By Rob Stummer
INDUSTRIAL production in Malaysia dropped by 4.9% year-on-year in March 2020. This was the first decline in industrial output since December 2015, and the steepest since May 2011, as the economic impact of the Covid-19 pandemic took a huge toll on the sector, with manufacturing output tumbling (-4.2% vs 6.2% in February), mainly due to non-metallic mineral products, basic metal and fabricated metal products (-9.8%), electrical and electronic products (-5%), transport equipment and other manufactures (-10.2%), and food, beverages and tobacco (-9.9%).
However, after hitting a record low in April 2020, a strong rise has been evident in the country’s Purchasing Managers’ Index (PMI) for May, indicating that the economic downturn may have bottomed out. In its June 1, 2020 report, IHS Markit said Malaysia’s manufacturing sector showed signs of approaching stabilisation midway through the second quarter, with rates of reduction in output, new orders and employment all easing considerably.
Agility in manufacturing and distribution is the ability to respond quickly to unpredictable changes in supply and demand. Right now, it is a fundamental requirement for the day-to-day survival of even the fittest in our industry. Creating a more agile organisation that can adapt quickly while increasing the potential for collaboration with other companies also involved in the “wartime supply chain” is a key factor to bringing back pre-Covid-19.
Enterprise resource planning vital to survival of resource and cash-flow-challenged organisations
Enterprise resource planning (ERP) systems add value to all scales of organisations. Organisations use ERP systems to facilitate and optimise day-to-day processes and activities connecting people with data for decision-making, from the CEO through to the accounts team. A key aspect of ERP solutions for manufacturers is the ability to look at the entire company in a single view, spot weaknesses, opportunities and ways to optimise costs and resources to best survive and even profit during a pandemic like this. In the worst-case scenario, the one-view from ERP solutions gives operational and reporting efficiency that helps companies minimise losses to pull through for the long-term rebound.
From a business continuity and growth perspective, pivoting has become the new buzzword in Malaysia. It is not merely sufficient today to realign our business endeavours, but we need to be ready and able to pivot activities based on available resources and new logistical regimes. With an uncertain future, planning and monitoring partners become increasingly valuable, and will empower businesses to adapt with the shifting landscapes, both current and future.
Enhance, realign and pivot
Every business has the opportunity to adapt. Be it small adjustments strongly in line with existing capabilities, or wider scale transformations and pivots, your success is strongly correlated to the systems you have in place.
The restrictions associated with recent government policy initiatives have seen businesses both big and not so big adjust to both contribute to the collective cause, as well as to build new relevance in the market. These businesses join the growing number of international brands that are embracing opportunities and creating results for themselves and their communities.
Gardenia Bakeries (KL) Sdn Bhd, which produces bread that is now a prized commodity from the supermarket shelves, was able to maximise its output of bread within days, responding to the panic buying wave that overcame society. Its full capacity production was a direct response to increased demand.
Top Glove Corp Bhd estimates that it is mere weeks away from preparing a facility to produce face masks, with an anticipated capacity of 110 million masks a year. That is excellent news as current estimates are suggesting the current stockpile of such items is limited.
Condom manufacturer Karex Bhd responded early on by converting two lubricant lines immediately to hand sanitiser production, specifically for medical customers.
Combi-Pack Sdn Bhd noted that its customers in the broader food and beverage sector were experiencing an increase in demand of up to 30%, and thus were able to support their customers with enhanced production of packaging to facilitate this.
On a non-linear transformation, Permaju Industries Bhd went on record recently as investigating bottling and distributing Penaclo, which it claims has been proven as one of the most successful sanitising solutions in eliminating the virus.
SCGM Bhd had pivoted from food packaging to facial shields, with orders from Malaysia, Singapore, and abroad. Public Invest Research is quoted as expecting double-digit profit margins from this new segment for SCMG.
Overseas, HP & Smile Direct (Australia) are working on 3D printing of parts like ventilator valves and breathing filters, while local Penang-based engineer Louis Ooi Shiong Yirk has teamed up with local 3D printer owners and Prestige Dynamics Industries Sdn Bhd to produce face shields for frontliners. Working with the Penang Science Cluster to source additional raw material supplies, and to get state government involvement and buy-in, these collaborators have shifted resources to 3D printing for this specific purpose.
Supporting the national supply chain emergency
Maintaining supply chains is crucial in responding effectively to humanitarian crises like Covid-19. Malaysian supermarkets are buckling under the strain of unprecedented demand and panic buying of groceries, toilet paper, cleaning products and medicines. This has resulted in calls for calm from politicians and reassurances from the leaders of our major supermarkets and essential-brand products.
Malaysian manufacturing and distribution companies have responded positively by extending their resources amid a reduction of demand for their own products, along with donating money to community causes supporting frontliners and the economically disadvantaged. In fact, Malaysia’s homegrown Proton has even provided 60,000 face shields to help protect frontliners and enable them to continue in their valiant effort.
Manufacturing and distribution agility
ERP applications help small and mid-size manufacturers to respond with unprecedented agility to this “new normal” operating landscape. With a few exceptions, the manufacturers that survive and progress in this crisis are the ones that have been able to change direction at a moment’s notice. The organisations that have a solid ERP application in place will have better visibility, improved scheduling and will enable the automation and customisation of any new products required.
The truly agile manufacturers will have the ability to switch gears quickly between production runs, shortening or lengthening the run or even changing products entirely, as needed. ERP systems make it easier for manufacturers to adopt this type of flexibility by providing scheduling strategies to handle unexpected orders or order changes through features such as capacity planning, work order management and materials requirements planning.
How manufacturing solution providers are responding to the crisis
With many manufacturers having to rethink the number of employees physically present in their plant at any one time, organisations are finding creative ways to stay productive and meet social distancing requirements, as well as to leverage on adjusting to less manual intensive work-flows. SYSPRO, a leading manufacturing ERP solution provider with clients in over 60 countries, has done so by enhancing its supplier procurement portal to assist with business continuity and manage multiple supply chain and procurement constraints with more flexibility, including automated procurement and quotation management based on pricing and supply availability of different suppliers locally and abroad.
For manufacturing, the silver lining in Covid-19 is that private sectors were playing their part to support their own communities. SYSPRO has been offering licences which allow clients to work remotely and across any mobile device during this period where there was a greater need to work from home due to lock-downs.
With the increased focus on training and up-skilling during this period, SYSPRO provided complimentary unlimited training courses to all employees of their clients to maximise the benefits of their ERP investment. Across the globe, 500 individuals who were made redundant during the pandemic by their companies will also be provided free up-skilling programmes by SYSPRO to achieve better re-employability in the future.
Overall, predictions are that the country will see a return to growth as it heads into the third quarter of 2020. However, a recovery to pre-pandemic production and gross domestic product levels could be long and slow. Looking ahead though, IHS Markit noted there were signs of optimism as survey data pointed to a rise in business confidence. This is echoed by Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid, who noted that the catalyst for manufacturing would come from domestic-oriented industries, “manufacturing of food and beverage-related products, textile, furniture and others, which are geared towards domestic consumption, would lead to more manufacturing activities ”. – June 25, 2020
Rob Stummer is the Asia-Pacific CEO of SYSPRO, with regional headquarters in Singapore.