Logo of Phnom Penh Post newspaper Phnom Penh Post - Winds of change amid and after Covid




Winds of change amid and after Covid

Content image - Phnom Penh Post
Employees work on a battery production line at a factory in Huaibei in China’s eastern Anhui province. STR/AFP

Winds of change amid and after Covid

Covid-19 has deeply impacted the world, bringing challenges to various industries. In the post-pandemic era, reshuffles in the global supply chains and accelerated digital transformation will have a profound impact on China’s manufacturing industry.

The pandemic has reshuffled the global supply chain. The safety of supply chains has become the top concern as the manufacturing industry struggles out of the pandemic into an unknown new normal. China’s shrinking cost advantages have also increased the desire of multinational corporations to return to their home countries or move to countries in Southeast Asia. In addition, geopolitical uncertainty has the potential to reshape trade and investment flows.

Will manufacturers diversify their supply chains for greater safety or shift toward domestic self-sufficiency? Most strategic sectors that produce necessities for national security or public health will increase sourcing from and production in their home countries. For instance, some manufacturers in the US are helping suppliers finance new plants or collaborate with similar manufacturers to build a supply network. Nonstrategic sectors are likely to follow the economic logic of pursuing safety, cost advantage and efficiency through supply chain diversification.

The pandemic has accelerated the adoption of technology. One thing most would agree on is the digital transformation of industry will speed up since businesses have been forced to make a rapid switch to digital tools.

Manufacturers are facing the increasing pressures of low margins and fast changes, therefore they need transparent supply chains and predictable demand to guide production and control costs. The answer lies in smart factories. For manufacturers, the ability to track quality and process parameters throughout the whole production chain will become a competitive advantage.

At the same time, the pandemic is changing the manufacturing workplace and workforce in many ways – office workers telework where possible, factories are stagging shifts to reduce the number of workers taking lunch and breaks at the same time, production lines have increased the use of collaborative robots, and companies are increasing their collection of their employees’ health data. One should expect a learning curve as manufacturers devise new ways of working, one that will involve more remote workers and automation.

The changing global manufacturing prospects and trade landscape combined with China’s solid plans for industrial upgrading are pushing the Chinese manufacturing industry into an important transformative stage. In other words, China’s manufacturing is transforming from scale growth to quality enhancement.

China’s 14th Five-Year Plan (2021-25) is expected to include a greater focus on industry value chain upgrading, core technology breakthroughs and green manufacturing, and will be the policy blueprint for this transformation. The recently launched “New Infrastructure” initiative that fosters digital infrastructure will enable the growth of all industries.

There is no doubt that manufacturers of different scales in various sectors will have different priorities and approaches to deal with the new normal. Manufacturers should figure out strategies to survive the pandemic and shrive for quality growth.

They need to rethink their industrial footprints and product portfolios. Manufacturers in China, especially export-oriented ones, are faced with excessive inventories and constrained external demand. Amid order cancellations from foreign clients, manufacturers are shifting to the domestic market in search of customers.

Shifting to the domestic market means a completely new way of doing business – export-oriented manufacturers will have to develop their own brands, take care of marketing and sales, adjust product specs to better serve domestic clients, and face fiercer price competition.

Manufacturers need to find ways to cut costs and increase productivity through automation and improvements in management. A wave of mergers and acquisitions is likely in the coming two years, followed by post-merger activities in product portfolios and industrial footprint adjustments.

Also, they will need to refocus on digital transformation with new purpose. Digital transformation is not just about technology and it has to be aligned with operational excellence.

Operational excellence covers product design and development, production planning, supply chain management, manufacturing execution, and the operational effectiveness of people, processes and assets. The key for operational excellence-driven transformation is transforming raw operational and assets data into actionable insights to enable humans and machines to take right actions at the right time to continuously improve performance.

The industrial internet of things (IoT),5G, smart sensors and machine learning are playing an increasingly important role here. For example, we are seeing some manufacturers optimising their production planning, using advanced artificial intelligence analytics and rescheduling based on the prediction of inventory available or changing demand.

To achieve digital transformation objectives, manufacturing companies need to align leadership, talent and culture with clear-cut vision and a human-centred approach.

Meanwhile, manufacturers will need to be prepared for an evolving workplace and workforce. We learned during the lockdown that increasingly a lot of work can be done remotely, and we are able to run factories remotely from behind a screen. These convert the workplace for the workforce.

Automated systems and robotics in manufacturing are enabling employees to focus their skill sets on more value-added tasks, by taking up some of the more repetitive processes. Further, there will be a growing demand for skills, which generally requires a workforce with higher level of skills, technical knowledge and education. There will be likely a growing shortage of workers with the skills required for rapidly evolving jobs.

Ricky Tung is a senior partner and the Industrial Products & Construction sector leader of Deloitte China.

CHINA DAILY/ASIA NEWS NETWORK

MOST VIEWED

  • Hungarian exposes 90 to Covid in Siem Reap

    The Ministry of Health has discovered 90 people who have been exposed directly or indirectly to a Hungarian man infected with Covid-19. They all are required to quarantine at home and the hospital. The ministry is searching for other affected people. Among the 90, one is the

  • PM: West unfair to Cambodia

    Prime Minister Hun Sen released a message celebrating the International Day of Peace on Monday, saying that some major powers and western countries had been systemically cooperating to put political pressure on Cambodia as they did in the 1970s and 1980s. Hun Sen said pressuring

  • ‘Bad news is an investor’s best friend’ – unlocking investment potential in Cambodia

    It is time to shop. Economic woes provide good pickings for investors if they know where to look The poem If, written by English Nobel laureate poet and novelist Rudyard Kipling for his son circa 1895, is widely perceived as fatherly advice for John who would

  • PM requests Russia’s Covid vaccine

    Prime Minister Hun Sen has requested that Russia provide Cambodia with its Covid-19 vaccine after the former announced it planned on mass vaccinating its population next month. The request came on Thursday through the prime minister’s Facebook page as he met with Anatoly Borovik,

  • First ‘mobile kitchen’ in Cambodia enters service

    A catering company recently rolled out Cambodia’s first “mobile kitchen” – a $50,000 container capable of serving up to 200 people at a time. The kitchen is the brainchild of Seng Hok Heng Catering Services. At 4.4m-high, 6.8m-long and 2.4m-wide (expandable to 6.8m), the kitchen is equipped

  • Kingdom, China rebut basis for US sanctions

    The Council for the Development of Cambodia, the Ministry of Foreign Affairs and International Cooperation, and Tianjin Union Investment Development Group Co Ltd (Tianjin) have responded to US sanctions on Union Development Group Co Ltd (UDG), a Chinese-owned company currently developing the sprawling $3.8 billion Dara