COVID-19 and the manufacturing sector

Property Management Company

As such manufacturing sector was reeling under the aftereffects of low demand & contracting GDP for 2019 and COVID had only made the down slide even easier! Manufacturing sector as such was undergoing a lean phase in terms of both production volumes and stiffer competition, which was really felt in the third quarter of 2019 and the effects were still lingering up to first quarter of 2020.

With the seven power houses of manufacturing sector contributing to almost two third of the total industrial output; it has been a very alarming situation even before the pandemic arrived on our shores. Only Fertilizers, Petroleum & Energy segments were able to contribute to the 40% of the manufacturing output projected for the first quarter of 2020. The writing is clearly painted on the wall that there has been a considerable shift towards Agricultural produce and power segments from both the govt & private institutions which are by and large able to maintain consistency. Hence, other manufacturing sectors like automobile, steel, cement, process. etc has lagged and will continue to do so for another 6 months due to growing uncertainty in production volumes which is again dictated by consumer demand.Now with the lockdown eased in many parts of the country; green shoots shall emerge, but it takes a lot of time to nurture, grow & expand the core manufacturing sectors contributing to industrial growth. Testing times ahead and it applies for both the consumer & supplier in every sense!!!!

Another scenario emerging due to COVID–19 is the shift in customer perceptions & risk-taking abilities with respect to their Capital & Operational expenses. Many industrial clients have delayed their CAPEX investments for this year and are exploring options of OPEX model from their vendors and partners. Due to reduced production levels, companies are striving to retain talent by engaging them in virtual environments and ready for revenue sharing models with few partners & vendors on the OPEX model. Few companies have taken bold decisions to change their vendor in FM business and many of the leading corporates are fearing to make the change & continue with their existing set up. Industrial output which has been declining in the first quarter has started to show signs of recovery in July 20 and should improve in the days to come .As companies continue to engage their work force in virtual environments and follow safe distancing in their assembly units; it is a great challenge for vendors & logistics partners to stay away from customer touch points and should innovate by embracing technology .Going forward; lot of strategic decisions must be revised to position the company in marketplace taking stock of current situation and conditions emerging from existing scenario With new initiatives & policies from govt of India restricting the number of foreign players & capping their investments; there will be huge opportunity for Indian companies to develop their infrastructure and nurture talent for the future.

Customer expectations are bound to change, and it will be remarkably interesting to see the outcome of change management from both the customer and partner.


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