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How COVID-19 is impacting the heavy equipment manufacturing industry

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June 29, 2020

The curve isn’t as flat as leaders or citizens would like it to be. Globally, some countries are recovering but a minute percentage of humans worldwide are completely out of the woods. Economies have been shaken, livelihoods upturned and existences fundamentally altered.

And it’s only been about half a year.

So it goes as the novel coronavirus pandemic catches a second wave in some places, including the United States. Here, the case count has steadily climbed upward since mid-March and is up to 2.5 million, according to the Centers for Disease Control and Prevention. While part of that’s due to increased testing, data from Johns Hopkins University of Medicine shows even the percentage of positive tests — which allows for statistically relevant comparisons to previous time periods — has started to climb back up. It had been falling till about the middle of June.

Worldwide, the World Heath Organization lists 10.4 million cases with over half a million deaths. The situation is most dire in places like Russia, Brazil and India — all of which play a key role in the heavy-duty manufacturing space.

The virus’ potency and governments’ varying responses in the forms of shutdown and social distancing continue to send shockwaves throughout the global economy, with millions of workers losing their jobs and businesses small and large feeling the impact of a world fraught with uncertainty.

Heavy equipment manufacturing, of course, isn’t immune. The novel coronavirus has had a dramatic impact on the industry. And even after it recovers, it’ll likely look drastically different.

Consider:

  • One-third of heavy equipment manufacturing leaders said in a recent Association of Equipment Manufacturers survey they plan to lower their financial outlook by up to 30 percent for the next month. One in eight plan to reduce their projections by 30 percent for the rest of the year.
  • More than 33 percent of respondents to the same survey said they’ve furloughed up to half their employees, and about 20 percent have laid off as many as 10 percent of their staff.
  • Most major OEMs have experienced some sort of plant shutdown, though many are back online and starting to produce (albeit with lower demand than anticipated).

That’s a positive development as a traditionally resilient category is tested in ways it never has been before. Potential impacts in the long term include redesigned supply chains, a more digitally-oriented approach to both administration and production, and even more emphasis on the need for creative solutions across all departments as truck, construction, mining, agricultural, power generation and other heavy equipment manufacturers seek to climb out of the current hole they face.

Per a study from the University of Birmingham, manufacturers must start balancing cost control with risk; for example, producing in several locales rather than one. The time-tested, single-source, just-in-time delivery model isn’t going away, but “there is a real tension between optimization of [global production networks] and risks which ripple out across the globe. COVID-19 is the first time that these ripples have impacted every country and the majority of people living on this planet.”

Which is why advancements like new safety policies and procedures, remote conferencing, contactless tech, e-commerce, digital and AI-enhanced production tools and virtual simulations and testing, for example, are becoming more important by the day. The world was already moving that way; COVID-19 appears to have sped it up.

The good news is, this will pass. Researchers continue to work toward a vaccine, and while the pandemic isn’t quite like anything seen in the past century, the heavy equipment industry has weathered past storms.

“We’re really bullish on the future of manufacturing,” Ananth Iyer, senior associate dean of Purdue’s Krannert School of Management and director of the Dauch Center for the Management of Manufacturing, told OEM Off-Highway. Iyer’s school recently released a working paper examining the future of manufacturing, highlighting infection control, social distancing and expansion of technology as primary recovery factors.

“We want manufacturers everywhere to come out swinging because that’s the only way the supply chain will ramp back up,” Iyer said. “And we actually think that, however bad the pandemic gets, there is a bright future.”

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