For many firms, the outbreak of COVID-19 has meant staff working from home and more use of teleconferencing, rather than face-to-face meetings.
However, it is a different situation for manufacturers because, despite investments in automation reducing the need for staff on assembly lines, they still need to receive raw materials.
The impact of COVID-19 is both global and unpredictable, and the supply chain shock it is causing will most definitely and substantially cut into the US$15 trillion worldwide manufacturing revenue currently forecasted for 2020.
Short-Term Impact: Initially, plant managers and factory owners will look to secure supplies, realising the constraints further up the supply chain and how much influence they have on their suppliers.
Long-Term Impact: Manufacturers will need to conduct an extensive due diligence process, as they need to understand their risk exposure, including the operations of their supplier’s suppliers.
To mitigate supply chain risks, manufacturers not only need to be flexible and not source components from a single supplier but also, as COVID-19 has highlighted, should not source from suppliers in a single location.
In software applications in the manufacturing setting, ABI Research forecasts that the supply chain impact of COVID-19 will spur manufacturers’ spending on Enterprise Resource Planning (ERP) to reach US$14 billion in 2024.
While many ERP platforms include modules for inventory control and supply chain management, in light of the outbreak, many manufacturers will also turn to specialist providers.
Supply chain orchestration requires software to be more than a system of record, providing risk analysis, running simulations, and enabling manufacturers to understand and prepare for supply chain shocks.
Summary And Recommendations
Industry 4.0 has received much attention; however, the focus has been on the activities inside the factory gates. But investments in robotics, Internet of Things (IoT) sensors, and more assume that assembly lines are still receiving a steady flow of raw materials.
COVID-19 demonstrates that manufacturers need to be as focused on their suppliers’ capabilities as they are on their factory floors.
A full analysis of the impact of COVID-19 on various industries is provided in ABI Research’s white paper, Taking Stock Of COVID-19.
Article by Stuart Carlaw, chief research officer, ABI Research.
To stay updated, view our latest coverage on COVID-19 here.
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