March 22, 2020
By: Lyat Avidor Peleg
The Impact of Novel Coronavirus on the Process Plant Industry
The novel Coronavirus, which causes the disease COVID-19, is having a serious impact on every aspect of the world economy. Like other businesses and industries, the process manufacturing industry is feeling the effects of canceled orders, disruptions to the supply chain, quarantined employees, and more. We examine the current and potential consequences of the Coronavirus on process plants and the people who work there, along with some practical suggestions for minimizing their impact.
1. Lack of Manpower
COVID-19 is highly transmissible, with a reproduction number somewhere between 1.6-2.4, according to the CDC, which is much more infectious than seasonal flu. It impacts on manpower both because of the need for quarantine to slow the spread of disease, and when it causes widespread infection among a group of people working or living close together.
Self-quarantine and isolation
In order to reduce the spread of the disease, governments in many countries have advised self-quarantine for people who have been exposed to the virus. Millions of people in the US are self-isolating, under quarantine, or following shelter-in-place rules. France, Spain, and Italy are among the countries under near-total lockdown, the EU has closed its external borders to travelers, and new restrictions are announced daily, or in some cases several times a day.
Additionally, medically vulnerable people are choosing to self-isolate to avoid exposure to the virus, and employees with immunologically-compromised family members are making a similar decision in order to protect them.
Several governments have issued advice to people to work from home as much as possible, but that’s not an option for many plant workers. On top of that, advice to avoid crowded spaces and public transportation makes it more difficult for employees to come in to work.
As the disease spreads, it’s possible that many or all of the workforce could be on sick leave. Plants can be crowded workspaces, so it only takes one infected employee to effectively shut down an entire plant, if everyone is ordered into isolation and/or develops the virus themselves.
The risk that this could take place grew with the news on March 14th that an employee at Marathon Petroleum’s Los Angeles Refinery in Carson, California, tested positive for COVID-19. The worker and a few others that they’d had contact with immediately went into isolation, but it could take a couple of weeks before we find out how many workers at the state’s largest gasoline plant are affected.
How to prepare for a lack of staff
It’s vital to provide clear guidelines for plant managers and employees to know what to do in different scenarios, and to keep the lines of communication open at all times. Although managers need advice about how to respond, they also need to be given the authority to make on-the-spot decisions if the need arises.
At the same time, employees need to be kept informed about the plant’s COVID-19 policies, including how the company will support them if they catch the virus or have to self-quarantine, in order to reduce panic and prevent more employees staying home out of fear. Amongst other policies, plants should:
- Offer hand sanitizer and hand-washing facilities;
- Insist that employees wash their hands every hour;
- Rearrange workspaces if needed so that no one is sitting directly across from each other, and there are at least 2m/ 6ft. between each employee, even if it means splitting shifts and adding more shifts during the day to make up the difference;
- Test employees’ temperatures before they come into work, which is currently in force in most Chinese factories that are returning to production.
These measures help lower the risk of COVID-19 spreading through the plant’s workforce, and reassure employees that it’s safe to come into work.
Plants may want to consider providing transportation for their employees, so they won’t have to take public transport, or be left stranded at home if the authorities decide to reduce or close transportation lines.
2. Interrupted Supply Chain
Since the outbreak of the novel coronavirus in China, supply chains for many industries have been disrupted, even though China is showing signs of recovery. This affects both logistics and difficulty sourcing replacement parts.
Global logistics are disrupted, and it’s still unclear how severely plants are being affected. In Hubei, which is starting to struggle back to normal function, goods face delays of 8-10 days on their journey to the ports. Trucking capacity is at around 60-80% of normal. In the rest of China, logistics still haven’t resumed.
It’s expected that this disruption will ripple outwards and become compounded by similar or even greater delays in other countries, as they in turn deal with the worst of COVID-19 and then slowly return to previous delivery patterns.
Plants in other countries could struggle to ship their refined products to impatient customers. In Europe, for example, plants could face even more obstacles if their goods need to travel by land through a third country en route to their final destination. The disruption in logistics could extend to raw materials which may get held up on their way to the plant.
