24 minute read
7 Impact of COVID 19 on Construction Industry
Emerging Managers
Mr. Shubham Yadav MBA, Batch 2020-2022 RICS School of Built Environment, Amity University, Mumbai
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Impact of COVID-19 on Construction Industry
The construction industry in today’s era is known to be the second-largest employer in the country after agricultural sector, construction industry has been significantly impacted due to the ongoing covid-19 pandemic situation. This outbreak has not only affected many people working in the sector but also the investors as well as customers.
Real estate and construction sector is very badly affected as it consists of the 7% of the GDP of the country and it employees 15% of the labour force of India with the Nations Lockdown it is severely impacted. Since it is a labour-intensive industry 269 industries along with it got affected because its resources materials of different kind from Iron, steel and nails to smallest of small items different kind goes into the building Industry. Major stakeholders in construction industry such as supply chain vendors, contractors, subcontractors, developers and Owners they have experienced varying degrees of overall impacts as a result of the COVID-19 pandemic. This outbreak of Corona has deeply impacted the complete chain and spectrum of the real estate industry, including residential, commercial, retail, and construction segments. The restrictions imposed by the Government of India as well as State Governments and the Union Territories to control the spread and the impact of the covid-19 virus has affected work on projects, it has heavily impacted supply chains, plant, equipment, materials and manpower. Before this pandemic situation, the construction industry was recovering from a few minor issues like Demonetisation, policy changes (RERA), changes in taxation (GST).
Since the construction industry is facing a problem due to migration of labour and limited supply of raw material it has halted the activities in construction industry. Investor and consumers who have invested their savings they are expecting timely delivery of their projects.
Difficulties faced by Construction Industry
Manpower plays a vital role in the supply chain of construction industry and due to lack of manpower it impacted the speed of construction projects. Due to Migration of labour in Pandemic, majority of
labor migrated to their hometown and most of the construction sites have struggled due to shortage of labor and had suffered where the projects had been delayed upto 6 months to 9 months. One of the major difficulty faced by the construction industry is shortage and unavailability of Raw material. This shortage unavailability of raw material has led an increase in the cost of raw material particularly cement which is considered an essential necessity in Construction Industry. Price of cement has hiked by almost 25%. Since this process is linked to each other, if there is an increase in price of cement the builder has to adapt with such price change to let his work of construction keep going. With the increase in the cost of construction, Capital cost increases and other expense such as marketing cost also increases. Project seems to less viable with decrease in the sales velocity.
Force Majeure
‘Force Majeure’ is basically a clause that is a contractual provision where unforeseeable circumstances arise that prevent someone from fulfilling the contract. In this case Covid-19 is such circumstance where it is impossible to fulfil the contract.
In current lockdown situation it is very difficult for the contractors and consulting companies to meet contractual performance for consultancy contracts under execution of project.
Relief by RERA
Challenges that contractors need to tackle in 2021
• Lack of skilled labor
Due to migration of labor to the respective places has created lack of skilled labor on the project. One of largest Construction Engineering group of India Larsen & Toubro said, by the End of July they had seen labor force fallen from 2,25,000 to 1,60,000 during lockdown in the country.
• Disruption in Supply Chain
Due to restriction imposed in the country it affected the supply chain of raw material required. There has been decline in shipping of material and taking material across state and national borders. Lack of material and equipment were some reason that are causing serious damage to construction sector with its unavailability.
• Dwindling Project Pipeline
As per reports published by Ministry of Statistics and Program Implementation (MoSPI) in December 2019. Out of 583 delayed projects 183(31%) delay range 1-12months, 129(22%) delay range13-24months, 146(25%) delay range 25-60 months and 125 (22%) delay range above 61 months. Nearly, 111 trillion work project in National Infrastructure Pipeline (NIP) that is in roads, gas, rural housing etc.
The Real Estate Regulatory Authority (RERA) of their state have recognized the issue and took the matter in their hand and also accepted to modify the given timeline of project with respect to filing by RERA.
