2020 has been a year full of unprecedented change around the world. And it couldn’t have been a more disruptive time for the cement industry. The industry projected and was prepared for a strong year at the beginning of the first quarter of 2020, however, with the COVID-19 pandemic, it is experiencing the steepest fall in production and demand, especially in developing countries where Construction Industry is the backbone of the economy.
As operations across production plants and construction sites came to a standstill with global lockdowns to contain the spread of the virus, the production and consumption of cement fell significantly. Even in countries where construction was exempted from the list of economic activities prohibited during the lockdown, the economic slump and weak consumer sentiment led to shrinkage in cement offtake as we neared the end of the first quarter of the year 2020. The economic fallout from business interruptions across industries will further cause a slowdown in the replenishment of order books, only to recover slowly as the economy recuperates.
Apart from macro-economic challenges affecting the cement industry, a string of operational roadblocks have caused the demand for cement to flatten. In particular, the construction space suffered a drop as a result of a shortage of workers due to fears of infection, disruptions in supply chains, lack of personal protective equipment, and crew social distancing requirements. Recent forecasts suggest a 6.6 percent fall in construction output for all of North America in 2020, equivalent to a loss of USD 122.4 billion in projects.
While those trends and metrics paint a grim picture, the COVID-19 pandemic is pushing the cement industry to reimagine legacy processes and embrace digital to create operational efficiencies and reduce expense factors.
It has put into perspective the importance of business continuity and resilience when it comes to survival during a black swan event. Cement companies looking to bolster business performance and ensure superior business continuity should focus on three key areas – supply chain robustness, operational excellence, and cost-effectiveness:
Improve supply chain resiliency
According to a PwC study, digitized supply chains (DSC) can generate efficiency gains of 4.1 percent annually, emphasizing why cement companies need to build a digital-first integrated ecosystem that offers superior transparency across the supply chain. From predicting demand accurately by leveraging cognitive technologies and historical data to optimizing the overall supply network through greater coordination between quarries and production plants, technology adoption across the supply chain will deliver better business outcomes. Cement producers can also use readily available technologies such as RFID to manage the flow of raw materials through the supply chain and ultimately prevent stock-outs or overstocking.
