The Impact of the COVID-19 Pandemic on Electronic Contract Manufacturing

Right now, the attention of the world continues to be focused on the COVID-19 pandemic that has gripped our nation and the world, so most people are not thinking about what the long-term impacts of this crisis might have on electronic contract manufacturing specifically. But here are a few things that will most likely happen as a result of it:

1 – Massive Supply Chain Disruption

Because the COVID-19 outbreak exploded in the Wuhan region of China—one of world’s biggest centers of electronic contract manufacturing–the Chinese government’s efforts to contain the virus resulted in production shutdowns, and a lockdown of skilled workers throughout Wuhan and the surrounding regions. This unprecedented work stoppage has lasted over two months and even though it looks as if the lockdown will be lifted there soon, the rest of the world is dealing with the virus so trade will be at a standstill for several months to come. During the shutdown in China, Supply Chain Managers sourced components through a variety of other suppliers in other countries, but now that the virus has spread into these countries, Supply Chain Managers will have to shift their sourcing efforts back to China. This takes considerable time and effort and delays in the production and sourcing of components will be challenging and production delays will be inevitable.

2 – Shortages of Key Electronic Components Is Inevitable

Once COVID-19 has been contained, the demand for electronics will rebound, but there will still be a massive shortage of electronic components. Losing at least two months of production time will lead to component scarcity which will in turn result in higher prices and long lead times, impacting the roll-out of electronic companies’ latest product lines. Companies that have contingency plans in place to keep the flow of components coming will have the edge over those who do not. And even though it is difficult to see when things will get back to normal, the companies that are prepared will get the jump on the competition that does not have plans in place once production restarts.

3 – Impacted Industries Will Recover at Different Rates

Manufacturing companies that are focused on consumer markets will very likely have a long road to recovery, but companies that are focused on healthcare equipment products will see their business actually grow because of the urgent demand for certain types of medical equipment (e.g. Ventilators). And companies that produce equipment in support of cloud-based infrastructure and computing services will do well and also bounce back quickly because of the higher demand for capacity and infrastructure for the cloud to support things like increased online shopping, remote workers, on-demand content providers due to the social distancing measures in place.

Those companies focused on serving the consumer and enterprise-based segments will be challenged because of the inevitable reduction of spending because of work stoppages and limited access to consumer goods. One bright spot for these market segments is that companies that focus on basic staples and hygiene-related products may bounce back faster.

4 – Addressing Employee Concerns About Their Jobs and Health

All of the data suggests that COVID-19 will still be hanging around for months, maybe even years, after production goes back into full swing, and employees will be worried about catching it from other workers if someone gets sick. In the unfortunate event of a worker contracting COVID-19, other workers that were in close contact with that individual may be carrying the virus and will have to be quarantined to prevent the additional spread. This will disrupt production if one sick worker forces several other workers into quarantine, creating a labor shortage.

To help combat this scenario, companies are investing heavily in cleaning supplies and labor to deep clean their facilities often to maintain a clean and virus-free environment. Companies should also have contingency plans in place to reduce the chances of workers getting infected in the first place. Actions such as keeping production workers at least six feet apart, providing hand sanitizer and hand washing stations, and providing paid time off for sick workers can limit the chances of COVID-19 taking root in your production lines.

Having a labor contingency plan in place in case of an infection is also critical to avoid production shutdowns. Actions such as providing rigorous cross-training so every worker is at least somewhat familiar with all aspects of production in case they will have to perform different jobs than usual or handle more than one task within the production process. Having a hiring pool of temporary workers to help fill in the gaps is also a good measure to put into place. A lot of people are out of work right now and looking for short term job assignments to help supplement their household income, so having resources to rapidly hire new workers is essential.

5 – Impact of Governmental Rules and Mandates

Federal, State and Local governments are quickly enacting new regulations to help shore up the economy and protect businesses and their workers. Because most companies run on a tight cash flow, mandates to offer PTO to employees for a variety of COVID related reasons, as an example, will cause small companies’ financial hardship. These financial difficulties may result in a need for some companies to lay off workers, ask salaried employees to take large pay cuts, or take even more drastic measures just to survive. Fortunately, the current payroll protection program for Small Medium businesses will help keep all employees on the payroll for 4 months as we all work through this pandemic.

The good news is that everyone is in the same boat. All of us have been significantly impacted by the COVID-19 pandemic. The companies that take time to set up contingency plans for worst-case-scenarios are the ones who will have the advantage once production starts back up.

Cascade System Technology Is Ready to Help

Here at CST, we are taking all necessary measures to keep our team safe and healthy. We stand ready to help our customers work through the numerous challenges presented by the COVID-19 outbreak. Our goal is to help you continue to run your business and deliver the builds that you need. Whether you are looking for quick turn PCB assembly services, help with design for manufacturing and assembly, or circuit board manufacturing, we’re here to help. For more information, give us a call at (503) 640-5733, email us at info@cascadesystems.net, or complete our simple online contact form today.

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