Five Things to Know about the Coronavirus Impact on Manufacturing

Posted by Jim Kurtz on Jun 2, 2020 4:52:00 AM

Coronavirus Impact on Manufacturing

The Coronavirus Impact on Manufacturing

Nearly three months have passed since March 11, and everyone is still waking up to fresh news about how COVID-19 is impacting every facet of our lives. Although lockdowns are lifting and grocery and retail store shelves are seeing signs of recovery, it is a gross understatement to say this is a “difficult time” for the manufacturing and packaging industries. Here is SRM’s line of sight into what is happening to US supply chains in the age of Covid-19.

Behind the scenes, as anxious consumers hunted down paper products and meat to the point of near-extinction, supply chain executives had their own hunting to do. From employee safety measures, to stocking up on packaging, to meeting pandemic-grade demand spikes, here’s a list of 5 things we’re seeing impact our manufacturing clients.

  1. PPE and Safety Measures: When demand for PPE skyrocketed globally, manufacturers everywhere were suddenly hard-pressed to procure enough masks, gloves, face shields, aprons, and hand sanitizer to keep operations humming along safely. Beyond this, they were also challenged to implement a barrage of social distancing measures– including policy changes, clear plastic partitions, and big Xs spaced 6 feet apart taped on the ground.
  2. Absenteeism: Regarding production lines across the board, we have heard reports of 5-20% factory floor and administrative employees taking days off due to illness. Unfortunately, this leaves production lines and project teams both undermanned and under In cases where that one key employee is needed on-site to do that one linchpin task, the work simply doesn’t get done until their return.
  3. Transportation: Recent and sudden shifts in consumer demand has maxed out like never before. FedEx and Amazon stocks are up (since everyone is working AND ordering from home), but international shipping/trade has been utterly disrupted by quarantines and shutdowns, further narrowing margins, even when money is exchanged. Further, while the demands and pressures mount for drivers to deliver at unprecedented rates, it’s no secret that many are aging Additionally, some may also have underlying health issues.
  4. Packaging: In mid-March, while heads-of-households rushed to banks and stores to stockpile cash and TP, manufacturers were stockpiling packaging supplies. Abandoning their usual lean supply chain models, procurement professionals went to war to fatten the larder, bidding in bulk on paper, film, and flexible packaging to keep them operational for several months. Meanwhile, demand for plastic packaging, especially for produce, is going up on the retail side. This demand is driven by a need to convince consumers that everything possible is being done to limit the spread of the virus. In other words, squeezing tomatoes into a grocery store and allowing shoppers to hand select them may soon become a thing of the past.
  5. Order Fulfillment: The name of the game is doing more with less. Even running operations above capacity might not be enough. With restaurant and school cafeteria closures, retail sales in the food categories are up 25%, yet many are struggling to fill these orders due to mismatched packaging or distribution suppliers. Consider recent headlines of potato mountains, warehouses full of commercial-grade TP, and restaurant-destined livestock kept alive way past their expiration date.

What happens next? Consider this quote from a recent Deloitte article, “Embrace the long view. Resilient leaders stay focused on the horizon, anticipating the new business models that will emerge and sparking the innovations that will define tomorrow.” There is like the present, and SRM is already encouraging our clients and prospects to re-evaluate their business models to adjust for the environment in which they must now operate.

Click here for an overview of SRM’s Packaging Practice

Speaking of business models, SRM has an approach to its business engagements built around a shared savings model - taking budgetary pressure off of procurement while offering relief to bandwidth as well as reinforcements in several areas where the pain is acute, including temporary labor, transportation, and packaging contract evaluations. As we are seeing in SRM’s other industry verticals, hunting season for cost savings is now open – and it shows. While North America slowly starts re-opening restaurants and retail stores, the reality setting in is that the “new” normal has been replaced with the “now” normal…which will be the context for our future in business as well as in our personal lives.

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Topics: Manufacturing, Vendors & Contracts, Contract Management, Contracts