The Great Wall Of Economic Distancing

How have businesses changed their modus operandi in this pandemic? What are manufacturing units doing to maintain business with China in 2020?

2020 has fast-forwarded the technology revolution. In his book, The Fourth Industrial Revolution, Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, makes a compelling case for how this new revolution will be characterized by incremental advances in technology. He predicted the new frontier to be more of a seismic shift in real-time communications, unprecedented amounts of data-share, rapidly changing human behaviour and the dominant presence of the global economy and social constructs.

The worldwide pandemic is also characterized by lightning changes in the adoption of remote work environments, virtual information-gathering and knowledge-sharing underpinned by global connectivity driven by the Internet of Things and Smart Devices. The ability to connect and collaborate seamlessly at a global level for end-to-end visibility, control, and monitoring, creating virtually automated environments with continuous feedback loops – and oftentimes without human intervention – is of paramount importance today.

Manufacturing is one of the biggest sectors impacted by the pandemic. As such the Southeast Asian countries especially China would see a change in the way business is done in the near future. According to a report by McKinsey, China accounts for 35 percent of the global manufacturing output and is the largest market in the world for many products such as automobiles, luxury goods and mobile phones, accounting for roughly 30 percent or more of their consumption worldwide.

Domestic consumption fuels economic growth. To alleviate pandemic driven uncertainties global economy must continue with minimal interruptions. International manufacturing units & businesses with offices in China must consider intensifying their activities in 2020 and adjusting their mode of operations.

Made In China: Staying strong 

China, named as the “World’s Factory” thrives as a manufacturing powerhouse and the nation’s products seem to be everywhere. The reason is not limited to the abundant availability of cheap Chinese labour which brings down the production costs, but also because of its strong business ecosystem, low taxes and duties, and competitive currency practices. 

China remains a winsome total supply chain solution. There are very few countries in the world where you can find the A to Z’s needed to build something. A decision to move production from one base to another cannot happen overnight and requires a lot of planning, especially as businesses try to conserve costs as they struggle in an economic downturn.

The key question now is how soon will factories return to the routine?

Many companies announced temporary restrictions on travel to its manufacturing base in China. Lockdown and controlled work environments are still in effect in several locations.

A recent post by Forbes mentioned that the All-China Federation of Industry and Commerce recently surveyed over 80,000 private companies and according to them, as of early April, 91.4% of private companies were back to work. The bad news: less than half of them were operating at above 50% capacity. 

It is expected that businesses will take anywhere from six to nine months to return to normal. Institute of Supply Chain Management, CEO, Tom Derry states that “Insufficient data is a crisis.” Companies worldwide are now looking to create a strong data model supported by secure, reliable and latest technological advancements. 

How will the manufacturing units deal with the changing global scenario?

Manufacturers are preparing for a long period of uncertain exchange of demand and supply while maintaining hygiene and physical distancing. Companies are now crafting ways to prevent future disruptions and are exploring possibilities to increase automation and getting back to work. 

Non-Chinese and even Chinese manufacturers in China are consolidating different production units by shrinking on-site workforce and adopting technology & automation in their factories. 

Here are some of the things manufacturing companies are doing to keep their unit operational in China: 

• Adoption of smart manufacturing: Businesses are adopting advanced manufacturing processes, systems and models, based on information technology. 
• Increased collaboration: Enterprises have accelerated the pace of digital transformation and are making efforts to improve their system solution capabilities by increasing collaborations.
• Increased automation: China has become the largest market for industrial robotics worldwide. Robotics can lower labour costs and increase productivity and can also prevent a recurrence of future plant shutdowns.
• Digital supply networks: Companies are looking for ways to make their supply chain digital. For example, a manufacturing company for apparel is creating 3D samples of clothing online instead of the buyer taking physical trips to the country. 
• Improved digital capacity and quality: Manufacturing units are enhancing the production process to the ability of a system to optimize itself. China tech innovation is being tested and reimagined at new levels.
• Manage risks to ensure business continuity: Businesses prepare to anticipate changes and mould its plant to be proactive and prompt. 
• Drive virtual productivity: Companies continue to effectively manage plant performance virtually with the help of quantifiable data proving the large scope of opportunities in the field of automation, data and analytics. 
• Reliable connectivity: With many regulations now in place, companies all over the world, especially North America and Europe are looking for reliable network partners that can safely transfer the data back and forth to China. 
• Integration of data: As China takes up new initiatives in the field of industrial IoT, manufacturers have made towering improvements to their digital landscape with a major focus on the integration of data. 
• Fragmented manufacturing: The future is now headed to what is called fragmented manufacturing – many small factories of the world, rather than the idea of the ‘factory of the world.’

Transforming operations overnight is not an easy task. Few companies had planned for a long-term pandemic outbreak and even fewer have fully-operational business continuity plans for their manufacturing & production plant units in China.

Key considerations for a pandemic-ready operational plan for China-based units:

WHO’s strategic objective with response to the pandemic is to communicate critical risk and event information to all communities, and counter misinformation. 

It aims to achieve this objective by rapidly increasing international coordination to deliver technical support via existing mechanisms and partnerships. As this pandemic is also accompanied by overabundance of information – infodemic, there is a high demand for secure data transmission. 

As all companies are rolling out their pandemic-ready operations plans for their units in China, the key considerations include: 

• Investment in Technology: As this pandemic requires limited exposure and demands remote working, investment in technology, virtual collaborations tools and platforms is the need of the hour. 
• Data Transmission: This pandemic has stressed on the importance of an effective communication channel to exchange important and relevant information to the communities requiring speed and necessary bandwidth to communicate the volume of the information. 
• Security: Global pandemic raises concerns on global security. Considering the complexity and severity of important data and its potential human impact, companies are re-thinking the implications on business and developing specific crisis management frameworks around security threats. 
• Compliance: Companies are validating their contracts between country-to-country to reduce uncertainty of terms and payments, regulatory compliance and data sharing agreements and hence a comprehensive plan is mandatory. 
• Assess dependency on third parties: As more and more businesses increase their dependency on outsourced vendors, cloud service providers, and data aggregators, a resilience plan and an effective and robust communication strategy including social media strategy is essential.

It is time to incorporate these key considerations into your business continuity plan and redesign the framework on disaster recovery strategies and actions. This pandemic has cautioned all supply chain professionals, manufacturing units and companies with global presence to revise their strategic framework to mitigate the risk from such unfavourable conditions.