Impact of COVID-19 on cement industry

Jul 27, 2020
Manufacturing | 4 min READ
This article was originally published in Engineering Review's - Source link
In this article, we will look at the impact of the COVID-19 pandemic on the cement industry and propose strategic, digital-first interventions that can better prepare cement manufacturers to cope with black swan events. By enabling close integration of physical and digital systems, prioritizing automation, and deriving actionable insights using predictive data analytics, cement producers can drive significant business outcomes and gain an edge over their competition.
Gopi Padiyath
Gopi Padiyath

EVP & Global Business Head

Manufacturing & Services


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.
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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.
Enable smart, agile operations
Operational agility is key to maintaining productivity levels and cement companies need to make strategic investments in digital tools to enable predictive maintenance, ensure employee health and safety and monitor operations remotely using integrated control towers (ICT). With the use of robotics and cobotics, cement manufacturers can mitigate occupational hazards of working under intense pressure and heat conditions. On the other hand, using interactive technologies such as augmented reality (AR) can help maintenance crews resolve equipment issues quickly, putting them at a lower risk. Further, by harnessing massive volumes of operational data and using intelligent technologies such as machine learning, cement producers can anticipate equipment failure more effectively, and minimize the possibility of unprecedented equipment breakdown. Similarly, predictive analytics can be used to assess cement quality in real-time and ensure better customer value.
Optimize operating expenditure
Cost reduction becomes critical to maintaining profitability during an economic slump. Cement manufacturers can leverage data and powerful machine learning algorithms to drive cost efficiencies with proven application in maximized fleet utilization, alternative fuel optimization, and raw material cost reduction. The use of digital twins to streamline the entire production process is also an excellent digital intervention to achieve the lowest possible cost while ensuring the optimal output and quality.
In these tumultuous times of change, manufacturers that channelize their bandwidth and resources towards accelerating digital transformation and driving innovation will be able to weather COVID-19 in the short term and drive long term value generation. The focus will gravitate towards automating skilled workforce, strategic technological, and operational interventions that closely connect digital and physical systems to boost process visibility and enable large-scale automation will deliver critical business results.
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