Response of Supply Chain in Manufacturing Sector to COVID-19 and Revelations
By Schneider Electric（China）Co.，Ltd.
COVID-19 has greatly impacted China for its society and economy. From social life to business operation，and to the whole Chinese economy，in particular，the manufacturing sector，all seemed to have hit the pause button. As an important part in the global supply chain，China suffered long period of work and production stoppage，which in turn disrupted the industry chain and supply chain，bringing tremendous shock to those enterprises and countries that rely on China’s supply chain.
Schneider Electric was put to this unprepared test too. What is worth mentioning is that we have come out of the test with some initial success. The company not only resumed its production at the first allowable time，but also worked with the upstream and downstream enterprises，ensuring smooth delivery of capital goods and logistics and full recovery of the production capacity. As of February 21st，2020，90 percent of 23 Schneider Electric China plants have resumed production. Nearly 90 percent of its 1000 upstream suppliers throughout the country have returned to work. Most of the suppliers who fail to go back to work are from Hubei province. During the same period，among 23 provinces which announced work resumption，calculated by the resumption ratio for industrial enterprise above designated size，only 5 coastal provinces and Shanghai achieved 70 percent of work resumption.[1] Schneider Electric’s outperformance couldn’t have been achieved without support of the local governments. But our proactive response measures in combating the pandemic also helped win some good recognition.
This paper shares the practices and experiences about Schneider Electric’s response to the emergencies，including its quick reaction from supply chain，global synergy，all-around cooperation and intelligent technologies adopted to deal with the public emergencies，with the purpose of providing some references to the government and other enterprises. In the long run，we wish to build capacity with more enterprises and local governments to develop more agile and prudent supply chain response system and city management，to guard against the shock and damages brought by major public incidents to the real economy.
1 COVID-19 impact on manufacturing sector
From the perspective of economy and supply chain，COVID-19 has the following impacts on the manufacturing sector.
Materials：Due to supply shortage of materials or semi-finished products transported from the logistics hub in the hardest hit regions，suppliers are slow to resume production and suffer insufficient production capacity.
Labor：Employees are unable to go back to work on time due to different quarantine or lockdown policies in various cities.
Procurement：New business or planned business cannot proceed due to travel restrictions.
Logistics：Established logistics network could not function well due to flight or shipping embargo in countries and logistics restrictions in regions. Finding alternative routes and ways of transportation become more difficult.
Customer：Demand from downstream customers，such as sectors as real estate，commercial buildings，industry，infrastructure construction and data center，is either stagnant or shrinking under COVID-19. Customers are slow in resuming work or production in face of sluggish sales，delayed orders，interrupted supply chain and varied policies for workers to resume production.
Disruption of supply chain and ecosphere bring more shock than trade frictions do. If trade diversion and substitution appear due to interruption，it will shake the manufacturing foundation that China has laid down in the past three decades. Mr. Huang Qifan[2] in his article suggests that we must place high importance to protecting the industry ecosphere，industry chain and supply chain and SMEs，at the same level as we fight against the pandemic，to withstand this hard time.
The central government has sufficient understanding about how the pandemic may damage the manufacturing supply chain，so has given instructions on multiple occasions. In the Work Arrangement Conference on COVID-19 Prevention & Control and Economic & Social Development on February 23，[3] the central government pointed out that it is important to boost production resumption，implement tiered and precise control measures for various regions，break bottlenecks for people and logistics flow，relax restrictions on freight logistics and promote aligned work resumption in every link of the industry chain. As anti-pandemic situation turns better，enterprises in different areas speed up going back to work. By February 24th，more than 80 percent of enterprises[4] in 6 provinces have resumed production.
2 Efficient emergency management system to ensure production resumption
Contingency plan is part of the routine management for supply chain at Schneider Electric. We have set up，in the first time since outbreak，a COVID-19 Control and Treatment Command Center and a global Special Action Team. Cross functional meetings were organized on a daily basis，to deliver updates on security，procurement，production，transportation，people，order and funds，which helped agile responses. Corporate-level safety protection plan was put in place. Besides，internal cooperation，both along the industry chain and across different functions，played an important role. Global Supply Chain（GSC）China team，working closely with global team，and China sales and marketing team，organized emergency meetings to make timely decisions and quick response.
