TAPA APAC’S ‘CORONAVIRUS IMPACT’ WEBINAR DISCUSSES THE CURRENT MANUFACTURING SITUATION IN CHINA
To provide a clearer understanding of the manufacturing situation in China and its impact on operational activities, supply chains and employees, TAPA APAC hosted a special ‘coronavirus impact’ webinar, sharing the expert insight of David Collins, Chief Executive Officer at China Manufacturing Consultants (CMC) Pte. Ltd., a consulting firm specialising in providing business solutions to companies involved in global supply chains and manufacturing activities in China. Vigilant summarizes his comments…
What is the effect of the coronavirus?
The effect to China has been severe. Wuhan and numerous other cities are still under lockdown. Under pressure from the Chinese government, cities are slowly returning to work. Local authorities inspect companies individually before issuing certifications for operations to commence. At the beginning of this process, about 40% of the people went back to work. Some companies have up to 90% of their workforce now but the numbers vary wildly.
What is the global impact of COVID-19?
China is the world’s workshop, hence no country or industry is likely to escape disruption. In addition to production delays, the flow of freight containers is heavily reduced. Busan, South Korea, for example, is 30% below the normal volume of containers since so many of the containers are stuck in China. Most electronics are made in China and this will have a detrimental effect on any industry using electrical parts, which explains the already-affected automotive industry.
How much longer will the shutdowns be in place?
In most of China, the shutdowns are over, with the exception of Hubei province. The real problem is that movement is still restricted, so people leave their city or are afraid to leave. In Shenzhen and Dongguan, the governments were cooperative and worked hard to get companies back working. Much of the rest of China is following this plan. I believe that most of China will be up and running by the middle of March at the latest. Wuhan is a different story and this area is unpredictable.
Can staff from other countries go to China?
The answer is yes and no. Many countries have stopped allowing people to go to China and most airlines have stopped services. Although there are still ways to travel to China, it is difficult and expensive to do so. Furthermore, the real problem is coming back. Most western countries require a 14-day quarantine on return from China and many Chinese cities will not allow entry without a city-specific ID. I recommend that companies do not send people to China for the near future.
Should we move out of China?
No, you should not move out of China with coronavirus as the main reason. Nonetheless, there are a few exceptions, one of which is when you already had plans to move and have good economic reasons to do so. Then there is no reason to stop. China’s supply chain and manufacturing is huge and cannot easily be replaced. According to a report from Standard Chartered Bank, it estimates that close to 300 million Chinese are likely to join the middle class in the next 15 years, which translates to a huge opportunity for businesses. Moving out of China will not stop the fundamental problems that are existing now in China and you may miss the upcoming opportunity.
How can we mitigate current and future risks?
At this crucial period, it is necessary to update or create a Business Continuity & Recovery Plan (BCRP) for future risks. You may explore alternative suppliers, taking note of costs and feasibility. Companies can look at increasing factory productivity to reduce the number of people needed and allow production to continue despite labour shocks like this. Standard work instructions for each job must be readily available for new employees to be taught quicker if labour availability decreases rapidly. Another strategy is to implement a robust planning system in order to plan and adjust product mixes quickly and easily to market changes. These mitigation strategies have the added benefit of improving overall operations and leading to better productivity, costs, and cash flow.
About the presenter:
David Collins is an expert in leadership, lean manufacturing and employee engagement. With over 30 years of manufacturing experience in the automotive, aerospace, computer, furniture and chemical industries, he has held several leadership positions with international assignments for numerous global automotive and electronics suppliers and manufacturers. David has helped to set up five manufacturing facilities from scratch in the US, Canada and Mexico, including a $450 million project.
To hear the webinar in full click here