Status of Project as Specified in NIP
40% 30% At conceptual stage Unclassified
20% 10% Under Development
Source: National Infrastructure Pipeline
• Inflation across industry • Decrease in Revenues
There has been decline in construction sector that had direct impact on revenue generated by state government. With the decline of 7.3 Lakh Crore from 8.6 Lakh Crore in Financial Year 2019-2020. According to data shared by Crisil, share of private spending has fallen 26% in financial year 20092010 to 17% in 2019-2020.
Recommendations
One of the biggest challenge which contractors has to face is the sudden rise in price. There will be fluctuation in the price of raw material, supplies, deliveries which will does have significant increase in the price across the country. Since with the ease of lock down there will be a demand for essential construction materials which will thus result in increase in the price with this situation of sudden deflection, it has disturbed the demand and supply cycle of the construction industry. In the current scenario of Covid-19, the running contracts that are about to expire during the lockdown they should be given an extension of time. Period of bank guarantees must be waived off or can be given extension as provided in the contracts during this lockdown period. Government policy like NITI Aayog will play major role in overall survival of construction sector so that India can achieve huge growth further in future.
Emerging Managers
Online Classes: A step forward or backward?
The era of Global pandemic has taught the world to use the technology at a next level. Many countries saw a lockdown in their economy and economies suffered huge losses. Mainly 2 Industries saw a boom in demand: Medical & IT.
The demand of protective gears increased at a very impressive rate as World Health Organization (WHO) recommended to use face masks and sanitizers to protect from the spread of Covid-19. WHO also advised to maintain social distancing leading having physical distances but it brought people closer virtually. Most of the businesses were operated from work from home model. Not only had private sector adopted this but the public sector too.
The online world had has benefitted a lot but businesses but there are losses also. In India, most of the school and college students haven't gone to their institutes after lockdown. The schools are conducting online classes. This brings us to our first problem: lack of resources, student of government schools are so poor that they can’t afford a smartphone or a laptop to study. Most of their parents are daily wage workers. Education department of India started to telecast the lectures on TV’s but most of the daily wagers couldn’t afford food for 3 time how would they afford a TV for their children. Not only had the students faced a problem but teachers too. Most of the teachers didn’t had and technical knowledge of how to teach in online classes, which created a lot of problems for teaching process. Coming on the private sector, they had resources but they were not sufficient. Many working class middle families didn’t had a Wi-Fi connection as they mostly spent their lives in offices or schools. The students who were earlier criticized for using phone and laptop while studying had to study on it now. It took a long time to adapt to online changes for students and teachers and simultaneously loss of studies was going on.
Coming on the next problem, Health issues. Due to this lockdown, the students didn’t get any place for physical workouts. In addition to that looking for a laptop/phone screen for more than 10 hours caused many medical issues like loss of proper vision, cervical, headache and mainly the obesity. These problems are not something normal and requires
immediate action. And the question here is if the school can’t take care of students then who shall do that? I know studies are important but at what cost: The health? This is something which is not acceptable.
Problem number three. It has been noticed that students are actually not able to focus and face technical glitches like poor connectivity or freezing issues or anything else. I don’t blame the educational system for that or the government, but they both knew that this would become a barrier in their learning and this should have been considered.
Despite of knowing these problems, the educational Institutions wanted to provide learning to students. They tried very hard but unfortunately the results are not as expected. The blame is not that the institutions or government didn’t try to provide opportunity to learn, the blame either they didn’t predicated the problems well in advance or if they did, they continued it anyway. Knowing about all these serious problems. A simple step Coming on the next problem: Lack of personal touch. The personal touch in student’s learning has a very important role. As we know not every person has same level of understanding and require a personal touch. In a physical classroom, a teacher is able to figure it out who all are getting and who are not by the expressions and the body language. The online classes full of technical glitches creates it more difficult for teachers to figure it out who are actually able to understand and who not. The lack of personal touch is also creates a problem in mentoring the child and his overall development
from government could have helped to avoid these issues and create a better situation, which is announcing a drop year for academic session 2020 - 2021. The schools would have not gone for online education and students would have not affected their health in such a way and would also get a better opportunity to learn in physical classes. This would have given the students to develop a new hobby or w o r k on themselves for a better future, learning new skills.
