The Impact of Covid-19 on Production

Endeavor Webinar Series:

The Experience of Guido Iannone

Continuing its webinar series which aim to shed light on various facets of the coronavirus emergency, Endeavor invited Guido Iannone, General Manager of Nuceria Group, a European leader in packaging production, manufacturing labels, foldings and industrial packaging, with a specific division devoted to pharmaceutical industry packaging, to share his insights on how to manage industrial production during this crisis.

Guido spoke of the progress his company has managed to make over the past few weeks, slowly recovering from the initial shock, establishing new ways of working to ensure the safety of employees and the continued production of packaging materials, which is classified as an essential economic activity by the government, and as such must continue.

While a variety of measures have been put in place, the ongoing process of reassuring employees has been an essential part of this effort. “We had to calm people down and we had to ask them to keep their distance, adopting responsible behaviours. We also had to help them understand we might have to live in this environment for a while – that this is not an emergency of just a few days. As such, we need to figure out how to keep going. Despite that, the factory is now running better than in the previous weeks. It isn’t running as usual yet, but we are recovering. At the end of the day, this is a battle we are fighting on various fronts”, he stressed.

Staying Safe

In terms of specific processes that have been put in place to keep employees safe, in order to make sure those who come into the factory are not sick, the workers are asked to measure their temperature at home, before they come into work, instead of at the entrance of factory facilities. If they are running a temperature, they are asked to call in sick and are told to stay home.

The company employees arrive in the facilities driving their own cars or through public transportation, which is still operational in Italy, albeit with reduced traffic. Management has recommended employees do not come into work together in the same car – carpooling was a common practice before, but it could be highly problematic in this new situation.

In terms of protection, gloves were being used since the beginning of the crisis, but it was quite difficult to find masks – “almost a mission impossible in Milan”, Guido remarks. “Yet, we eventually received masks from our colleagues in China, where we have some factories, which was a great gesture of solidarity on their side.”

What will the company do if a worker tests positive for Covid-19? “We have a task force in place and are monitoring and tracking people at home. If one of our workers tests positive, we have to put all the people who were working on the same shift in quarantine as well. What we have done to reduce the risk is we have completely separated the shifts. We are running on 2 shifts instead of 3 and we have established a 20 minute break between shifts, so that if one person tests positive we are in a position to only quarantine one group and keep production going.” They expect to continue in this reduced shift mode for at least another month and a half.

Regarding sick leave, they have had to change their approach as the crisis evolved. In the beginning, when there was panic in the factory and beyond, they did not ask people to provide a certificate, but they eventually decided to become more severe. “Now, if our workers are at home, we ask them to provide a certificate. As a business, we are in the essential list, and we have put measures in place to stop the spread of the virus. At the same time, for all employees not involved in the production (sales, procurement, R&D etc.), we have offered smart working options.”

Communication & Productivity

Asked how they approach internal communication and assess the psychological state of their employees, Guido admitted that in the beginning it was really hard to introduce the topic of the outbreak, but during the last days, people are getting more comfortable talking about it and more used to this new situation. 

“I have always been close with my employees. I believe this is one of our great strengths. We have 80 employees in Milan and I know each of them personally. One of the key messages that I used in my dialogue with them was that we have to consider ourselves lucky as a company that is still able to work. We are really essential because we produce labels for food products and pharmaceuticals. We are really strategic. All our workers should feel proud to be a part of this supply chain, contributing to this endeavor.”

Another company policy that has been helpful in reassuring employees, even though it was not required by the law, is sponsoring a personal insurance scheme, so that if an employee tests positive with Covid-19 and ends up having to go to the hospital, part of the charge is covered. “This has helped them get used to this new context.”

“I have always been close with my employees.
I believe this is one of our great strengths.”

They also launched an 5S workplace methodology and have asked all of the top managers to take a Gemba Walk twice a day, going around their departments and the factory floor to make sure the right measures are being implemented, making sure people are respecting the new rules that have been put in place.

In terms of staying in communication with their workers, the Gemba Walks have proven helpful, as they give managers the opportunity to talk to people one-on-one. Given the circumstances, managers are trying to avoid talking to groups, as people need to keep their distance, in line with safety recommendations. They have also set up a WhatsApp group with all factory workers from the beginning of the crisis to disseminate information.

Impact of the Crisis

In terms of the impact of the crisis on revenues, February was in line with the company budget and the first drop the company is experiencing is in March. Guido explained they have forecasted a month-on-month drop in sales of 25% for March in their Milan plant, which is mostly linked to the fact that they lost shifts over the past month and as such have had less people working – this was not due to a sales issue.

As for the real impact in terms of sales, “In the next 3 months, I think we have to expect a drop in sales in the range of 10%. Clearly, this is not a complete answer. You would have to split the impact into demographics and segments. All our wine customers, for example, are experiencing a very tough moment – this could lead to a segment drop of 30%.” 

Luckily, in terms of the prices they face for the supply of their raw materials, they have not been particularly affected by the crisis, as they had already secured these last year. “Paper and plastic are not an issue for us at the moment.” Yet, transportation has been an issue, with border closures etc. “Last week was particularly challenging due to the border situation. Most of our suppliers are located in Luxembourg or Germany and we are experiencing delays due to the blocks at the borders.”

“All of us in the post-coronavirus world will be great managers”

Dealing with peaks in demand has also been an issue. “Last week we also faced a huge increase in orders. We had to face a peak in demand and this also created some problems and some issues with our suppliers. We need to work with different, longer delivery times. Logistics are getting harder.”

The Post-Coronavirus World

Is there anything positive that is likely to come out of this crisis? “I think that when the storm is over, we will have an opportunity to capture new market shares. But probably the biggest learning from a personal and managerial point of view is the meaning of being resilient, being patient, learning how to communicate to our people in these tough moments, having an open-minded approach. Every day we have to convince people of a new way of working and a new way of doing things. All of us in the post-coronavirus world will be great managers. This is the great opportunity on top of any market opportunities.”

In terms of the government response to this crisis, dealing with the devastating economic impact this is likely to have on small businesses and a variety of sectors that have been hit especially hard, Guido would ask the Italian government to do more in support of these categories. “What is being done is not sufficient to support these vulnerable entrepreneurs in this time of crisis.”

You can listen to the recording of the webinar here

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