Transcript Blog- The Global Impact of COVID-19 on the Industrial Machinery and Components Industry
In this episode of Industry Insights by SAP, Josephine Monberg hosts Sayan Bose, Head of North America and LAC Regions, Global IM&C Industries at SAP. Sayan shares how IM&C companies have responded well to the crisis by reaching out to their customers and addressing their needs right away.
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Welcome to the industry insights by SAP podcast series. My name is Josephine Monberg and I am your host. You are now listening to the COVID 19 special edition of our show. Welcome to our podcast. Hi everyone and welcome to this episode of our podcast. As you know, if you’ve been listening because you just listened to the intro, you’ll know that we’re taking a closer look at different industries and we’re examining how each of them are being impacted by COVID 19 today we are looking at industrial manufacturing industry and to do this I have with me in his home virtual studios Sayan Bose. Sayan, thank you so much for being with us.
Oh, thank you for having me.
So Sayan, you are part of the industrial manufacturing industry at SAP. What does that mean?
Interesting. So as an as a, as a team and as an organization, we are fundamentally responsible to work with customers and also understand what’s going on outside the world of in the industry is what the industries, manufacturing industries are looking at their future in the next coming years. And then we bring them back inside SAP value chain, which is all about our product engineering, product sales go to market. And we translate that into either innovation portfolio cases or we either translate that with innovative, go to market models and of course then we incubate these solutions together with customers to see what do we need to develop them further. So it’s a, it’s an amazing organization to work for because you are staying so close to the customer and understanding what’s going on in the industry so that we are better prepared to help the customers to do their business. Not just for today but in the next three years or the next four years or five years.
Hmm. So you play your critical role in being almost a translator between the parts of the business. Yeah, it’s a very, it’s a very, very fascinating, um, role. And tell me, I mean, I know where you are, but tell our listeners where in the world you are.
So I am in the windy city of Chicago and the sun is shining, so it’s great. So spring is around the corner. So no complaints.
Well you were just telling me that it was in, I work in Celsius. I’m in Copenhagen, in Denmark, you’re telling me it was minus a degrees yesterday, is that right? Yes.
The day before yesterday. Yes. So, so apparently after long time in summer, this year of spring, this year, so to say New York and New Jersey also got some snow after, I don’t know, after a hundred years or something like that. So that effect was brought into Chicago. So we had a little cool, freezing they yesterday. But now as I said, it’s all past the sun is shining, so it’s beautiful.
Okay, well I’m glad to hear that. I know it’s important during this global pandemic that we’re able to go for walks and it’s always better not to do it in minus degrees. At least that is my opinion. Um, okay, so let’s talk about industrial, the industrial and manufacturing industry. Tell me what you’re seeing right now in terms of the impacts that COVID 19 is having on the industry.
That’s a, that’s a good question because of course now the scenarios are different, a little different. So some companies have been really at the beginning when this announcement came from the different government and health agencies to stay back at home. I think what I observed working with customers or discussing with customers are the biggest impact and the biggest challenge for them was to how to keep their employees safe. That was the most important topic for most every single manufacturing company I’ve spoken with. And to do that, in fact, the first wanted to understand even what are the employees feeling? So that’s something I saw that they were looking into these kind of issues so that they can address them proactively. Because manufacturing industry people are not used to staying back at home and working from home, unlike in the software industry. So that was one of the important areas.
Uh, then what the biggest challenge came in because of the complex supply chain and the manufacturing network, which all the manufacturers have. These days, it’s a global world. The sourcing is from different countries. You tap the local resources. Sometimes you source local produce local or you source in some other countries. So the supply chains are quite disruptive, especially even on the logistics side. So how to rationalize the product, how to look at the right parts of inventory, of the components, which could go in the production of the OEMs. Those were the bigger costs. And of course, uh, even with some countries where there you cannot run your factories. These are the, some of the challenges that we’re seeing because of it. Even their manufacturing developed a lot of backlog. But that’s the scenario. One interesting challenge which I saw that we’re all facing is it’s related to the supplier risk because the suppliers that across the globe, there’s a bigger risk in terms of the supplier’s ability to produce because of their country by country regulation and then also to ship.
So leading to, I would say multi-client inventory shortages as well. So these are some of that stuff. And finally, if you ask me, uh, customers, I mean, of course, because of the supply chain disruptions and of course even their customers were having this. I think one of the major interesting observations of challenges, so to say was the fact that the customers also were not able to commit to order, but still some customers were still requiring the deliveries to be done. So it was kind of a prioritization. But what I felt, and this is something I felt that the manufacturers did an amazing job, is they immediately reached out to their customers, talk to them, and they did spend time to understand what their customers wanted, what was missing so that they can add interest and prioritize and address the needs accordingly. That was, I felt, was like a brilliant step by most of the manufacturing companies across the world.