Additionally, the same staffing issues mentioned above are also likely to affect logistics.
Difficulty replacing parts
Process and manufacturing plants face another issue: difficulty sourcing replacement parts. Most parts are made in factories in China, but many of those have been closed down since the beginning of February. Only now, in the middle of March, are they reopening and gradually ramping production back up to normal level, which means an effective delay of nearly 2 months in parts production.
The lack of replacement parts is just beginning to appear, as existing stock is used up, and it will only truly bite during the upcoming weeks and months.
How to prepare for a disrupted supply chain
Plants need to lay the groundwork for disrupted logistics in two directions; both regarding delays in shipping their product to customers, and waiting to receive raw materials and replacement parts from further up the supply chain.
It’s important to manage customer expectations regarding delivery, making it clear why products could be delayed and when customers can expect to receive them.
This is also where an efficient predictive analytics solution can be very valuable in helping plant engineers to spot problems and fix failing equipment before they break and require replacement parts.
3. A Drop in Demand
Unlike the tourism and travel industries, which are suffering directly as people cancel flights, vacations, and conferences, the process industry isn’t likely to be affected much by changed behaviors in response to the risk of catching COVID-19.
However, just like every other industry, it will feel the effects of a general global slowdown or recession, which is already underway. Much depends on how quickly the spread of the virus gets under control, if it becomes seasonal, and how well the health system in various areas can cope with demand.
The chances of a global recession
Economists are still unclear on the extent of a global COVID-19-provoked recession. Analysts at McKinsey have produced extremely broad estimates that range from a 12-32% drop in global GDP in the best-case scenario, to a 40-60% drop in the event of a global slowdown, which is the middle-way prediction. Its worst-case scenario of pandemic and recession anticipates a fall to -1.5%.
In any of these scenarios, the process industry can expect to see a drop in orders and reduction in demand for products all around the world.
How to prepare for a drop in demand
Don’t lose hope. The economy is expected to recover, possibly as soon as Q2, although it may not pick up until Q3 or even later. In China, which as the first country affected by COVID-19 is also the first to come out the other side of it, industrial enterprises are slowly restarting, offering hope to the rest of the world.
Plants shouldn’t be shy about securing financing to help them through the slow patch. Governments in most countries have released emergency financing for businesses, and many banks are also offering favorable funding conditions to help companies survive a COVID-19 recession. The Federal Bank in the US and the Bank of England in the UK have dropped interest rates and eased regulations to help businesses get loans, to name just two examples. Similarly, plants should consider offering support wherever possible to employees, to help weather this difficult period. At the minimum, plant management should help employees access any governmental assistance that is being offered.
4. Canceled Conferences
By now, it seems as though every international conference in the world has been canceled, postponed, or moved online. That includes Hannover Messe, the biggest event in the manufacturing industry’s calendar, which has been pushed off until July.
Conferences offer important opportunities to nurture relationships with current and potential customers, learn new trends in the industry, meet with vendors, and network with peers. When conferences are canceled or delayed, plant owners, engineers and other employees lose out on that experience and have to find alternative ways to achieve the same ends.
How to prepare for canceled conferences
Move to online activities as much as possible. In response to the loss of networking opportunities, it is becoming more possible to connect virtually with other companies and people in the process manufacturing space. Some conferences may be replaced by digital meetups and online events. LinkedIn is always a good place to find like-minded professionals with similar interests. While being stuck at home can be a burden, it can also open up possibilities to sign up for webinars or other online events — often free — to expand knowledge in ways that are not often possible during a busy, daily routine.
The impact of COVID-19 is inescapable, but it can be mitigated
It’s almost inevitable that COVID-19 will have a severe effect on process plants and work life, but there are ways to blunt the impact. Maintaining good communication with managers, employees, and customers, putting sensible hygiene policies into place, taking creative steps to replace in-person networking and marketing opportunities, and taking advantage of any financial help that’s available can help position process plants and their employees to weather the COVID-19 storm and come out of it intact.