COVID-19 IMPACT ON PRODUCTION CAPACITY

COVID19

Alongside the alarming trend in the infection rate, the daily newspapers, are full of images of migrant labourers returning to their home states. The sheer scale of this movement is staggering, and it has overwhelmed the infrastructure. They are travelling from the worksites, where the projects have been stalled due to the COVID-19 pandemic. Many who work in the Arabian gulf have returned to India. Workers who had accepted jobs in Mumbai and other metros were walking very long distances, because they did not have vehicles, and public transportation had been suspended. The government has arranged Shramic Special trains to transport them back to their homes. Shramic is the Hindi word for “labourer” and this intervention is quite thoughtful on the part of the government. Now having said that these trains have been arranged, the transportation has apparently been quite chaotic and overloaded, despite state governments cooperating about the passenger data. There has also been a spate of accidents involving private carriers transporting workers. Madhya Pradesh for example, being a centrally located state in the Indian union of states, is not a destination for many workers, but has been a transit point for those in Maharashtra and the Southern states who want to reach the Northern states and for any flow in the reverse direction from the North to the South or West. The chief ministers of the various states have been discussing how to do this best. I think some O.R. techniques could smoothen out the large scale of transportation to some extent, in the future. After the pandemic is declared to be receding, the workers will want to return to their worksites in the same distant states. It should be possible to work out precisely how many buses and trains will be necessary per week and arrange for that requirement.

Now these workers are, at least conceptually, will have to be dependent on the labour force that stayed back in their home states. This may be difficult, given that they had to leave and look for work in the first place.

What I want to discuss this week, are the dynamics at a typical production facility where the full labour force was working, before the lockdown. If the labour is down to 50%, then the production will have to be deferred to later months, unless there is sufficient inventory of the product. If the capacity has fallen below a critical level, no production is possible.

Figure 1

Figure 1

For the sake of an example, we have considered six automotive parts with a particular demand pattern has given above in Figure 1. There is a large demand for Product 6, which is indicated by the green line. Otherwise, this order is not a problem for the manufacturing company at their current capacities. If the capacities go down by half, then the situation is quite different. The comfortably placed company will have to resort to inventory management, and also backlog some month’s orders, to achieve the order as a whole.

Figure 2

Figure 2

In Figure 2, we can see that the production is rather level, that is, almost the same volume of products are made each month. This is true for all the products, except product 2 which is indicated by the red line. The red line zig-zags between the lower and upper bound, which suggests that we can satisfy all the demand for that product, even by raising or lowering the production level in some periods.

Figure 3

Figure 3

In Figure 3, we can see how the inventory should be managed for all six parts. The large spike for Part 5 shows that we must keep a high level of inventory for that part in the middle of the planning horizon.

Figure 4

Figure 4

Figure 4 shows that production is deferred for all the six products due to the reduced capacity. At full capacity, there was no need to defer the production in any period, except one. This is in spite of clever inventory management during the year. So, it appears, that delays in shipments are going to be quite common, for products for which there is limited stock.

Fortunately for those, who have heard horror stories of famine, food supply is not considered to be in short supply in India. It is just that the national and global mobility that all Indians were getting used to as a given, has been snatched away for the time being. When this liberty is restored, passengers and commuters will still be nervous for some time at airports, railway stations, and other checkpoints because of all the testing that is ongoing, but the confidence of the diplomat, the business traveller and the economy class tourist is in my opinion, bound to return.

Author:
Dr. Badri Toppur
Associate Professor, Rajalakshmi School of Business, Chennai
Email – badri.toppur@rsb.edu.in