After the lockdown, industries are going to face various issues related to production, finance, laborers, cost, sale etc. Few are common problems which are described in this article.
1. Migrated Labor Issue:
We all know that millions of laborers work in various industries, far away from their home towns in states all across the country. After this pandemic started, almost all workers have already returned to their native states. Now in the upcoming days. after this lockdown period subsides, when the production will be restarted, industries will face human power issues, and now the question is who will fill their places, and how will the production restart efficiently?
The migrant laborers who have already returned to their states may resist coming back for a while. It might take about two to four months for them to come back. It is also possible that they might look for work in their own state. During this period, industries would have to think about whether to restart production without their usual labor, or with new laborers.
People can argue that if this situation arises, industries might resume their work with the workers who migrated back to their own states from other states.
This might be the possible solution: to continue their work with new laborers, but it will accrue training cost to the company, and the new laborers will have the disadvantage of the learning curve that will ultimately affect production.
2. Health and safety measures:
Till the situation gets better, we are required to deal with this. As the work resumes, due to the contagious nature of the virus, the industries are required to take care of the health and hygiene of all workers and staff.
Companies require to do thermal scanning of each and every person who is entering into the premise, and also lay down some social distancing norms.
Suggestions:
- Lunch time should be in two or three slots so that the staff can maintain social distancing.
- Sanitizing of each and every place properly after every shift should be carried out. Handles and doors should be sanitized
- Maintain physical registers for attendance instead of biometric system.
- Masks should be made compulsory in premises.
3. Finance Cost and Impact
- High Interest/Finance Cost: Industries were either shut down in lockdown period or continued working with reduced staff. During this period, there was lesser inflow of funds due to a decrease in sales. In the lockdown, companies were paying salary to its staff without any production, and as pointed out earlier, there was a lesser rate of inflow of funds such that the companies were using their credit limits to pay off expenses. Now that the lockdown has lifted, the finance cost like interest will be high and need to be paid by companies. If the few small companies (SME) also adopt the scheme laid down by the Finance Ministry to defer loan repayment of installments, it will add extra burden of interest on companies.
- Liquidity issues: After the lockdown period ends, companies will also face the liquidity crunch because there is low fund inflow in the companies during lockdown, and for further production companies will need funds for expenses. To inject liquidity, companies will require to take loans or use their credit limits leading to increase in the finance cost for the company.
4. Less Production but overall high cost:
On resuming business after the lockdown, it will take substantial time to achieve the previous level of sales, so units will have to adjust the production level according to the demand. Otherwise, due to demand and supply rules, it might affect the sale price of the product.
On the other hand, increase in the cost of raw materials will increase the cost of production which it will eventually affect the financial results and growth of the company.
Impact: Low sale and high cost will produce losses in the quarterly results for at least next two quarters.
5. SMEs’ need a new Life
Although big players in the market will manage to survive this situation and collect funds as required, SMEs will generate losses and it might even lead to shutting down of the business. We can say that due to the impact of the corona virus, a few starts ups might shut down permanently
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