When the pandemic hit, shutdowns were mandated for most businesses, save for the most critical of industries. Manufacturing was one such key industry, and it had to face more than just the risk of COVID-19 while trying to keep everything afloat.
Insurance Business spoke with CNA’s manufacturing industry experts – underwriting specialist and manufacturing industry lead Luke Sampson, as well as senior risk control consultant Barry Martin – to understand how the industry weathered the worst of the pandemic’s economic impacts, and how insurance was able to help.
When asked what the manufacturing industry’s main takeaways from the COVID-19 pandemic were, Martin underlined how the global health crisis managed to metaphorically catch the industry with its pants down.
“I think there’s a number of takeaways from the pandemic,” the consultant said. “First and foremost, COVID-19 really did expose just how globally-integrated – and in turn, fragile – supply chains for most manufacturers really are.”
The supply chains of manufacturers were also severely impacted by the worldwide pandemic, Martin explained.
“Shortages in raw materials and component parts for Canadian manufacturers to scramble in finding new sources of supply. There’s government shutdowns in various jurisdictions [that] took effect. This ultimately led to supply cost increases, making it more expensive for companies to make their product.”
Business continuity plans were also “significantly tested” during the pandemic, said Martin, “even as demand for Canadian products stayed level, or even increased.” But COVID-19 did not just stop at raw material disruption, the consultant told Insurance Business.
“It also significantly led to shipping delays; whether it was due to travel restrictions at border crossings, shortages of packing materials, even shipping containers were difficult to get a hold of.”
“All in all, the COVID-19 pandemic really tested the business resiliency plans of most manufacturers. Going forward, the resulting effects of supply chain disruptions will continue to be felt long after the pandemic has passed.”
Sampson chimed in to add that the pandemic has affected the way insurance assigns value, both in terms of replacement costs for real property, as well as for production machinery and equipment.
“I think this really does go hand-in-hand with Barry’s commentary on the supply chain,” said the manufacturing lead. “Given the lack of skilled labour in the marketplace, and – obviously – the ongoing supply chain disruptions, the cost to rebuild a partially damaged facility or replace a key piece of production equipment has really skyrocketed over the past few years.”
Sampson also commented that the lead times for equipment replacement have also been significantly delayed during the pandemic – this has left many manufacturers with inadequate valuations, he noted.
But there is a silver lining to this dark cloud over the manufacturing industry, Sampson prefaced.
“All of these challenges we’ve discussed really does show how nascent and resilient the manufacturing industry in this country really is,” he stated.
“Over the two-plus years of the pandemic, we saw manufacturers deal with all sorts of challenges. From the government shutdowns, to the decimated supply chains, to the delay in getting their manufactured product out to market. And given all of these challenges, the industry was still largely able to find its way, by keeping their revenues stable. By finding new sources of supply, and continuing their R&D activities, along with a continued commitment towards quality control.”
That manufacturers also managed to keep their businesses running while generally keeping their employees safe “in an environment of both uncertainty and anxiety” also deserves some credit, Sampson mentioned.
“So all in all, what a truly tremendous achievement – and one that I really think needs to be celebrated.”
