15 April 2020

Coronavirus & Manufacturing

Companies: What are the Effects &
How we can Fight Them.
I-Batch Presentation
I-Batch Group 4
Kossi Mawouéna
Shrey Mittal
Leonardo Valencia

DO WELL DO GOOD
Executive Summary

• The impact on the sales of the world’s largest manufacturing companies.

• Sales of “essential” manufactured goods have skyrocketed due to panic buying.
• Medical goods: In the USA, many medical goods experienced a large increase in sales.
• Sales of “non-essential” manufactured goods have decreased as many governments have ordered
a halt in operations of non essential item’s stores.
• Online sales: During the crisis, Italy as experienced a large increased in sales through online
platforms.

• The impact on the production and workforce of the world’s largest manufacturing
companies.
• Coronavirus negatively impacted 20% of the global supply chain by affecting China.
• Productivity levels on home office workers are expected to decreased during the Pandemic.
• Due to decreased productivity levels and a contraction in the PMI, a decrease in production for all
manufacturing industries is expected.
• Case Study: More than 1 million employees in the European automotive industry are being affected
by COVID-19 and their production is expected to decrease.
• Furthermore, the European automotive industry has already experienced a production loss of
almost 1.5 million units.

• What these companies can do in order to mitigate the effects of COVID-19 on their
businesses.
• Production and storage could be relocated to areas less affected by the outbreak.
• Online retail solutions could be promoted to help mitigate the damage on revenue during the crisis.
• Automation could be used in order to avoid on-site workers spreading the disease.
• With many embracing the use of robots and drones in supply chains, manufacturing companies
could invest in automation.

2
The impact on the sales of the world’s largest manufacturing
companies.

• Sales of “essential” manufactured goods have skyrocketed due to panic

buying

• Medical goods: In the USA, many medical goods experienced a large

increase in sales.

• Sales of “non-essential” manufactured goods have decreased as many

governments have ordered a halt in operations of non essential item’s
stores

• Online sales: During the crisis, Italy as experienced a large increased in

sales through online platforms.

3
 Sales of “essential” manufactured goods have skyrocketed due to
panic buying.

Growth in sales value of FMCG Buyer Growth after 4 weeks vs. YAG
products due to coronavirus in Italy at 23 February 2020 in the USA
2020 (%)
(%)
Refrigerated Milk
Canned meat 406% 92%
Substitutes - All Other
196%
Toilet paper 146% Hand Sanitizers 64%
129%
Canned tuna 217% Frozen Other Breakfast
111% Food 46%

Pasta 174%
107% Spray Disinfectant 29%
Tomato sauce 129%
103%
Cloth All Purpose Cleaner 20%
Flours/mixture 163%
85%
Ready To Serve Rice 17%
Bottled still water 107%
74%
Mozzarella 188% Internal Analgesic Liquids 15%
60%
White bread 89% Convenience / Pet Still
Water 13%
52%

Lombardy Rest of Italy

Source(s): IRI´s COVID-19: Impact on CPG and Retail, page 11;
FMCG:Fast Moving Consumer Goods; YAG: Year at Glance Copyright ©2019 ShARE. All Rights Reserved 4
 Medical goods: In the USA, many medical goods experienced
a large increase in sales.

Increased sales of health-related items amid COVID-19 concerns

(%)
319

262

179

78 73
54 47
34 32
19

Medical Masks Household Masks Hand Sanitizer Thermometers Aerosol Disinfectants

After 1 Week After 4 Weeks

• Hand sanitizer sales are up 73% in the same four weeks, but we can project, based on trends
elsewhere, that sanitizer sales won’t peak for some time.
• Regionally, the West Coast is definitely leading the growth of medical mask sales.
• Specifically, drug stores in the Los Angeles and San Francisco metropolitan areas have posted
year-to-date dollar growth of 340% and 541%, respectively, compared with this time in 2019.
• Across mainstream U.S. outlets across the country, medical mask sales are up 239%.

Source(s): Nielsen Copyright ©2019 ShARE. All Rights Reserved 5

 Sales of “non-essential” manufactured goods have decreased as
many governments have ordered a halt in operations of non
essential item´s stores.

Decrease in expenditure due to the coronavirus (COVID-19) in Mexico &

the USA in March 2020
(%)

63%
Leisure expenses
38%

53%
Restaurants
30%

49%
Transport
27%

48%
Fuel (gasoline)
36%

United States Mexico

Source(s): Statista Copyright ©2019 ShARE. All Rights Reserved 6

 Online sales: During the crisis, Italy as experienced a large
increased in sales through online platforms.

Increase in online sales in Italy between February and March 2020

(%)
114%
102%
94%
90% 87% 88% 87%
81% 82%
74% 90%
67% 70%
61%
69%
49% 45% 47%
52%
42%

Comments
• Many consumers have been increasingly worrying about worry about public places, providing
opportunities for the e-commerce business to thrive during the crisis.
• Most online sales revenue comes from either health, “necessity”, or productivity products.
• In 2020, e-commerce is expected to represent 12% of total retail sales and 25.5% of all
home furnishings sales, however, a change in consumer behavior in the first quarter of this
year due to the coronavirus can impact the future quarters for 2020.

