Covid lockdown: Why electronic manufacturers are concerned despite relaxations

By: |
May 12, 2020 5:30 AM

As consumer electronics companies fire up their manufacturing units with limited employees and resources after taking permission from authorities, there are still supply-side constraints and issues related to movement of labour across states

Besides, many companies, especially small and medium enterprises, are worried about the sale of their products ranging for USB ports to smartphones to TVs, ACs and washing machines.

As consumer electronics companies fire up their manufacturing units with limited employees and resources after taking permission from authorities, there are still supply-side constraints and issues related to movement of labour across states, and in some cases districts in which these factories are located, as they have high incidence of Covid-19 positive cases.

Besides, many companies, especially small and medium enterprises, are worried about the sale of their products ranging for USB ports to smartphones to TVs, ACs and washing machines. Their fear is that since Covid-19 pandemic seems far from being stabilised, there are chances that government might again have to resort to stricter lockdown procedures, thereby impacting production and sales.

Deloitte India partner and leader (supply chain) Easwaran PS said, “Primary issue facing most organisations is the visibility of demand in marketplace. Moderation in demand (attributed to store shutdowns and last mile delivery constraints) requires organisations to effectively plan their supply side in terms of usage of assets and resources as they have a significant implication on product costs and profitability”.

Some fear that since there is already inventory with channel partners and in warehouses, producing more could lead to storage issues. On this Easwaran says, “We expect inventory in the chain given that all channels of sale had no activity in lockdown period. However, organisations may not be able to do the long wait of clearance to drive manufacturing as there is a fixed cost and associated production volumes that need to be factored”.

Some companies point out that Centre needs to devise a more robust plan, keeping in view ground realties in districts, for opening up industries and services as manufacturing states like Tamil Nadu, Maharashtra, Andhra Pradesh, Telangana and Karnataka are still battling the pandemic. This issue becomes more crucial as a section of experts within the government’s Covid-19 management task force have said that the month of June could see a surge in number of cases.

Industry body MAIT said local conditions play a major role. “One of your supplier could be a trader importing some nuts and bolts. Now, permission is given to factories to open, but this trader cannot open shop, so you would not get those nuts and bolts. How do you go about explaining that this trader is not in manufacturing, but is key to my supply,” MAIT CEO George Paul said.

However, some firm have started production and are working on strategies to reach out to consumers. Smartphone majors like Oppo and Vivo, which will begin production from Friday and Saturday, respectively, are already working strategies to reach out to interested buyers.

An Oppo India spokesperson said the firm will be operating with 30% workforce. “About 22% of Oppo retail stores are also operational in permitted zones, with around 17% OECs staff present on-ground. A host of stringent preventive measures have also been put in place for safety of our employees both at manufacturing plant and retail outlets. We have also introduced contactless service for consumers to stay safe and buy safe,” she added.

Similarly, a spokesperson for Vivo said the company will start production with 30% capacity and around 3,000 employees at its factory in Greater Noida with all procedures and precautions. It is using its Facebook page and e-Store to reach out to interested buyers. It has also leveraged Vivo brand ambassadors (VBAs), to help buyers get their preferred model. The VBAs contact retailers and online partners to source the preferred handset model for the buyer.
For the next three-six months, Deloitte’s Easwaran says, it would be more the dimension of demand than supply that will be of significance in the next few days. “We expect the supply side to be streamlined in the immediate months. Focus would be on addressing liquidity in the channel,” he added.

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