Covid-19 is Creating a Perfect Storm for Manufacturing April 14, 2020 • By Rafael Gomez, Director Product Strategy By Rafael Gomez, Director Product Strategy The pandemic’s economic impact started as a supply chain shutdown in Wuhan, China, but rapidly became a three-tier global disruption. As the virus spread, worldwide supply chain was interrupted, followed by an unprecedented shift in product demand and most recently by mandated factory shutdowns imposed on non-essential product manufacturing lines. Let’s discuss the impact of these disruptions and explore how we can mitigate these forces that threaten to destabilize manufacturing. Disruption #1 – Manufacturing and the supply chain The first disruption to manufacturing and the associated supply chain was in China. This was due to the outbreak of novel coronavirus (Covid-19) forced workers in that county to stay home rather than return to work after the Chinese New Year holidays. The resulting impact was that a significant amount of the world’s manufacturing capacity was essentially shut down for an extended period, more than two weeks in most of China, and much longer in Wuhan. This manufacturing and supply chain shutdown turned out to be just the start. As the virus spread, manufacturing shutdowns rapidly spread throughout Europe and the US. We are now faced with the challenge to scale additional capacity or rapidly move production from one facility to another, neither of which are feasible in the manufacturing industry. Disruption #2 –Demand volatility Just as China’s factories started to come back online it became abundantly clear that the challenges were global and that certain products like PPE (Personal Protective Equipment) and medical devices were in unprecedented demand in terms of volumes and urgency. Meanwhile, workers, who are themselves consumers, were staying home and not shopping, sending economic shockwaves around the world, resulting in a dramatic downturn in market demand for non-essential or discretionary products. Add government and administrative intervention, including the loosening of FDA regulations and the use of the Defense Production Act in the USA, and it’s easy to see how the manufacturing industry was suddenly forced to deal with the unprecedented reactionary shift in market demand. Disruption #3 – Workplace challenges The third disruption came in the form of government directives to shelter in place and enforcement of workplace social distancing (including new OSHA guidelines). Furthermore, non-essential factories have been shut down for an extended period. Once factories reopen, manufacturing plants will need to adhere to new and complex regulations. For example, when factories re-opened in China, they were mandated toto demonstrate ten-day supply of face masks for each worker. For example, a factory of 500 operators would need 10,000 masks to be authorized to continue operations. For many factories, an ongoing supply of PPEs in short supply and can be challenging and costly to obtain. Once manufacturing companies receive authorization to restart operation, workplace social distancing on the factory floor will impact every discrete manufacturing function Traditionally, manual assembly lines are designed with minimum operator to operator spacing to facilitate the passing of product between stations and to minimize required floor space. With the new OSHA directives, these manual lines will need to be redesigned to increase operator spacing. factories have met these challenges in creative style, like running extra shifts to redeploy staff and keep them distanced. The data-haves and data-have-nots Manufacturers that have embraced digital transformation, and the associated software-controlled automation, are best equipped to succeed in light of these disruptions. Real-time data drives visibility, which allows these “digital haves” to see the impacts of disruption sooner. Meanwhile, smart automation provides tools to adapt and adjust course quickly. Not only are these companies able to adapt production to meet increased demand or comply with new regulations, they are able to rise to the challenge of manufacturing the machines, devices, and consumables needed to help fight the virus, perhaps offsetting the loss of orders for ‘non-essential’ products. The Future is agile and resilient This perfect storm of disruption has exposed limitations of traditional manufacturing ecosystems and their associated supply chains. It has become clear that manufacturers need to move away from traditional analogue operational models, where production takes significant and costly time to set up on a line and requires constant tweaking or adjustment by experts with tribal knowledge of manufacturing processes. To minimize the impact of economic disruption, manufacturers need to operate in a new paradigm. This new version of manufacturing is fully data-enabled and software-driven to deliver an automated solution that provides the resilience to cope with disruption and the agility to react and adapt when that inevitable disruption occurs. Considering previous viral outbreaks and natural disasters, Covid-19 isn’t the first global event to disrupt manufacturing and the supply chain, and it certainly won’t be the last. One key learning from this unprecedented event is that companies that have embraced digital transformation of manufacturing are the most robustly equipped to survive this economic disruption. These forward-thinking manufacturers will surely reap the prosperous benefits of their proactive digital transformation. Want to learn how you can future proof your factory? Check out our free webinar, The Challenges EMS Companies are Facing and Overcoming in 2020.