The priority for many manufacturers amid the Covid-19 lockdown involves “getting back to basics” in terms of enterprise resource planning (ERP) and supply chain management, says ERP systems provider Syspro professional services head Doug Hunter.

“This includes ensuring visibility of what is transpiring in one’s supply chain, as well as properly setting up parameters for the ERP system, such as lead times or availability of supply, which would have drastically changed for many manufacturers and distributors.”

He says the priority for most manufacturers during the lockdown has been sheer survival. While technological innovations, digitalisation and Industry 4.0 technologies continue to edge forward in the manufacturing industry, much of it has taken a back seat to the immediate need for cash flow sustainability.

It is quite understandable that manufacturing companies under lockdown have faced serious cash flow problems. For some companies, a portion of revenue was earnable throughout the lockdown, but not enough to sustain cash flow.

Despite some companies having managed to continue earning revenue, owing to aspects of their operations being categorised as essential services, many have been struggling with cash flow because their services are still limited to certain key products or certain key sectors.

Many of these companies, although still operational, have reduced their on-site staff to a minimum to reduce costs, leaving many employees with reduced wages or facing a no-work, no-pay policy.

This decrease in consumer spending power will inevitably have an impact on consumer demand, leading to even less revenue for suppliers. Hunter explains that demand curves are changing not because the products are not needed, but rather because they cannot be afforded or input stocks are running low and difficult to replenish.

“It is important – now more than ever – for companies to forecast demand, which is extremely difficult amid these unusual circumstances. “Adding to the complication is that there is not much historical experience or data to refer to for guidance. The current set of circumstances is, in many ways, unprecedented,” he comments.

Hunter advises that manufacturers should take advantage of the slowdown, or halt, in activity to engage in forecasting and planning through detailed financial analyses, adding that agility is essential.

“Companies certainly do not want to produce items that they are not able to sell and deplete all the working capital in the process,” he notes.

He says it is likely that there is a substantial amount of food stock being discarded because it is not being bought, owing to decreased consumer spending power or regulatory roadblocks. Detailed and accurate use of ERP systems can help avoid this.

Finding a Solution

Syspro’s ERP software solutions can help provide financial reporting services. They can also automate and integrate core business processes such as customer orders, production, inventory control and reporting. This is aimed at driving improvements in manufacturing, distribution and financial management, says Hunter.

Syspro’s ERP software solutions have been used quite extensively during the lockdown period, he adds.

“We expect that this kind of increase in planning and forecasting using data will occur much more frequently in the coming months and years because the supply and demand shifts are quite unpredictable. The more unpredictable a situation is, the more predictability is pursued,” he notes.

Hunter says the lockdown period has provided a good opportunity for Syspro to help manufacturers of non-essential products, whose operations have been completely put on hold, to check their ERP systems and ensure that they are being used properly and to their full potential. This entails not only rethinking processes as well as double-checking the accuracy and correctness of various parameters but also whether the ERP hardware and software has been properly set up.

“The rigorous checking will ensure that any upgrades or rectifications needed can be implemented as soon as possible. “This minimises the amount of time needed to restart operations,” he explains.

Moreover, this will ensure that when production restarts, the manufacturer’s supply chain management and logistics are in better shape than what they were before the lockdown.

“If you can’t earn revenue, at least use the time to create value,” Hunter quips.

Aside from ensuring that ERP system basics are up and running at optimum levels, strategic planning is also essential, though difficult.

“For example, the strength of various food brands is changing as brand loyalty is eschewed in favour of brand availability,” Hunter tells Engineering News.

He further explains that many brands that relied on China as a key source of supply will have to rethink their supply chains, owing to China’s role as ground-zero for the Covid-19 pandemic.

“The rumbles of distrust in China and, by default, Chinese products and components, will likely lead to medium term higher end-product prices in many cases, while the availability of certain brands’ input products will decrease as sourcing moves from China to other countries.”

A positive aspect of this consequence is that more input materials will be sourced and manufactured locally, which Hunter hopes will bolster the South African economy in the medium to long term.

He says a new trend is likely to emerge, whereby the same customer base will need to be serviced with much less stock – and this will require finely tuned planning.

Hunter concludes that manufacturers who fail to adequately use this time to ensure that their ERP systems are properly set up and attuned to the shifting demand, supply forecasts and improved processes and efficiencies, will likely be ill-prepared to cope after lockdown or might never recover at all.