Emerging Managers
2020 with a PLUS 1
A fresh start, we all have come into this New Year which is 2021 with a positive wave. Whether it is about vaccine development of covid-19 or revival of economies in the world but wait there is another perspective to bring value to this New Year. One can think of, it has 2020 with a plus 1. An addition of 1 in 2020. Addition signifies an increase in the value of something. So, 2021 is an addition of 1 in the previous year. The addition of something increases the valuation of the final product. An addition of 1 Rs into 99,999 Rs will convert it into 1 lakh Rs. In a normal circumstance, a person may want to pay 99,999 Rs instead of 1 lakh Rs of the bill. But it is the opposite in cases of returns every person wants a sum of 1 lakh Rs even addition of 1Rs increase the overall value of the material.
The Right decision
The previous year had been very painful to all of us talking in terms of businesses, economies, health, and many more. Despite this fact in this tough situation what a person can do is adding knowledge to themselves. Students enrolling in universities or colleges might have found it very difficult to learn online. This online education must be felt like a resistance band to many of us. But what is great you know the resistance made you strong every day, every next day you have to push hard to that resistance, and one day you that resistance is no more a difficulty to you. What else you had done in this lockdown despite taking your education forward. One person might think of doing business but that would haven’t succeeded in these tough situations where many companies are laying off their employee to save on cost. In India 10.08 million employees had been laid off due to covid19. It has been estimated that businesses will grow once again after this pandemic and you as a student should be ready to be hired as an employee to these companies.
(Sector-wise job losses in India)
PLUS 1 to yourselves
With the increase in the value of the previous year, i.e., 2020 with a plus1 isn’t it becomes important to do this addition to our life also. Because think of yourself as a business, you must supply goods of the same value to meet the demand to make your customer satisfied or feel delighted. In this context increase in the value of a year is the demand which we have to supply with the addition of plus 1 to our life, knowledge, skills, efficiency, talent, or basically to ourselves. In case you are unable to meet the expected demanded value then your customer (which are your goals) may not get satisfied or fulfilled. Since 1 month had already passed to this new year as an MBA student had applied the following plus 1 to myself.
1. Plus 1 to skills – while pursuing an MBA program I have understood the importance of skills in real-life working environment skills can supplement your knowledge in work culture. So, I’m learning advanced excel, SPPS, and other software to meet the expected demand for the corporate world.
2. Plus 1 to social life – Being social does not mean going out meeting new people and coming back with the same level of knowledge as before. For me, it is meeting people and exchanging my vision and ideas with others. Also, understanding their point of view. Even if I’m unable to learn something new but we should try to learn what not to do also.
3. Plus 1 to responsibilities – Responsibilities are owning up to your decision. Whenever we made a bad decision or bad choice, we start playing “Blame games”. Otherwise, if we have achieved something or done something good then we take it as our hard work. We must take our lies or failure with the same pride. Because blaming your failure to others comes with a price of taking something with return always may not be immediate but sooner or later it will.
4. Plus to technology – we all have understood the importance of the technologies in this pandemic where our day starts with tech by logging on to classes online and ends with tech. To be ahead in the future I have been learning how artificial intelligence works. Every department of the organization will see some part of artificial intelligence in their system in the next few years. As AI is the topic of discussion these days.
Conclusion
Take a step back think about yourself where you are at now and where you want to be work on your strengths to be ahead in the future. People say work on your weakness but it is important to work on your strengths master the things you are good at. Your strengths should suppress your weakness. So, what is your plus 1 then?
References:
https://www.moneycontrol.com/news/business/economy/10-8-million-and-counting-take-a-look-at-how-manyjobs-covid-19-has-wiped-out-5704851.html
Emerging Managers
GIG ECONOMY: VIRTUAL IS NEW REAL
As the great Albert Einstein rightly said that “In the middle of difficulty lies the opportunity”, the term GIG economy become popularized during the financial crisis of 2008-2009 when swaths of the population faced the problem of unemployment or underemployment. Dating back to history, the word 'gig' was arguably first used for people in the music industry, although it later became synonymous with people who work for companies individually for a shorter period to make a living. In simple terms, the gig economy is often defined as an “on-demand, peer or platform economy”.
