- Digitisation can reduce capex, head count and increase efficiency
- A jump in inquiries on digitisation benefits during lockdown from SMEs and large companies
- Liquidity and preserving cash priority of most businesses while re-opening
- Supply chain management and lack of labour are big challenges in reopening factories
In the post-COVID world, most companies are going to adopt digitisation as a tool to reduce capex, head count, increase efficiency, flexibility in processes and thus cost savings, said Sunil Mathur, CEO and managing director of Siemens Ltd, the Indian arm of the German engineering and technology multinational Siemens AG.
"That is evident from the inquiries we are getting from customers for the last two months. Now a lot of SMEs to large companies are interested to invest in digital solutions than sticking to conventional manufacturing processes," he told Business Today in an exclusive interview.
While the country is reopening from the lockdown, industries across sectors are worried and their problems are complex and uncertain. Liquidity is a major issue for all companies, whether big or small, and all are trying to preserve cash. "Lack of clarity on how and when to start or stop a business in red zone is an issue. Even if opened, supply chain is a challenge, as many companies in the chain can be in red zone. Further, availability of labour and logistics is uncertain. Customers are demanding deep discounts and demand in the market is not known. Maintaining social distancing and safety norms is a problem and companies have to learn how to run a factory with 50-70 people, where they were employing 100 people before lockdown. In non-air-conditioned shop floors, work will be difficult with masks. Conserving cash, reducing overheads and capex reduction have become the focus of most companies," he said.
According to him, the reform package should have focussed more on stimulus to regenerate demand and supply, than sectoral reforms which were bound to happen whether COVID-19 had hit us or not. "A time bound action plan to bring SMEs back on track and big infrastructure spending are required at this time of crisis. Industrial capacity utilisation has come down. In that scenario, private companies will refrain from spending. Government spending, speedy clearance of tenders for public infrastructure projects and clearing pending dues to Contractors are also required in this time of crisis," said Mathur.
He said Siemens is slowly reopening its factories. Currently six factories have been reopened with limited operations and other two are being re-opened. Siemens Limited reported a revenue of Rs 2,738 crore, 20.9 per cent decline for the second quarter of FY2020, as compared to the corresponding quarter of the previous year. Profit after Tax (PAT) was at Rs 172 crore, a 38.6 per cent decline. The company's order backlog now stands at Rs 12,547 crore.
Mathur said the economy was already slowing down before the Covid-19 crisis erupted. He says at Siemens, the capex spending has been reduced dramatically in the current quarter. A gradual slowdown in the operations of customers and supply chain was already visible from February. With the announcement of the lockdown, all Siemens factories, project sites and offices were shut since the last week of March, resulting in a steep drop in revenue for the quarter, said Mathur.