SA manufacturing sector has ‘small window’ to safeguard itself against Coronavirus
WHILE the containment of the Coronavirus (COVID-19) remains the biggest priority of governments and health organisations, businesses are starting to take a toll. As cities start to shut down in an effort to curb the spread of the disease, local businesses have felt the direct impact of this on income. The true impact of the pandemic on the economy still needs to be determined.
According to Sujeet Morar, principal at Kearney, a number of its partners in already hard-hit areas, such as Asia, Middle East and Europe, have been documenting their experiences and giving ‘safety guidelines’ for local manufacturing to help plan forward.
“There is a small window of opportunity for the local industry to act and to safeguard themselves, due to the fact that the virus has only recently hit us compared to the longer period it has been present in other territories,” says Morar.
In a report published early February, Business Impact of the Coronavirus, a Dun & Bradstreet, 938 of the Fortune 1000 companies have a tier 1 or tier 2 supplier that has been affected by the virus. While the final economic toll of the outbreak is unknown, it is already clear that the crisis will be far more disruptive than anything the world has experienced in the past, with Europe and America’s manufacturing now being slammed.
“Now is not the time for manufacturers to panic. The outbreak provides an opportunity for business owners to improve their business strategies and inoculate their companies against COVID-19,” added Morar.
He mentions that there are three global trends that exacerbate the damage the COVID-19 outbreak is having on the supply chains:
- The climate crisis and widespread environmental degradation profoundly impact global supply chains through increasing risks to available resources.
- Trade tensions increase uncertainty by disrupting supply chains and creating opportunities for local suppliers.
- Emerging technologies are reducing the importance of economies of scale, facilitating the location of production closer to consumers, and enhancing transparency between producers and consumers.
Morar says that companies are going to have to look at diversifying their supply chains.
“Shorter supply chains, geographic clusters of activity, and technologies, such as artificial intelligence, can bring more production to where the demand is. Everyone must develop a ‘sense and pivot’ capability. This allows them to detect potential blind spots in the face of varying external circumstances, such as the outbreak, and to build supply chains that can react swiftly to remove bottlenecks.”
This 5-point coronavirus checklist for businesses tells you what you can and must do right now:
- Assess the strength of your industry
Coronavirus is weakening already weakened industries. It’s the same as with us humans. Companies that are fit and healthy have a far better chance of surviving the impending coronavirus pandemic without lasting damage than those that are already suffering. Getting a consultation will help you assess the strength of your own industry and take appropriate measures.
- Get informed about your supply chains right now
With the announcement on Sunday that South Africa has 72 ports of entry in the country which are land, sea and airports. Of the 53 land ports, 35 were shut down on Monday 16 March. Two of the eight seaports were closed for passengers and crew changes. It’s no secret that the transportation and logistics industry is already feeling the effects of the epidemic on a massive scale.
- Review your business forecasts immediately
Your business forecasts are now hollow words. Be realistic and review them at once by drawing up several different scenarios for the next three to 12 months. For example, if significantly fewer people board an aircraft, B2C sales at airports will also decline. And the last-minute cancellation of the Mobile World Congress in Barcelona resulted in many companies with launch strategies for new products and services in the B2B and B2C segments that are now redundant.
- Plan your survival
Even though the low point is probably still to come, you should already be working out how you’re going to overcome this dip, because you’re not going to come out the other side just like that. Realistically, we’re talking here about two to three years during which the repercussions will be felt, although this will vary greatly depending on the sector.
- Don’t waste any more time
Reading points one to four has you worried? Let’s get started right away and erase the negative effects of the coronavirus from your balance sheet as quickly as possible. And see to it that future crises no longer give you such a headache.
Morar added that no one is in a position to predict exactly if and how the epidemic will continue to spread.
“Just looking at what has happened over the last couple of days and weeks should indicate how fast this can disrupt industries. It is critical that businesses start taking proactive steps to mitigate any negative fallout.”