This type of economy is very broad and encompasses a gamut of the population from workers who are full-time independent individuals to the small part-time businesses, freelancers who provide services to make an additional living. There are two major segments of gigs i.e., Knowledge-driven gigs (such as consultants, data scientists) and service-based gigs (such as tradespeople, delivery drivers). Some of the major key drivers of the gig economy are emerging new internet technologies and ideas such as big data and AI.
This sharing economy model, another name of the gig economy, was earlier adopted by very few companies such as Uber and Airbnb, due to which they are able to get the competitive edge and even able to surpass some of the world’s largest businesses in their field respectively and become exemplary for all other businesses. The leaders of the firm have acknowledged that today’s generation i.e., millennials and Gen Z have a different meaning of success that is to find an equilibrium between possibility and predictability, and balance between viability and vitality.
CURRENT SCENARIO
The pandemic has seen technology play the role of a great leveler as location and time zones become less relevant. This has boosted opportunities for gig
workers, and providers of platforms enabling a gig workforce marketplace.
There is also a shift in the mindset of people regarding work as most of the millennial and boomers started to see this as an opportunity for freedom, flexible pay, and personal fulfillment. There are various options available for gig workers as various industries such as IT, Accounting & Finance, Administrative, Education and Training, and Project Management attract and hire gig workers. Even the gig economy has certain challenges that one has to face such as the lack of benefits like health insurance, PF, or others, there might be a problem of inconsistent income due to lack of work or burnout due to excess workload at odd hours.
By overcoming these challenges, countries will continue to make progress towards the gig economy. Companies cannot continue to neglect the freelance workforce if individuals and companies want to consider constructive tactics to beat global competition. In truth, to be a developed economy very shortly, the gig economy has to succeed in gaining traction internationally for any country.
(Fig: Adoption of Gig workforce by various industries in India)
FUTURE OUTLOOK
Even though the 21st Century has been full of revelation such as disruptive innovation led by Artificial Intelligence and Machine Learning, technological advancements such as smartphones, smartwatches, and many more. But the year 2020 is the real eye-opener where everyone's life came to standstill because of COVID 19, world economies face a downturn and even reached the extremes of recession. For example, India’s GDP figure contracted by 23.9% in Q1 of 2020 and the unemployment rate at present is at a record high 27.1% as per the Centre for Monitoring the Indian Economy (CIME).
To counter this India will have to come with new trends and solutions to give a boost to its economy and employment and the gig economy provides a pathway for the same. As per NASSCOM President, Debjani Ghosh “If we don’t use this
opportunity to drive radical changes, it is our
loss”.
In the new decade, the Gig economy will break all the barriers and assert itself in the world and will capture the demand and supply and fills the gaps of the economic development with employment. According to the ASSOCHAM report, the size of the gig economy is estimated to grow at a Compound Annual Growth Rate of 17% and it will hit a volume of $455 billion by 2023.
While on one hand autonomy will inspire, it will result in ‘Corporate gigs’ being the ‘new normal’,
with many potential win-win stories.
Emerging Managers
Application of Internet of Things in Supply Chain Management of Amazon
Mr. K Pavan Kumar Reddy MBA, Batch 2020-2022, IBS Hyderabad, India.
Internet of Things (IOT):
Internet of Things (IOT) is the current trend toward digitization and automation. IOT with sensors play a crucial part of what the next revolution is called Industry 4.0. IOT has its application in almost every sector like agriculture, manufacturing, construction, security etc.The pandemic has changed the focus of the world on the supply chain of various industries highlighting the loop holes and future way ahead. Supply chain is one of the fields where IOT shows its full potential in management, forecasting and its various applications help improve efficiency of distribution and improve transparency in the supply chain.
Supply Chain Management (SCM):
SCM is defined as the management of flow of goods and services which includes the total process from procurement of raw materials into final products and fulfilment of order from point of origin to point of consumption. The last three decades gave birth to a new term Global value chain(GVC) which means production and distribution at different geographies or supply,processing,assembling and distribution taking places in different countries to lower the economic cost of production. The present situation calls for the evaluation of the GVC.