In terms of execution，local plants prepared specific prevention plans based on the distributed instruction manual and the requirements of local governments，to ensure health and safety of employees with refined management. Accountable departments and individuals were assigned in the plan. Detailed rules and regulations were followed in the staff-intensive areas as production and warehousing etc. Feasibility of decentralized workspace was assessed where office staff were encouraged to work both online and offline，mostly online. In risky areas such as the canteen or changeroom，measures were taken as setting maximum allowable visitors，and arranging more on-duty guards，to reduce people density and ensure staff security. Our control plan and work resumption manual，being praised as comprehensive，targeted and operable by local governments，have become the reference book for other enterprises. They also warranted quick approval from the local governments for our production resumption.
From our observations in practice，we believe that enterprises，in particular SMEs，shall put more effort to build their capability on emergency handling and seek synergy effect. Contingency plan shall be put on the agenda and become a routine system. Enterprises shall strengthen contingency plan and play the drill regularly. In this respect，the local government plays an indispensable role，such as building platform to introduce good practices and experiences of emergency handling to more SMEs and encouraging enterprises to develop their own Contingency Plan as part of their routine management，so that they can quickly respond to the unexpected incidents. Schneider Electric will be more proactive in the future to share and impart our practical experiences，and provide relevant consulting services to our business partners.
3 Agile response of supply chain with global collaboration and upstream and downstream alignment
The Global Supply Chain of Schneider Electric covers 200 plants and 98 logistics centers in 46 countries，which manages more than 260，000 entries and process over 150，000 orders daily. In China，Schneider Electric employs nearly 10，000 supply chain staff in 23 plants and 7 logistics centers. In various plants all over the world，we have standardized production process，job settings，production languages and management structures. This makes it possible to seamlessly leverage global resources when sudden public events hit one region，instead of leaving a single site to bear all the losses and damages from disruption of production or supply chain. In this pandemic outbreak，emergency response of the supply chain shows the following features.
（1）Global alignment to address regional impact caused by COVID-19
With the mindset of unified management，centralized control measures were taken in this special period. Schneider Electric China has set up a special action team and organized regular high-level meetings to update the corporate executives daily，schedule means of production and capacity globally，increase level of inventory by identifying alternative resources for the affected plants in the lockdown areas. We also adjusted the supplying place of origin by identifying affected critical suppliers. For example，Schneider Electric has one branch，one plant，one logistics center and about 1500 employees in the city of Wuhan，where COVID-19 broke out. Considering the great uncertainty of timing for Wuhan to resume production，Schneider Electric decided to leverage the production capacity from France and Indonesia to guarantee on time delivery of orders of Wuhan plants. Schneider Electric also mobilized its GSC team to lock in resources besides production materials，i.e. protective outfits. 80 percent of the protective facial masks were imported from countries as Middle East（Dubai），Europe，India，and Singapore. Corporate executives granted authorization to the GSC team to find resources globally and place orders as soon as demand was determined. In face of obstacles as embargo from countries like India and suspended air or shipping services，Schneider Electric employed its global unified logistics system and team to find out the turnaround solutions.
（2）Promote upstream and downstream collaboration and ensure an unobstructed supply chain.
Modern industry chain is featured with interconnectedness of the upstream and downstream enterprises，in which any changes of one may affect the others. If one enterprise along the chain gets stuck，as affected by the pandemic，all the other upstream and downstream enterprises will be affected. According to the survey，one of the major pains for work resumption came from insufficient supply of production-intensive and trans-regional logistics supply chain. 229 out of 1852 surveyed enterprises mentioned supply chain and logistics as an obstacle for their back to work. Trans-regional logistics for production was a more prominent issue. These problems not only affected the logistics industry itself but also led to insufficient supply of raw materials，delayed delivery of finished products，and increased logistics costs，therefore affecting recovery of the whole economy.[5]
Schneider Electric encountered the same dilemma in the first week of coming back to work. We found it hard to recover production capacity due to low level of work resumption at the suppliers and lack of raw materials. To solve the problem，we quickly assisted suppliers to resume work by sharing our Work Resumption Guide and issued official letters to the local governments. We also communicated with the local governments，working out possible solutions for major issues. Mr. Li Hongzhong，the CPC party secretary in Tianjin，proposed a good suggestion in his visit to Schneider Wingoal（Tianjin）Electric Equipment Co Ltd. The idea aims at recovering a whole industry through restoring production of one leading upstream enterprise first. That requires us to look at the supply chain and logistics chain for major in-service enterprises，screen out the suppliers who have not yet started production. The local government then coordinates and urges those enterprises to resume production as soon as possible under the premise of good pandemic control. In this way，we can resume production of the whole industry chain and enterprise clusters in a steady and orderly way.
