The state of industrial
COVID-19 has turned into a global crisis, evolving at unprecedented speed and scale. No industry is immune and Industrial Equipment is no exception.
Industrial Equipment companies are grappling with the immediate impact of COVID-19 as both their manufacturing and supply chain operations are being disrupted, and their customers’ own operations face similar challenges. This is having an exponential effect down the whole supplier network, hitting Industrial Equipment companies with a lag, but at full force nonetheless.
In addition, COVID-19 has introduced new challenges that needed to be addressed quickly, including worker absence, restricted site access and collaboration, travel limitations, fatigue and new ways of working. And two things should be top of mind when planning a response: 1) ensuring the ongoing safety of your employees, and 2) mitigating the risk of any future disruption to yours and your customers’ business.
Learn how we are helping manufacturing companies maintain a safe and productive environment by leveraging our Industry X.0 Digital Worker Platform.
COVID-19 comes at a time of economic uncertainty
This comes at a time when Industrial Equipment companies were already facing severe economic headwinds with clear signs of a recession in their main markets around the globe. The global economy was cooling down (Global GDP growth declined by 13 percent from 2017-2019; Source: Accenture Research based on IMF DataMapper world economic outlook) and Industrial production in most global markets has strongly decelerated. The COVID-19 crisis is adding yet another vast layer of complexity to an already hugely challenging environment.
Industrial Equipment is critical to the world’s economy: with over $3 trillion in revenues it represents about 25 percent of the manufacturing GDP (21.2 percent of GDP in US manufacturing, 25.4 percent in Europe and 32.9 percent for Japan) with a significant workforce, up to 30 percent of all manufacturing employees across the globe.
The time to act is now, while preparing for the future
Industrial Equipment manufacturers must act now to preserve the integrity of their operations and protect their people while preparing for the ramping back up of their operations and the future post COVID-19. And while some companies have started responding to the immediate crisis—taking steps to protect their workforce, supply chains and operations—not all have. And even fewer have started to face the equally important challenge of planning for the new ways of working which will emerge as COVID-19 infection cases start to decrease significantly.
How to manage now
There is no 'one-size-fits-all' solution to the issues facing Industrial Equipment due to the scale and diversity of the sector. Global operations rely on international supply chains which are under immense pressure, while different regions and markets mean many different reactions to the COVID-19 crisis.
Right now, business continuity and prioritization is the focus
The scale of the impact on supply chains eclipses anything most Industrial companies have had to deal with. And right now, companies must ensure the most resilient supply chain possible whilst protecting their workforce. This requires them to:
(1) Establish a command center and begin rapid response deployment
(2) Rapidly adjust operations and continue response cycle
(3) Establish an ongoing operating capability
All of this must be done with a specific focus and prioritization on their customers' core needs, as client-centricity continues to be of the essence.
At the same time Industrial Equipment companies must enable virtual work whenever possible to protect their people while ensuring highest levels of productivity. This change in the current ways of working will clearly stress existing IT infrastructure and systems.
System resilience is of the upmost importance putting even more pressure than before on technology teams and IT infrastructure across the whole enterprise.
And digital channels must be leveraged to their fullest extent to keep commercial links with customers and partners as well as the products, machines and assets in operation.
But cash is becoming critical
The potential of lockdown is looming, and based on current cash reserves, Industrial Equipment companies can only afford a full lock-down of business for a maximum of 2-3 months.
Yet those same cash reserves are also vital to prepare the company to ramp up business and go back to industrial markets. This requires companies to (1) reprioritize investments and put on hold all non-essential investment programs, as well as (2) launch cost reduction initiatives across the enterprise with both immediate and longer-term impacts.
This makes managing the Covid-19 crisis a timeline battle: the remaining cash buffer vs the necessary financial demands to revive the company.
What's on the horizon: Reinventing Industrial
Industrial Equipment companies, while focusing now on maintaining their customers’ core operations, should also start anticipating the ramping back up of the business. They must take a longer-term view and think through the post COVID-19 implications.
Industrial Equipment will never be the same again
There are several critical business capabilities Industrial Equipment manufacturers will have to adjust. These are 'no regret' moves that should be anticipated: (1) a more elastic workforce and digitally enabled workplace, (2) differentiated and resilient supply chains by customer segment, (3) resilient and distributed IT infrastructure and systems and (4) digital channels and ecommerce platforms.
Industrial Equipment companies will need to scale their leverage of digital across the enterprise and its ecosystem – from PoC to scale deployment. But this requires rethinking the portfolio of products with an acceleration of the development of digital services.
The "What If" questions to ask
Building these capabilities, while mandatory, must be put in light of what’s possible post COVID-19. Leaders of Industrial Equipment companies should think through the following What if questions:
These are just a few of the What If questions that will guide CXOs of Industrial Equipment companies in the necessary reinvention of Industrial.
Companies who develop target-oriented action plans now to tackle these challenges – and who execute them when indicators show the time is right – will be revived, revitalised and ready to reap the rewards in a post COVID-19 world.