economy revival. The construction equipment industry in India has the biggest prospective for expansion and opportunities for growth and investment. The major factors that currently drive the demand for construction equipment in India mainly include infrastructural projects by public and private enterprise like building construction, tunnels, maintenance, road construction, power plants, ports, urban infrastructural developments etc. It has also seen incremental growth with the smart cities, fast train and clean India project has been started in India.

Overall, industry experts across manufacturing sector believe that the incorporation of software and automated technologies for factory operations and safety of the workers will enhance production capacities of companies in future.
 

- Frans Van Niekerk, Managing Director, Atlas Copco India