Every company has its own way of doing things and has its own supply chain. But by having an effective and efficient supply chain, a company can ensure that their services and products are available at right place at right time and price. One of those companies with effective supply chain is Amazon. Amazon is one of the biggest companies in the world and has one of the best supply chain implemented which became the key to their success in connecting with customers at high level of
responsiveness. The reason for its success lies in its effective usage of IOT throughout its supply chain.
Amazon:
Amazon is the world’s largest online marketplace. It is spread throughout the world providing various services like e-commerce, live streaming platform, AI assistant provider and cloud computing. Amazon is delivering millions of orders per day serving millions of customers. To manage the workload, Amazon has incorporated technology in its supply chain. It has been efficient in using technology through IOT and robots to the fullest in warehousing, artificial intelligence, tracking and inventory management.
How IOT impacts Supply chain:
The major areas IOT is used in the supply chain are tracking and monitoring which allows to keep track of cargo and inventory.
1. Real time location monitoring
IOT with the help of GPS allows the company to keep track of the products in delivery and helps to monitor them to make sure they are transported in the correct direction. At present this is possible only if IOT devices are connected online but Amazon is coming with new technique Amazon Shadows, a technique with the help of shadow can keep track of the connected device even when it is offline and connects it to cloud when the device comes online and updates the location of the device, this lets us keep track of the device without any interruptions.
2. Monitoring Storage conditions:
We cannot always keep monitoring the temperature, humidity, pressure levels when certain need to be transported or stored in the warehouses. IOT provides much help to solve this when connected with different sensors and when instructions are programmed to monitor the environmental factors and automate them if the values changes without any need of human intervention.
3. Forecasting arrival of the product:
The real time tracking has helped the companies to forecast the delivery of the product and mitigate the involved risks.
4. Warehousing management:
In the past employees had to keeping on running to search for the products and its location in the warehouse. But now Amazon with the help of Robots and IOT has increased its efficiency of warehouses by keeping track of the products through RFID tag and store/retrieve them from the specified areas in the warehouse
5. Strategic planning:
IOT helps to create strategies in planning routes for transportation taking into consideration of various factors like traffic rates, average delay time, less risky routes, less accidental routes and plan routes that cause minimum delays and are highly secure.
6. Asset management:
With the scanning of RFID tag using robots and IOT attached with database management system, Amazon can easily keep track of millions of products that are incoming or going out of the warehouse and the company can get an instant access to the total required data with regards to product inflow, outflow and product location.
7. Increase Transparency:
Revenue losses that occur due to theft, product missing are more than the losses suffered due to accidents because of the complex delivery system
where the products gets transported to different stations before reaching the final station .IOT with real tracking can increase this transparency and helps in reducing the losses.
Amazon also integrates IOT in forecasting the demand and supply of products and services depending on the regions, seasons based on the previous data collected from movement of goods incoming and outgoing during that specific period of time.
Conclusion:
Negatives in dependence on IOT:
Loss of security may be an important factor as all the data collected is connected to the internet which is vulnerable to hackers. The complexity in maintaining the IOT, as IOT works on a software, a bug in the software can harm the whole system as the validation of products may vary.
With Cisco and DHL expecting a value of $1.9 trillion increase in value due to IOT evolution in industrial sector. We can say that IOT has vast uses that are still untapped and going to continue to revolutionize the world in every sector available as companies are searching for ways to increase the efficiency with minimum cost spent. IOT application in SCM of Amazon has played a vital role in paving the path for its large and successful supply chain. The next phase of Amazon’s plan to increase its efficiency and delivery time is implementation of delivery through drones i.e Amazon Air.
ABOUT US
The word “Kaizen”, where “Kai” = change, “Zen” = good, which signifies change for better. In its birth place Japan, the word Kaizen is imbibed as a process that many small continuous changes in systems and policies bring effective results than few major changes. This methodology is applicable to every department across different sectors. Kaizen – The Official Operations Club of IBS Hyderabad has always been aspiring “Constant Change ad Evolvement”. We, as an organization work to inspire and aspire the student community for the betterment of the future.
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K PAVAN KUMAR REDDY EDITOR IN CHIEF - KORE Kaizen – IBS Hyderabad Batch 2020-22
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