Hmm. And you just touched on now what you’ve seen that they’ve done in order to respond. Are they using technology at all to also better cope? Cause we’re seeing that across most of the industries. Are you seeing anything related to that?
Oh yes, of course. I mean, uh, as we all say, right, there are people are saying that Coby 19 and it actually brought in technology at the front and center of every business operations. So, yes, needless to say, manufacturing industries. I’ve been have been working on these platforms and technologies. Even speaking with some of my council members or advisory council customers who are like bigger on-par machinery equipment manufacturers, they immediately use some SAP technologies to quickly reach out to their employees, quickly reach out to their customers to understand what the customers are feeling, exactly what I mentioned, how are they feeling, what do they want to prioritize and what are the big ticket items, what are the big elephants in the room, which needs to be sorted out us. So that’s where I saw the adoption of technology. You heard me mentioning about the supplier risk as well there also I found that many manufacturers use SAP technologies to identify alternate sources of supply because there are not many other suppliers and their own ecosystem if one is down because of country localization and the other support. So these were very interesting scenarios where I saw manufacturers using SAP network collaborations, SAP strategic sourcing and collaboration platform together with discovery to help address some of these challenges. But those at the beginning of when we were getting into this scenario of shelter at home. Yeah.
And what are you, you’re still talking to customers, I assume. What are you telling them? What are you telling them right now? What should they be doing? One to respond but also to prepare for the recovery. And we can talk about the reimagining later, but what are you telling your customers?
I mean yesterday also was with two customers. In fact one in someone in Europe, someone in America is also in the West coast. So the discussions are, it’s, it’s also about how and what they need to do to prepare themselves. But some are still in a scenario shelter at home only Michigan this week has opened their factories but rest of the States have not. So then the question is what do they need to do prepare themselves for the recovery and what do they need to do during the recovery phases so that they go back to original, pre crisis state. And the conversation is essentially speed and discipline will actually be the differentiator between a manufacturing company to another one. And honestly that is something even manufacturers are saying that will help them define their curve of recovery. Is it going to be a U shape curve?
Is it going to be a V shape curve or is it going to be a w nobody knows. But that preparedness with speed and discipline will be the key differentiation. So what we are discussing and what even manufacturing companies are saying is first to look at reactivating the global supply chains, but not just for the sake of becoming a country is opening, but looking at the doing it by a complete financial scenario planning. So because you want to identify the bigger bets, the customers I’m seeing, they want to pick up the right battles to fight so that they quickly get to the recovery stage because even workforce is going to come back to the factory soon. They need to feel safe. So that’s where something unseen a lot of. So hands, uh, uh, a lot of emphasis has been put together towards financial planning, scenario planning, sensitivity analysis, et cetera, to identify if there are possible threats.
And of course having a visibility of your cash flows are quite important. You know, the, the, the interesting scenario which customer was mentioning that since once we get out of the scenario, once we are in the recovery phase, they’re expecting huge volumes of standard business transactions to be processed. So which is where we were discussing that can uh, intelligent bots or robotic process automation tools or approaches can be brought in so that the repetitive processes during the recovery like matching payments for open receivables clearing payments can be done by quickly scheduling, monitoring and then conducting through the intelligent bot. So these kinds of scenarios. So that’s on the business operations. The other area is of course on the supply chain. I mean they looking for now and I mentioned based on the risk and based on the financial scenario planning, they look at possible strategies for diversification of your supply chain and also identify the critical suppliers from different geographies and then define what kind of production and inventory strategies you will have.
One customer actually mentioned, and I want to mention this to you, they said for the recovery phases they of course they formed a task force and one of the key elements of the task force is also to look at their engineering backlogs. What it means is equipment manufacturers, these are all machines, these are all heavy equipment, these are factory packaging machines, they’ll ship building, et cetera. So for them they’re saying of course we have been focusing on the physical product and adding some more intelligent technologies in the product, but they are not saying we got to prioritize the backlog, add more digital capabilities first in the product so that in a scenario of the future as well, we can do mostly remote maintenance of those assets. We can service those equipments or these machines remotely without being at the physical site. So that is something I found that’s quite thought provoking.
Of course you that changes the way you also, you look at engineering, so that’s on the engineering side and also I definitely want to call it out. I have not heard a single manufacturer saying that they are not going to be thinking about the workforce because that’s their most important one. So I’m, I’m seeing even, uh, companies are talking about surveillance protocols now because you know how some countries managed to quickly flatten the curve by looking at surveillance technologies but also having a view of, but it’s, it’s a thin balance, right, between privacy and the measurement. So companies have to think about what kind of health surveillance protocols needs to be defined and then also track occupational health history of the workforce. Because after COVID 19, employees need to feel safe when they are in the shop floor, when they are in offices. And you and the employees also wants to ensure that if as an employer, if some employees got effected with some of the cases, that they are recovering and it should be placeable, it should be known so that we give adequate amount of safety and security to that employee as well as to other employees.