Guided by this thought，the resumption ratio of suppliers to Schneider Wingoal Tianjin Plants increased from 24 percent on February 10 to 70 percent on February 21. China National Development and Reform Commission shared at the press conference held by the State Council Information Office on February 24，2020，that large enterprises resume work faster than SMEs，upstream companies and capital intensive or technology intensive enterprises faster than the downstream and labor-intensive enterprises.[6] We believe that the Tianjin practice，where enterprises above designated size and leading upstream enterprises driving the whole industry chain，work efficiently. It can be taken as a reference for other local governments.
This pandemic outbreak also reminds us that enterprises shall pay more attention to demand and supply balance and develop a buffer inventory，assess the possibility of diversified supplier’s ecology，and review or create the master risk assessment methodology. Enterprises shall work with the internal stakeholders，strategic departments and critical suppliers，to establish a consistent method of risk management，monitor and prepare materials to avoid shortage of manufacturing capacity. Also，enterprises shall have a broader insight for business growth. They shall work together in crisis response. Enterprises with critical stakes，either in the upstream or downstream，must support each other to build a good commercial ecosphere. Neglecting others and caring oneself only may put everyone in danger.
It is of critical importance for local government to build capacity in disaster recovery for materials and production. Such capacity not only helps us respond quickly to the emergencies，protect people for the safety of their life and property，but also assists the circulation and recovery of the industry chain more efficiently and precisely，so as to reboot the social and economic activities. We suggest local governments prepare the Disaster Discovery Plan for Goods Supply and List of Critical Enterprises for different types of disasters，in particular，for upstream critical components providers，so that when we face unexpected incidents which require us to recover production of medical supplies，prepare materials for constructing makeshift hospitals，we are able to race against the time and move emergency handling time forward. Besides，local governments could become the mainstay for enterprises. They shall stress the importance of building demand and supply platform for upstream and downstream enterprises，help balancing demand and supply，adjust production capacity as needed and make targeted policies to address the real difficulties faced by enterprises as they help enterprises and the industry resume production.
4 Intelligent technologies，with prominent advantages，shall be applied more to assist industry upgrading and city management
The Chinese always has a crisis view that opportunities arise from crisis. People may change in the process of problem solving. Mrs. Chen Chunhua，president of the business school from National School of Development，Peking University，believes that this pandemic will become a chance for enterprises to shift towards digital，future-oriented and intelligent. Enterprises that adopt digitalization，AI，symbiosis and synergy pattern are the ones that recover and rebound more quickly.[7] In the Survey on 100 Enterprises- About Work Resumption as the Pandemic Mitigates[8]-an article released by CICC，the writer asked what far-reaching impact the pandemic outbreak may have on business management in the mid and long term？Most enterprises say that they will speed up digitalization and application of intelligent technologies in the future，for example，developing the business IT system，allowing telecommuting and automating production in plants. We fully agree with these ideas.
① Digital technologies are adopted to ensure business continuity. During this special time，people are not allowed to meet each other，but business activities must continue. The front-end sales of Schneider Electric keep communication and interaction with customers and partners via digital platforms，ensuring that the orders are unaffected. In order to better support external partners，Schneider Electric established a learning community by opening 3000 accounts in the leading cloud platform of advanced learning，developing and providing various training courses on safety and products to customers and partners，so that we can make progress together during this hard time. Schneider Electric also kicked off “Cloud Recruitment” to address the talent challenge. We encourage digital recruitment model such as online training，online CV posting，smart recommendation，video interviewing，integrated appraisal and lead training，to ensure sufficient talent supply for enterprises.
