Vijay Rajpurohit: Survival of Manufacturing in the times of Covid-19
by Vijay Rajpurohit
Covid -19 will test the best of companies in the manufacturing sector. As it happens in any crisis situation, only the strongest will survive.
Strong here would mean manufacturing companies with the following strengths :
- Large order book
- Large cash reserves
- A dedicated and motivated workforce
- Low debt
The above are good to have even in the best of times but their effects get accentuated during a crisis.
It is a fact that the 1st qtr of financial year ( Apr 2020 – March 2021) will be a wash out in terms of manufacturing output. Companies that have the above mentioned strengths will rebound and use the next 3 qtr to make up for the losses.
Depending on a combination of the above strengths, manufacturing companies would maximize or continue to hold on to their market share.
Manufacturing companies such as CPP with its large order book will have their capacities utilized to the maximum. It is important to note that a large order book does not automatically guarantee success. In these turbulent times it is important to have majority of the orders from clients who themselves are strong and would like to accept the products that were ordered during the pre Covid -19 days. In due course the other clients would also open up to accepting the products. So in effect ,the initial months would be spent on manufacturing products for the most active clients while the following months will then be dedicated to the clients who stabilize their businesses later.
In the coming months, it will be common for major plant / project owners to postpone their payments to manufacturing companies for products that were delivered pre Covid -19. In this scenario, cash reserves within manufacturing companies will ensure that they would still be able to pay to their employees and vendors in time thereby increasing credit worthiness.
It is a fact that in a while life will come back to normal even though it will be a new normal. In any case, a dedicated and motivated workforce would be key to restarting production from zero. This will be possible only if management shows leadership by continuing to pay full wages /salaries to their employees for the duration of the lock down.
This gesture, even though a very tough one from business standpoint but ethically prudent, will go a long way in motivating the team and will result in the employees continuing to work with dedication.
This is possible only if the organizations has comfortable cash reserves.
Needless to say a low debt will help the manufacturing company to come out of this situation sooner.
As suggested earlier, success will depend on how individual or a combination of the above mentioned strengths are brought to bear in order to not only survive but excel in this crisis.
Vijay Rajpurohit: MD: CPP
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