September 29, 2020
By: Lyat Avidor Peleg
COVID-19 and the process industry: A look at where we are
How has COVID-19 affected the process industry, and what can we expect?
It’s hard to believe, but it’s been 9 months since the world became aware of the novel coronavirus and COVID-19 began sweeping the globe. We don’t know where we are on our long journey through the pandemic, but we do know that it hasn’t yet ended.
In Europe, many countries that took a battering in March and April are already seeing a second wave hit their populations. The UK returned to an average daily infection rate of 3,000 in September, numbers that haven’t been seen since late May. In France, daily cases peaked at 7,578 in March, but they’ve exceeded that throughout September. Spain’s August and September infection rates have been way beyond the peak in March and April. It’s a similar picture in Israel, where the 7-day average for daily infections passed 3,000, over 4 times the high in the spring.
It’s worth noting that all these countries are carrying out far more tests than they were in the spring, so more cases are being recorded.
The US and India never significantly bent the curve. In the US, there are still over 40,000 new cases every day and 1,000+ daily COVID-19-related deaths. Health officials expect a resurgence to peak in fall and winter. Meanwhile, Asia is faring only slightly better. China saw a new set of outbreaks in June, but swift lockdown and mass testing nipped it in the bud before it became a second wave. Vietnam and Hong Kong are also seeing infections rise again.
In the early days of the pandemic, we all saw many predictions about how it will impact on the economy as a whole, and the process industry in particular. It was expected that lockdowns and social distancing requirements would restrict operations; that a serious economic downturn would drive down demand; and that supply chains would be damaged. A survey of process manufacturing companies by NAM in March reported that 53.1% anticipated changes in their operations, and 35.3% feared supply chain disruptions.
In our own blogs, we talked about the expected effects that lockdowns would have on manpower, supply chains, and customer demand, and discussed the impact of digital transformation in helping plants weather any crisis, including coronavirus. We also emphasized the need for laggardly plants to carry out a digital transformation as soon as possible, including cloud tools, remote monitoring, and automated responses, so that they can continue to function throughout the pandemic.
As we enter Q4 2020, we pause and ask how COVID-19 has really affected process plants, and what can we still expect?
Supply chains caused immense upheaval
Supply chain disruption turned out to be the biggest single factor hampering business for process plants during the pandemic. Damaged and broken supply chains were the first major problem for many plants, because the virus began in China and spread first to the rest of Asia, the source of raw materials and supplies for much of the rest of the world.
Even when raw materials could be prepared for delivery, the drop in air travel slashed opportunities for air freight, and many ports shuttered at short notice, stranding shipments around the world. The problem didn’t end when raw materials arrived at the right port; ground freight transportation is very sensitive to volatility. COVID-19 upended historic assumptions about transportation patterns, making it difficult for manufacturers to acquire freight transport at the right time.
In March, 75% of companies in the US already had significant supply chain disruptions. By April, the number of affected companies globally rose to 84%, although that masked significant regional variations: for example, 75% of plants in Italy faced disruptions, compared with only 36% in France. It’s been estimated that 50% of manufacturers were unprepared for supply chain disruption, either because they were reliant on a single supplier, or because all their suppliers were in the same area of Asia.
As expected, digital transformation made an enormous difference to the preservation of supply chains. One manufacturer which had already digitally transformed its supply chain navigated pandemic relatively well. It enjoyed total visibility into the location of its shipments, proactively forecast freight capacity, and kept on top of daily changes in the status of ports, post offices, and ground transportation regulations in different countries. As a result, it prevented shipments from getting stranded in locked-down countries. Its flight delays from China peaked at 7%, even during the height of China’s lockdown, which was far better than most other manufacturers.
There was no universal slump in demand
Despite the general global economic slump, the process industry didn’t see demand drop across the board. However, most plants faced a struggle with demand and supply.