② Intelligent supply chain has shown its unique strength in responding to emergencies. An intelligent and visualized supply chain may help us see what is happening in each part of the chain，and allow supply chain managers to plan more accurately，allocate materials more reasonably. It enables real time monitoring to any disruptions in the supply chain，so that people can make timely adjustment. The intelligent logistics system of Schneider Electric，or end-to-end logistics control system，is based on the supply chain transport control system which we build with years of efforts，and the technologies as IOT，data link and data fusion，robot process automation，and business intelligence solutions. It empowers enterprises from five areas as planning，procurement，production，warehousing and transportation，which significantly increase the predictability and reliability for the order and goods receipt，improve customer experiences and boost the core competitiveness of the supply chain of Schneider Electric. During this COVID-19 outbreak，many materials could not get to places that need them most due to interrupted logistics and varied handling policies in different regions. A visualization platform equipped with the end-to-end control tower may allow real time monitoring to each circulation gates for the order based on the current level of pandemic control and work resumption in different cities. This system updates daily the COVID-19 impact on critical materials，production capacity，domestic and international transportation，and assess，predict and communicate abnormal conditions，send early warnings，coordinate different parts of the supply chain，and develop trans-department contingency plans. It uses available resources based on the level of order urgency. Such system helps minimize risks，ensures timely delivery for urgent orders，which greatly mitigate the challenges to the supply chain caused by the outbreak.
③ Digital and intelligent transformation in the manufacturing sector is of critical importance. Although Schneider Electric has advantages as flexible allocation of global production capacity，quick response to emergencies and high level of work resumption，it still encountered bottleneck of production capacity due to work force availability，as most labors in the coastal manufacturing base come from inner land provinces，who were blocked by the traffic control and quarantine measures. For example，116 technical interns recruited before the outbreak could not leave Wuhan for neither their school nor cities as Shanghai，where shortage of labors was a big issue. Another example is that some work resumption policies stipulate that employees from other cities may not get approval of back to work unless they can demonstrate that they are negative in the nucleic acid test，present evidence of employer’s work resumption，and prove that these employees are transported by chartered cars. In the short term，with restart of the whole industry，encouraging more front-line workers to go back to work and improving capacity have become a pressing request from manufacturers. But in the long run，manufacturers shall push forward smart manufacturing more pragmatically through building smart plants，promoting transparency and efficiency in business operation through deep integration of new generation of IT technology with manufacturing. Enterprises shall encourage flexible manufacturing，relying less on human labors to better deal with labor force changes. They shall also adopt digital technologies to optimize allocation of production capacity among internal departments or across regions，schedule production intelligently and coordinate multi-site businesses remotely with suppliers and customers. This may be helpful for the whole industry as enterprises can allocate their production capacity more efficiently and build their capacity to fight against risks.
④ As a responsible corporate citizen，we would also like to contribute ideas on emergency response in city management. In addition to industrial use，intelligent technologies can play their role in city management. It may even fundamentally change city management and the way of dealing with emergencies in future crisis outbreak.
First，intelligent technologies such as drones can play a bigger role in the front-end medical diagnosis and treatment. COVID-19 is highly contagious. As people may easily get infected during the outbreak period，we must minimize face to face contact. Intelligent technologies may help turn human-to-human contact into human-to-machine contact. This is not only helpful for pandemic control and treatment，but also can become a new normal in the public health system. For example，it can be used for smart patient screening at the outpatient service in hospitals and assist with medical diagnosis. AI can also be used to make preliminary medical judgement in combination with CT. We can even use a small number of medical robots for surgical operations.
Second，the pandemic outbreak comes with rapid changing information and explosive growth of incoming demands. It requires numerous interactions among different enterprises and regions. In this case，things may easily get out of control with shortage of manpower，pressing tasks and quickly changing situation. Among front line work at streets and community level，personnel control mainly rely on registration，form completion and loudspeakers. That’s also the case for calculation and distribution of living supplies and protective materials. Such practices cost large amount of manpower but with undesirable effect.