Source(s): Statista ; Forbes ; Amber Engine Copyright ©2019 ShARE. All Rights Reserved 7
The impact on the production and workforce of the world’s
largest manufacturing companies.

• Coronavirus negatively impacted 20% of the global supply chain by

affecting China.

• Productivity levels on home office workers are expected to decreased

during the Pandemic.

• Due to decreased productivity levels and a contraction in the PMI, a

decrease in production for all manufacturing industries is expected.

• Case Study: More than 1 million employees in the European automotive

industry are being affected by COVID-19 and their production is expected
to decrease.

• Furthermore, the European automotive industry has already experienced

a production loss of almost 1.5 million units.

8
 Coronavirus negatively impacted 20% of the global supply chain
by affecting China.

Today, China is a nuclei of global business transactions. Most the world's supply chains are highly
dependent on China, which accounts for 20% of world exports. Even if a company does not have its
suppliers in China, it is very likely that part of the supply chain will pass through that country. Below
are two major impacts of this virus on the global supply chain:

• In Retail / FMCG, we can

Share of All Imports of Intermediate Products
observe up to 80% decrease
Drop of Coming From China
in sales of some cities.
demand in (%)
• The impact on China’s GDP
China
is expected to be between
$30-100 Billion.

Drop of • There´s been a trade impact

supply in of 15,597 millions based on
China a drop of Chinese supply

• There are delays in the

delivery of goods from
suppliers in China and Asia.
Delays in
• Companies like Apple,
Delivery
Samsung, Amazon
<15% 15-25% 25-35% >35% N/A
announced delay up to 1
month .

Source(s): ABC Supply Chain; Havard Business Review ; freightwaves;

Pymnts; Forbes; UN-CTAD Copyright ©2019 ShARE. All Rights Reserved 9
 Productivity levels on home office workers are expected to
decreased during the Pandemic.

We interpret the result of Nicholas Bloom’s (professor of Macroeconomics at Stanford

University) study about home offices

• According to Bloom´s investigation productivity levels are expected to

What the
decrease during this pandemic, as most home office workers were not
results show prepared for this, they have been thrown out on this situation

• Productivity levels will be down dramatically and as a result of that there´s

What´s the going to be a long run cost in 2020
economic
• Innovations in the technological and scientific area will be stop during this
cost of this?
year and probably 2021 too

• All this situations points out an explosion of mental health issues leading to
What´s the depression
personal cost • We can see studies of how levels of depression and mental health issues
of this? goes up after their retire. This case is not the same but it is a very similar
phenomenon.

Source(s): Stanford University Copyright ©2019 ShARE. All Rights Reserved 10

 Due to decreased productivity levels and a contraction in the
PMI, a decrease in production for all manufacturing industries is
expected.
Purchasing Manager’s Index (PMI)1 as of March 2020
(points from 0 to 100)
52.5 52.3
50.1 50.7 50.0 49.8 49.0
48.5 48.3 48.0 47.8 48.7
46.9 45.7 45.4
44.2 43.2 42.4 41.9
40.3 40.3 39.7

February March
100 ×𝑃1 + 50×𝑃2 +(0×𝑃3 )
1: 𝑃𝑀𝐼 = , Where P1 is the number of people with increased productivity, P2 is the number of people with no change in productivity, P3
𝑃1+𝑃2 +𝑃3
is the number of people with increased productivity
Source(s): Manufacturing PMI Copyright ©2019 ShARE. All Rights Reserved 11
 Case Study: More than 1 million employees in the European
automotive industry are being affected by COVID-19 and their
production has decreased greatly.
Number of Employees in the European Automotive Industry Affected by
the Pandemic as of April 2020
(Thousands)
Germany 569
France 90
Italy 69
Sweden 67
United Kingdom 65
Spain 60
Czech Republic 45
Hungary 30
Romania 20
Slovakia 20
Poland 17
Austria 14
Netherlands 14
Finland 5

Source(s): ACEA Statistics Copyright ©2019 ShARE. All Rights Reserved 12

 Furthermore, the European automotive industry has already
experienced a production loss of almost 1.5 million units.

Production Lost in the European Automotive Industry due to the

Pandemic as of April 2020
(Thousands of Units)
Germany 457
Spain 264
United Kingdom 127
France 114
Czech Republic 90
Slovakia 81
Italy 80
Romania 51
Hungary 48
Poland 45
Sweden 18
Netherlands 17
Austria 16
Finland 11

Source(s): ACEA Statistics Copyright ©2019 ShARE. All Rights Reserved 13

What these companies can do in order to mitigate the effects of
COVID-19 on their businesses.

1. Production and storage could be relocated to areas less affected by the

outbreak.

2. Online retail solutions could be promoted to help mitigate the damage

on revenue during the crisis.