Essential companies such as power generation/distribution, water and wastewater treatment, oil and gas refineries, pharmaceutical plants, and others continued working ceaselessly, since they produce vital items. Nonetheless, many had trouble adjusting to the changing situation. 41% of plants experienced production and product shortages. Some struggled to keep up with demand when their workforce was mostly remote, whether demand increased, remained stable, or dropped.
Other non-essential items saw demand plummet almost overnight. Coca-cola announced that it was cutting thousands of jobs as sales fell by 28%. Most countries slowed down construction, which reduced demand in the cement industry. Paints and coatings were hit by a triple-whammy as organizations chose not to repaint premises that had been shuttered, the supply of pigments from China was disrupted, and the price of raw materials rose. Some plants producing vital items also saw demand slip away; for example, the evaporation of the travel industry reduced the need for oil and gas.
In contrast, certain verticals saw a surge in demand, such as pharmaceuticals, for obvious reasons, and there was a 30% spike in demand for paper products. Many process plants saw changes in demand for various items, or pivoted production to meet new needs. For example, Procter & Gamble, 3M, Georgia-Pacific, and ExxonMobil are among the companies that pivoted to produce hand sanitizer, ventilators, or other items. Many companies switched to selling direct to consumers, changing their demands for packaging, so paper and pulp plants had to be flexible in their response.
Maintenance had to be carried out from afar
Process plants needed to cut the number of people on site in order to reduce the spread of infection, but they also needed to monitor equipment and processes 24/7. Control room management proved a particular challenge for many, since they needed to be manned by experienced personnel, but using full strength teams would raise the risks of infection.
In response, plants have considered enabling remote control rooms that allow monitoring from afar and support socially distanced teams. It has become clear to most process manufacturers that digital transformation is no longer optional, and plants need automated tracking and response processes that can be supervised and approved remotely. We have seen an uptick in interest in AI predictive modeling and plant automation, and even plants which already underwent digital transformation are exploring expansion of their solutions.
Looking forward: what lies ahead for process plants?
The global coronavirus situation is still very fluid, and plants continue to respond on the fly. 60% of manufacturers said that they are making daily changes. With so much uncertainty about the future economic and work conditions, plants need ongoing flexibility and agility.
“Demand could rapidly change to other products once the present surge is over,” says Craig Resnick, vice president and automation consulting team member at ARC Advisory Group. “In either case, greater manufacturing and supply chain flexibility is needed when sales of certain items go way up unexpectedly, just as it is when they plummet again as demand shifts to other items.”
In the EU, production is returning to normal, but it’s still not fully recovered. By the end of July, EU-27 members had returned to 93% of their January production rates, leaving an overall drop of just 7% since their February 2020 levels.
But there’s wide variation between countries: Ireland, Lithuania, and Croatia returned completely to their pre-crisis production levels, but Germany has only regained 88.3%, and Hungary has reached 90%.
Going forward, we see that process plants need to:
● Ensure worker safety onsite
● Scale up and pivot production to meet changing demand
● Improve supply chain collaboration
COVID-19 is likely to leave a number of long-term effects on the process plant industry. It’s widely predicted that industrial automation and the use of robots in process plant situations will enjoy a significant boost. We also expect to see many employees continuing to work remotely and/or on a flexible basis, now that it’s been proven possible. Finally, the coronavirus emphasized the risks of a localized, single-supplier supply chain. Plants are already investigating and stress-testing their supply chains to make them more visible, more diverse, and closer to home.
Corona isn’t over, but the effects can already be felt
There’s still a long way to go before we reach the end of the coronavirus pandemic, but we can already see several ways that it has impacted the process manufacturing industry. Damaged supply chains, alterations in demand, and the need to continue maintenance and repairs from afar are among the challenges that process plants have had to overcome. In the process, changes that were already afoot have been accelerated, specifically the move to digital transformation, and new trends have arisen. Process plants are reaching new levels of flexibility and agility to continue to resolve the obstacles that COVID-19 has placed in their path. Those that survive are likely to emerge stronger from these experiences.
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