Schneider Electric suggests introducing intelligent tools and technologies to future community management，to make it more efficient and accurate. It is worth mentioning that the Health Code launched first by Hangzhou city helps classify and monitor Hangzhou population. In Changxing County in Zhejiang Province，residents’ information is collected through smart door locks. These have shown that intelligent technologies can play a role in pandemic control and quarantine as well as in sanitation and safety. If the information collected in the airport，railway station and public places from unmanned body temperature measurement，facial recognition and camera surveillance can be shared by the street-level communities，repeated door to door visits could be greatly reduced. If drones and unmanned vehicles can travel and distribute facial masks，alcohol and other common prophylactic drugs in the empty lockdown or forbidden cities，transport basic living supplies or patients，or serve as public transport vehicles，they can both alleviate the work burdens of frontline staff and reduce the risks for virus contact.
Equally important is the urban IT infrastructure construction. From our observation，many cities were short of a well-performing IT system for transporting and distributing the badly needed goods and materials. There were many blind spots on part of supply and demand and transportation. Materials allocation easily fell into chaos. Production capacity increase was not timely，due to asymmetrical information. In fact，AI has been widely applied for consumer business in China. We have seen many commercial businesses actively collaborate with local governments during the outbreak. For example，JD.com committed to building a disaster relief supply chain management platform for Hubei Province. Meituan.com launched the Pandemic Control Plan with Drone Delivery. This reminded us to give IT infrastructure more weight in future city management，and to put more efforts in developing intelligent technologies and their applications for public management. Technologies as IOT and big data analytics used in building a smart urban supply chain management system，for example，may help the command center get timely updates about information on procurement，production，warehousing，transportation and distribution，which enables accurate information sharing and resources allocation. In particular，big data analytics for logistics，with its predictability，can make real time risk forecasts and send early warnings，including forecast for potential risks caused by any force majeure events，such as flooding，earthquake or public health emergencies，assess possible impact and propose emergency handling measures as early as possible，so that we can minimize risks with proactive intervention，maximize steady delivery of supplies，predict trade risks by collecting abnormal information and providing basis for targeted policy making.
5 Conclusion
Some learnings from this battle tell us that we shall keep calm and act quickly in face of the pandemic outbreak. We need to have a robust crisis management system in place，and to conduct drills regularly in dealing with emergencies. As a manufacturer，we shall think and act with an integrated mindset and approach. Through collaboration with global and full industry chain players，and assisted with digital and intelligent technologies，we will surely win the battle，to protect China’s economy and its manufacturing sector.
[1] 21jingji.com：Map for Work Resumption in China on February 21，2020；24 cities above designated size achieve more than 80% of work resumption. Guangdong Province and Zhejiang Province become the major destinations of migrate workers http：//m.21jingji.com/article/20200221/herald/2c1508a2b810a8c211b6e6704112f9de.html 2020.
[2] Yicai，February 11，2020：Huang Qifan：Suggestions on Economic Development and Manufacturing Resumption under COVID-19 https：//www.yicai.com/news/100499981.html？from=groupmessage.
[3] XinhuaNet，February 23，2020：Xi Jinping：Speech on Work Arrangement Conference for Coordinated Promotion of COVID-19 Control & Treatment and Economic & Social Development. http：//www.xinhuanet.com/politics/2020-02/23/c_1125616016.htm.
[4] Ifeng.com，February 24，2020，Updated Version of Map of Work Resumption in China，Work resumption ratio in Guangdong and other 5 provinces exceed 80% http：//finance.ifeng.com/c/7uKrR4311fc.
[5] finance sina.com，February 21，2020，Survey：34.8 Percent of Enterprises are yet to Resume Production. Integrated Circuit Industry is Facing the Toughest Situation. http：//finance.sina.com.cn/review/jcgc/2020-02-21/doc-iimxyqvz4603862.shtml.
[6] Beijing Business Today，February 24，2020，NDRC：Work Resumption for Industrial Enterprises above Designated Size Gradually Increase，more than 90 Percent in Zhejiang Province. https：//baijiahao.baidu.com/s？id=1659384035330198660&wfr=spider&for=pc.
[7] finance sina.com，February 25，2020：Made in China in Global Industry Chain：Production Impossible with a Single Component Missing，Two Changes after COVID-19. http：//finance.sina.com.cn/roll/2020-02-25/doc-iimxxstf4215007.shtml.
[8] February 12，2020，CICC：Survey on 100 Enterprises- About Work Resumption as the Pandemic Mitigates. https：//baijiahao.baidu.com/s？id=1658301627838628342&wfr=spider&for=pc.