LONDON--(BUSINESS WIRE)--SpendEdge, a global procurement market intelligence firm, has announced the release of its position paper on COVID 19 impact risk analysis of the manufacturing and construction industry and risk mitigation measures to streamline sourcing and supply chain operations in this industry.
Highlights of this position paper
Analysis of the Coronavirus Impact on the Manufacturing and Construction Industry
Quarantine and travel bans have choked the supply sources of materials and mobility of the labor force that are the pillars on which the manufacturing and construction industry stands. While these measures are essential to contain the coronavirus impact, these have severely disrupted supply chain operations in this industry.
Closure of operations in the manufacturing hubs that are now identified as the COVID 19 hotspots have furthered added to the supply shortage in the global manufacturing and construction industry. Findings in this position paper stress on the importance of the next weeks that are expected to exert major impacts on the demand curve as the coronavirus impact becomes more evident and troubling in the manufacturing and construction industry. It is apprehended that the supply bottlenecks can lead to a very weak growth scenario for industrial products.
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Demand-Supply Trends Governing the Manufacturing and Construction Industry Sectors
The downward slide in oil prices is exerting a rippling effect on the growth scopes in the manufacturing and construction industry. The decline in oil price is limiting large-scale investments in the oil and gas sector which is reducing the demand for industrial products from this segment. In Western Europe, supply bottlenecks are prohibiting enterprises from catering to the sudden surge in the demand for healthcare infrastructure construction as the coronavirus impact on the manufacturing and construction industry becomes more evident.
Demand-Supply Trends in the Construction and Building Sector
- Nearly 100 countries have observed a complete or partial closure of all the commercial construction activities owing to the current pandemic impact. This compelled a majority of construction services suppliers across major countries to shift their focus on the delivery of alternative/similar service lines such as facilities management to improve their revenue streams.
- In the current situation, construction suppliers are facing major cost escalations while completing existing projects. To minimize these escalations, they are procuring materials from areas that are in proximity to the project sites.
Demand-Supply Trends in the Automation and Controls Sector
- Healthcare institutions are exhibiting high demand for disinfection robots while catering to patients with Covid-19 infection and other diseases.
- Suppliers are focusing on their R&D activities to cater to the increase in demand for automated systems. However, the increased supply of such systems will be visible only after about 4 months
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Risk Mitigation Activities to Address the Coronavirus Impact on the Manufacturing and Construction Industry
Revisiting contract terms
Considering the chances of extreme volatilities in commodity and energy prices, it will be prudent of buyers, who are known to make significant investments on commodities and energy items, to re-engage their suppliers and explore mechanisms to safeguard the upsides in pricing. In the face of the worsening coronavirus impact on the manufacturing and construction industry, it is advisable to fix the short-term procurement price or at least keep a maximum limit on upside price movements.
Buyers are advised to source from countries that have a lower count of Covid related cases or are still working in a relatively normal environment. However, it is crucial for buyers to factor in the possibility of increased prices in these geographical regions due to an increase in demand for industrial items.
Focus on creation of digitalized/automated procurement platforms
Delay in the procurement process of Industrial goods may extend the buyer’s production lead time as the coronavirus impact continues to affect the manufacturing and construction industry. Hence, buyers should focus on the digitalization of the entire source to pay process which can fasten the procurement process by as much as 20% and result in the timely completion of projects by buyers.
To stay on top of latest trends and supply market information, check out SpendEdge’s knowledge center on coronavirus impact assessment.
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