3. Automation could be used in order to avoid on-site workers spreading

the disease.

4. With many embracing the use of robots and drones in supply chains,
manufacturing companies could invest in automation.

14
 Production and storage could be relocated to areas less affected
by the outbreak.

Evaluating the effectiveness of the relocation of supply chain components

• Allows production to continue despite the crisis

How would it
- Prevents supply chain bottlenecks.
help?
- Prevents revenue loss due to supply shortage.

• Efficiency
- Large manufacturing companies typically have large, complex supply
chains that operate at near perfect efficiency. Changing any component will
likely decrease efficiency.
Obstacles in • Costs & use of resources
implementing - Closing down a factory/warehouse/etc. and finding a new location and
such a employees would result in a use of valuable capital and resources, that may
procedure be more useful for other projects.
• Risk of spread into new location
- Even if a manufacturing company decides to move some of its operations,
there is always a risk that the disease will spread in the new region.

If the supply chain team can find a location which does not impact supply
chain efficiency and does not require a lot of resources to relocate to, then
Conclusion this may be a plausible idea. Samsung and Apple, for example, have shifted
some of their production from China to Vietnam.

Source(s): The Financial Times; CNet; Morningstar; RBW Logistics Copyright ©2019 ShARE. All Rights Reserved 15
 Online retail solutions could be promoted to help mitigate the
damage on revenue during the crisis.

Amount of Increase in Online Sales of Products One Week After

National Emergency Called (USA)
(%)
Legend:
600.0% Green represents hygiene products
590.0% Dark Grey represents “necessity” products
Blue represent other goods

420.0%

305.5%

200.0%
178.0%

68.0% 57.0%
37.0% 50.0%
26.0%
5.1%

-5.0%

Source(s): Albertsons Cos; Ammo.com; JD.com; Nielsen; eMeals;

Carrefour; Minibar Delivery; AO.com Copyright ©2019 ShARE. All Rights Reserved 16
 Online retail solutions could be promoted to help mitigate the
damage on revenue during the crisis.

How we could interpret the results and implications

Should we look at the data in the previous slide, it is evident that in general, the
What the
overall sales of manufactured goods online has increased significantly in
results show the short term, especially for hygiene and necessity products.

Despite the increased sales in the short term, few analysts and
manufacturing companies with online retail platforms are optimistic:
• Supply chain issues caused by the virus may result in a severe shortage
Behavior of crisis in the future, which can result in lost potential revenue
companies
and analysts’ • Additionally, even though current demand is high, a long term crisis may
cause low consumer confidence, resulting in lower spending.
perspectives
• According to a survey by Digital Commerce 360, 36% of online retailers of
manufactured goods are predicting a decline in revenue.

If a manufacturing company is producing necessity, hygiene, or tech

products, devoting additional resources to online retail may be beneficial.
Conclusion However, if the manufacturing company sells items such as cosmetics (items
used in social/professional gatherings), online retail may not be the best
solution.

Source(s): eMarketer; Digital Commerce 360; CNBC; Fox Business Copyright ©2019 ShARE. All Rights Reserved 17
 Automation could be used in order to avoid on-site workers
spreading the disease.

Evaluating automation as a solution to some problems caused by the crisis

• Reduces the time required to complete tasks by adding extra “labour”.

How can
automation • Minimizes the need for human-to-human contact.
help? • Keeps production continuing, despite the sudden shortage of labour.

How have • Alibaba

some - Has deployed robots in many of its warehouses to manage their
companies inventories, preventing the lack of human labour to lead to a shortage in
used supply.
automation to • JD.com
their - Uses drones to deliver packages to customers, minimizing human-to-
advantage human contact and keeping human delivery drivers safe.

With many companies, especially in China, embracing automation and keeping

their supply chains active as a result, it is evident that automation has the
Conclusion potential to resolve many of the supply issues companies are facing due to
the current crisis.

Source(s): Forbes Copyright ©2019 ShARE. All Rights Reserved 18

 With many embracing the use of robots and drones in supply
chains, manufacturing companies could invest in automation.

Short-term Mid-term Long-term

• Telemedicine • Goods delivery • Epidemic

• Sterilization bots • Surgery robots prevention
Uses • Therapy robots
• Warehouse • Medicine
management development • Inside-MRI robots

• Governments are • With the market • Should the

firms currently having declined, implementation of
Benefits of more willing than many startups robots and
investing ever to try out with useful drones be a
now automation technologies are success, a large,
• Many immediate in need of more long-term market
uses available investments would be opened

• New technologies • Can limit the • Should the

are expensive to development of implementation of
Downsides develop other projects robots and drones
of not be successful,
• Mass production • Many still
investing it would limit the
can be a disapprove of
now long term adoption
challenge in the robotics due to
short term fear of job loss of automation.

Source(s): Forbes; GPS World; Crossco,; Online Sciences; ASME Copyright ©2019 ShARE. All Rights Reserved 19
Questions?

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