By: Beroe Inc --
14 June, 2020
The coronavirus pandemic has had a mixed impact on the capital equipment industry. Although dominant supply bases have been affected, COVID-19 has given a push to adoption of newer technologies to capital equipment OEMs, especially those operating in the essential services category like, healthcare and food.
However, many capex OEMs have reduced their work force to only those employees necessary to support projects deemed critical and essential especially for the food and pharmaceutical sectors.
There has been a medium impact of COVID-19 on process equipment, with dominant supply bases in China, India, Japan, South Korea, U.S., Germany, and Italy, being affected for products such as pressure vessels, heat exchangers, boilers, and reactors. In comparison, there has been a low impact on packaging machinery products and pharmaceutical production machinery products such as tablet press, tube/capsule fillers, granulator/coater/dryers, mixers, and homogenizers. Dominant supply bases affected by COVID-19 are Germany, France, Italy, U.K., Belgium, U.S., China, India, Japan, Korea, and Taiwan.
Process equipment OEMs manufacture many critical components and equipment used in the food processing and pharmaceutical industries, like pressure vessels, heat exchangers, cooling towers, etc. So, these industries have been designated as critical and as such they and their supply chain partners have been exempted from any shut down order; but the companies have to run with a reduced work-force. However, the customer base of these OEMs are affected by COVID-19 with many projects being delayed or deferred, resulting in many global OEMs reporting revenue losses in Q1 2020.
After struggling with the economic downturn brought in by COVID-19 pandemic in the last few months; OEMs are resuming their normal businesses globally but with increased safety measures and reduced workforce. Capex OEMs are recalibrating their shop floors to meet health and safety protocols and social distancing norms without hampering productivity as they restart production after the lockdown norms being eased. So, to absorb the extra spending on health and safety equipment, OEMs are expected to pass down the costs to their end-users.
The COVID-19 pandemic and its disruption to industrial production has begun to impact metals production, especially steel. The steel prices are expected to embark on a downtrend in the upcoming months.
Countries across the world have shut down borders and limited the movement of freights, with trade restrictions in place, affecting import of raw materials and components for OEMs.
Major OEMS supporting the pharmaceutical industries like, Glatt, GEA, Sartorius, IMA, Marchesini, Freund-Vector etc. are trying to ramp up their production to support scientists and researchers worldwide to accelerate their trials for developing a COVID-19 vaccine.
OEMs of packaging machinery have been designated to be part of the critical infrastructure necessary to tackle the pandemic. These companies are running fully functional taking all preventive measures, to be able to support the customer base.
The majority of customers of packaging machinery provide food and beverage, agriculture and pharmaceutical products, which are necessary products to store shelves to attend to the needs of the entire population to keep them healthy, clean, and fed.
OEMs continue to guarantee delivery of pharmaceutical production machinery products, spare parts and technical assistance to their customers, to ensure that all the pharma related industrial activities are functioning even during the pandemic.
The supply demand gap is expected to remain low as operations in both end use and the supplier side have been affected, thereby leading to relatively low price volatility. However, procurement from alternative sources could potentially lead to hikes in raw materials, component prices and logistics costs. As a result, the final price of newly manufactured capital equipment will be higher than the previous lots in the future. With an absence of manpower, OEMs have started offering remote installation support, remote services, remote planning, remote testing, and remote training.
American Red Cross CPO will talk about the Art of Stakeholder Management on Aug 4