So these are, I’m seeing, are there topics, the big elephants in the room for the customer to really go and work. And that’s where SAP is working with them using our, whether it’s leveraging the sustainability platforms to help them manage this health surveillance protocols or occupational health hazards or utilizing the supply chain for supply chain challenges. So,
so those are actually huge changes in areas that you mentioned that will in that case be what I’m hearing is re-imagined. Right? So it’s not just about the respond phase or the recovery, it’s about a complete reimagining of the industry longterm. So, and of course technology plays a huge role in that. And it’s interesting cause it’s the same trends that we’re seeing across the industries in terms of using data and intelligent technologies to be better prepared for whatever comes next. And then the supply building a resilient supply chain is also critical in all of this. So talk even more about the future and beyond COVID and the longterm structural changes and mirror imagining of the business model. What are you seeing there and what does the role of technology play in the longterm imagining of the
sure. Happy. No, it’s, it’s, it’s a very loaded question, but it’s, it’s a good question. And I’m going to actually, as I mentioned in the previous question is where I was, as I said, I was into the CPOs of sub company and they were themselves men talking about the portfolio decisions. That itself is showing the fact that the companies are not just thinking about today, but thinking about the future, they’re thinking about the newer business models and the foundation of it has to be done now. So that’s why technology is becoming more of a partner in the manufacturing environment. So that’s number one. And the example that the customer was saying. Yeah, our ability to do remote service based on equipment usage and performance is going to fundamentally drive new opportunities. Even manufacturing industries, we are used to, they’re used to selling products and equipment by really going into physical sites, et cetera.
That’s going to change. I mean they’ve their Salesforce and they’re already thinking instead of selling physical products, how can they also move to selling the same products through different channels, multiage commerce channels, digital channels, and also instead of just providing an occupant, because customers are going to look at shared business. So this model can you provide a solution instead of just providing a compressor pump of a factory machine, just do a solution in providing. So that is something I’m seeing and there is a lot of stress, uh, importance which I’m seeing customers are going to give is service because they now believe that service and especially having more predictive service and also defining using predictive service to define your product replenishment, define your even your service scheduling will be of paramount importance because now their customers want to share the business with them, with these manufacturers.
But there’s OEM. So these are some of the changes due which I can foresee. The other important aspect is with regards to the different business model. Speaking to a couple of manufacturers in North America, they were saying are there any flavors of moving to subscription models and you know, subscription has different flavors. You can do a standard subscription based business, you can do a performance students commercial model or it could be outcome driven commercial model. And I’m seeing more and more now with the shared business risk with technology at the center of it manufacturing companies. And now thinking about can they go into a subscription model of their equipment, so instead of selling an asset, they will go into a subscription which means usage base or can they go to a model which is based on performance of the audit, just on maybe a model where their customers pay based on achievement of certain outcome, let’s say factory optimization factory through product X amount of working hours. These are the models which I’m seeing. The other area on supply chain is now being discussed is globalization versus glocalization. It’s a very, I don’t know if have
I’ve heard that before? Yes as well.
Yes, and I think what they were saying, it’s going to be an important topic and which is where they are leveraging SAP solutions because we got to get them the visibility which will help them define and identify the risk and also define how do they manufacture, do they manufacture locally, source locally and sell locally or to what extent the procure from different countries and then produce where and then sell where. So these are the strategies I’m already hearing from my customers and manufacturing industries. They are working on it. Of course SAP is playing a pivotal role there because of our capability to help them look at supply chain, look at supply chain risk, look at the their ecosystem and their supplier base as well across the network so that they can do a seamless transaction. So these were some of the elements I’m seeing, which the customers are working on right now.
Yeah, this is fascinating. I will say COVID of course is a terrible, terrible, terrible thing that has happened to all of us. But the way it’s getting the wheels turning on businesses in the sense of how they’re reimagining their business model is, is very, very fascinating to me. So thank you so much for coming on the show and telling us a lot more about the industrial manufacturing industry and what’s going on. It’s just, it’s, it’s such a fascinating time and a fascinating industry, so thank you.
Well thank you very much. Thank you for having me and stay safe.
Yeah. And to those who listened, of course stay safe. And thanks so much for listening, sending in. Hopefully I’ll see you on the next, or you will hear me on the next episode. Please subscribe to our channel industry insights by SAP at open SAP apple, Spotify or Google podcast. To learn more about what SAP is doing to help you cope in COVID 19 you can go to sap.com about global health safety and find free access to select SAP software tools to support your business and much more stay safe.