The first quarter of 2020 passed with a wave of challenges for the global manufacturing industry. Manufacturers were pressed with the responsibility of ensuring the safety and health of their workers. At the same time, they needed to safeguard their businesses from the uncertainty of the next few months — uncertainties that included market demand, constraints in logistics, supply chain blockages, and government-mandated emergency measures
As early as February, 53.1% of manufacturers confirmed the possibility of changing in their operations due to the coronavirus pandemic. Over a third (35.5% of the survey respondents) even said they were already seeing disruptions in their supply chains.
Why are Manufacturing Supply Chains Disrupted?
The nature of COVID-19, i.e., highly contagious, fast-spreading, and deadly to the immunocompromised, is not the only issue in this pandemic. The virus originated in Wuhan City. China, as a result, had to implement strict containment protocols to protect its people and keep the infection from spreading.
Bans on human travel and transport of non-essential goods within and outside China were implemented. Moreover, international airlines suspended flights — including those that carry cargo — to and from mainland China.
These containment measures mainly banned movements in and out of the Hubei province. But even after the Chinese government lifted the lockdown order at the end of March, residents all over the country were still encouraged to stay at home. Many factories in Shanghai, Zhengzhou, and Shenzhen suffered staffing shortages, as a result. This directly affected distribution companies and indirectly stalled end-users, i.e., oil and gas exploration companies that require a regular supply of frac plugs, downhole tools, and CNC machine components.
China has dominated the supply chain on raw materials since the mid-1990s. It supplies 70% of critical raw materials, primarily rare earth elements, metals, and minerals. Given the recent turn of events, disruptions in manufacturing and industrial supply chains became inevitable.
Coping Mechanisms: Outsourcing, Downscaling, and Innovation
The pandemic created economic environments that were utterly foreign and unprecedented. Like in all other industries, manufacturing companies have had to make quick and sweeping decisions to ensure their survival during and after the pandemic.
One of the measures manufacturers looked at was shifting part of their outsourcing to other countries. India and Vietnam are getting plenty of attention, particularly since the virus had quickly spread to other manufacturing hubs like Singapore and South Korea.
The Indian government, in particular, saw this opportunity to fill the gaps left by China’s lockdown and sought to fix issues that limit the country’s manufacturing potential (e.g., taxation, investor regulations, factor markets).
For Western manufacturers that have long been dependent on Chinese supply and labor, many found it more economical to practice lean manufacturing instead of creating more disruptions in their processes. They used their inventory coverage to keep “business as usual” while simultaneously looking for alternatives within their shores.
Manufacturers of personal protective equipment (PPE), for example, used 3D printing technology to produce face shields and ventilator components.
It bears mentioning, however, that quick innovation isn’t possible for all. Industrial manufacturers, for example, have on-site operations that are dependent on heavy, sophisticated equipment and cannot be done remotely. Industries like drilling and oil and gas well development are among the most affected.
Companies with ongoing offshore constructions could experience delays due to bottlenecks in supply shipments. When the alternative, however, is to push through using under-tested materials and equipment, delays are more palatable than increasing the risks for infrastructure-related catastrophes.
Manufacturers will continue to face challenges in the coming months. Until the pandemic is fully suppressed, everyone is called on to innovate solutions for supply chain and manufacturing challenges.