Coronavirus fallout: When will manufacturing and logistics bounce back?

Investors in the manufacturing and logistics sectors will be keen to assess how long it will take both industries to recover from the coronavirus outbreak. It typically takes three to six months for these sectors to bounce back after containment measures – based on the experience of the 2003 SARS epidemic – however a “fast V-shaped recovery is becoming less likely by the day”, management consultants Bain & Company has warned.

Posted Tuesday, March 17th 2020
Coronavirus fallout: When will manufacturing and logistics bounce back?

Bain & Company says that, due to the fact the COVID-19 pandemic has spread faster and farther than its predecessors, with more stringent lockdowns and travel regulations,  local and multinational manufacturing and logistics companies are facing a range of difficulties — including labor shortages, struggles to ramp up manufacturing capacity, road closures and tight cash flows. This is in addition to the “cascading effects for companies around the world”, Bain & Company said.


The short- and long-term implications of these challenges vary depending on the sector. Bruno Zhao, head of Bain & Company’s greater China advanced manufacturing & services practice, said: Overall, industries that have been directly hindered by the pandemic, such as logistics, will suffer the sharpest blow – others, such as machinery manufacturing, may be only moderately affected.” He added: “Pandemics tend to delay the investment cycle, but purchase decisions mainly depend on long-term economic growth. As a financial crisis for small and medium-sized enterprises becomes more likely, however, the threat of a longer economic slowdown looms large.”


That said, a number of forces have positioned certain sectors for potential future growth, according to Helen Liu, a partner in Bain & Company’s advanced manufacturing & services practice. She explained: “The booming stay-at-home workforce, rising awareness of public health and surges in online shopping are a few trends that promise to reshape consumer behavior and business operations in the long run. Companies that are able to weather the shocks and respond to growing demand could find sustainable success.”


With regard to how the coronavirus has impacted on China’s manufacturing and logistics, research by Bain & Company has shown that, with regard to delivery services, for example, in the short term, with many Chinese shoppers being trapped at home, they have turned to ‘online-to-offline’ channels for consumer goods, especially for fresh products. “For example, volume rose three times at leading e-commerce food delivery platforms in February,” the research showed. It concluded: “After the pandemic wanes, we predict that many of these behavioral changes will stick – the sustained increase in online consumption will spur further demand and growth for delivery services.”

 

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