Higher costs another blow for SMES

Additional requirements and tighter supply during MCO adding to production cost

PETALING JAYA: Amidst falling revenues and tightened cashflows, SMES are also grappling with a sudden increase in cost as they try to maintain their business in the wake of the Covid-19 outbreak.

Several companies that have been allowed to continue their operations during the period of the movement control order (MCO) noted that additional requirements and tighter supply are adding to their cost of doing business.

GT Spice Manufacturers Sdn Bhd director Calvin Koh said the increased sanitation needs for its factory is quickly becoming a burden for the company.

“We are fortunate to be among those allowed to operate during the MCO. However, our operating cost has increased significantly for this period, because we have to get more personal protective equipment (PPE) like face masks and PPE outfits for our workers who are still working on site.

“And we also have to increase the cleaning and sanitisation frequency of the factory. That’s all a cost.

“The increase in production cost is about 10%-15% for the duration of this pandemic,” he said.

On the other hand, sales have dropped significantly for the spices and snack food manufacturer as its customers are returning stocks that they can’t sell.

“If the MCO is further extended, we foresee that losses will start setting in in April because of the increase in production cost,” Koh added.

Logistics is another cost that has ballooned in recent weeks as movement restrictions in Malaysia and other countries have made it more difficult for companies to get their stocks delivered.

Maxvue Vision Sdn Bhd founder Selvam Kanniah noted that courier cost has more than doubled.

“We are trying to bring in medical supplies like masks. But the problem is shipment. A lot of airlines are not flying and a large part of cargo actually comes from the extra space on passenger planes.

“So with planes not flying, it’s hard for us to get shipments. There have been a few cancellations. Courier cost has more than doubled,” he said.

Additionally, the weaker ringgit also makes it more expensive to import materials and finished goods.

Meanwhile, The Truly Loving Company Sdn Bhd chief executive officer Julia Chong said the company’s early preparation to face the uncertain market had added to its inventory costs.

“In view of the speed of the Covid-19 transmission, in early February, we increased our inventory levels at the expense of holding costs, in anticipation of consumer demand for household cleaning products and possible supply chain disruptions.

“We were very frustrated to find that when the MCO was implemented, we could not get an exemption to operate our business despite having sufficient inventory for our products, including hand wash, that consumers were and are searching for.

“Furthermore, our contracted warehouses remain closed and we cannot deliver our household cleaning products to the supermarkets.

“As our products are needed daily to clean homes, especially now with the Covid-19 pandemic, we believe that if we are allowed to open and operate our business, we will be able to rise to the challenge,” she said.

“If the MCO is further extended, we foresee that losses will start setting in in April because of the increase in production cost.”

Calvin Koh