The way through the Covid-19 crisis

We have developed guidelines and a road map for dealing with the crisis for our customers.

The coronavirus is currently spreading rapidly throughout the world. Based on what is known at present, it can’t be foreseen how things will progress going forward. However, the measures that have been implemented so far appear to be effective in slowing the virus’ exponential spread.

In addition to the human factor, the economic consequences are also becoming increasingly visible. Markets are collapsing and entire companies have come to a halt. The numerous stimulus programs that have been rolled out can only reduce, but not fully compensate for these losses.

Three Main Scenarios Are Currently Being Discussed

  • V-shaped scenario: brief shutdown and rapid recovery

  • U-shaped scenario: longer shutdown with subsequent rapid recovery

  • L-shaped scenario: extremely long shutdown with recovery not foreseeable over the long term

 

The effects across different industries vary, but the majority of companies are financially either heavily or very heavily affected. We believe that the effects of the coronavirus crisis will fall somewhere between the V-shaped and U-shaped scenario for most companies.

Regardless of exactlywhich scenario occurs, the mechanisms for guiding a company through the crisis will be the same. The only difference will be the timing of the phases and the intensity of the measures.

The Path to Recovery Will Pass through Four Main Phases

We are currently in the shutdown phase and assume that, due to control mechanisms and measures in place to protect the population, business operations will be able to resume starting on May 4.

We need to use the time and prepare for this ramp-up today so that activities can be resumed in a coordinated manner with as little friction as possible.
During this volatile stage, resources must be deployed in a target oriented and extremely cost-conscious manner.

If the public health measures take effect, we expect the markets to calm down and the supply chains to stabilize from September onwards during the stabilization and cost performance phase. During this period, the company will continue to make only the most necessary investments and rigorously cut costs in order to achieve the best possible result for the year.

Not before January 2021 we expect the economy to begin growing moderately. In this environment, the company will once again invest in the future and initiate the performance improvement phase. The focus here will be on programs with an ROI within the fiscal year.

Whitepaper

The way through the Covid-19 crisis

Every day new information reaches us, every day brings us new insights and every day new decisions have to be made. For our customers we have developed a guide and a roadmap for dealing with the crisis.

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Our program to guide you through the crisis!

As a starting point it is important to assess the situation and the available options for countermeasures as quickly as possible. The risk assessment provides a quick transparency about the entrepreneurial risk due to the Covid-19 crisis. Furthermore, the first immediate countermeasures are identified and implemented directly.

 

Production-resources assessment

Risk assessment for required production resources in correlation with the revenue scenarios.
→ Resource risk!

 

Health-risk assessment

Identification of health hazard hot spots. Assessment of infection risk for employees and development of immediate risk-reduction measures.
→ Health-hazard hot spots for employees!

 

Organization assessment

Definition of essential areas of the organization and establishment of required staffing levels accordingly.
→ Savings opportunities/capability of acting!

 

Lost-revenue assessment

Systematic assessment of current orders and forecast of revenue performance through the end of the fiscal year.
→ Riesgo en los ingresos.

 

Liquidity assessment

Assessment of short to mid-term company liquidity. Identification of potential savings for short-term liquidity.
→ Liquidity risk!

 

Fast action is important for survival. The foundations for the correct actions are developed based on forecasts and scenarios. All risk-mitigation and cost-optimization options are verified, prepared, and communicated to the management and team members.

 

Liquidity simulation

Simulation of V-, U-, and L-shaped scenarios based on the risk assessment, support programs, and industry- and country-specific crisis development/forecasts.
→ Range of coverage is transparent!

 

Application to reduce working hours

Filing of an application to reduce employee hours in accordance with Federal Employment Agency specifications.
→ Option to reduce hours is ensured!

 

Application for support programs

Checking of support programs for businesses (finance, grants, tax relief) and early application for them where relevant.
→ Support programs are utilized early on!

 

Determine cost savings

Determination of the required cost savings based on the scenarios from the liquidity simulation.
→ Target values defined!

 

Implementation of anti-infective measures

Establishment and implementation of immediate measures to protect the business’ employees.
→ Health protection established!

 

Working and management models

Structuring of the organization so that it is able to work (telecommuting, remote workstations). Adaptation of management duties to the new prevailing conditions.
→ Ability to work is ensured!

 

Communication

The cascade and content of communication is defined in order to give employees confidence and show them the path out of the crisis. The corporate communication is launched.
→ Information provides confidence!

 

The management task force ensures the business’ ability to act operationally in times of crisis. Effective structures are developed so that rapid action and responses are made possible – quickly and without bureaucracy; speed is of the essence here. The task force forms a central hub that gathers and processes all information and connects the players in the business who are critical to survival.

 

PMO for crisis-management task force

Rapid establishment of a central project management office (PMO) to direct all crisis-management activities.
→ Required structures established in short time!

Communication (internal/external)

Consistent, centralized communication to the internal and external stakeholders.
→ Consistent and up-to-date information status!

Ongoing monitoring of crisis development

Ongoing monitoring of the course of the crisis and comparison with established scenarios. Continuous monitoring of the overall conditions and identification of adjustments accordingly.
→ Always up to date!

 

Activity management

Management and coordination of all activities within the business defined for crisis management.
→ Activities addressed!

 

Effectiveness monitoring

Ongoing confirmation of the effectiveness of the defined measures on liquidity and protection of results with regards to the expected scenario and defined range.
→ Activities implemented successfully!

 

Supplier Management: How to Safeguard Your Supply Chain in Times of Crisis

The coronavirus pandemic has severe consequences for the secure supply of goods in the manufacturing industry. Even after the end of the government-ordered lockdown, it is in no way certain that companies will be able to achieve their planned output again in the short term. Controlled, postcrisis start-up management is therefore necessary and must incorporate the impacts of the crisis.

 

    What consequences does the crisis have for supply networks?

    The global spread of COVID-19 has led to economic constraints in all major industrial nations. They have had a direct impact on the reliability of the supply of goods to manufacturing companies, since their supply chains have been interrupted at various different points. Even if Germany begins ramping up production again over coming weeks, it is currently difficult to predict whether the required components, parts, and primary products are available in the quantities needed, especially at companies with tightly integrated, global supply chains.

    Supply chains are opaque and unstable at the moment. Decision-makers are currently barely able to gauge with any accuracy when a tier n supplier from the United States will be able to supply its products and in what quantity, whether the freight capacity required for them can be used without limitations, and what procurement alternatives there are if a supplier is unable to operate. Secondly, many companies still do not have an idea of how their supply chains and subcontractor chains are structured down to tier n level. This lack of transparency becomes very strongly pronounced during the present crisis.

    Another roadblock is the travel restrictions which make it almost impossible to personally verify the situation of existing and new suppliers that are based internationally. Currently, it is not immediately possible to say how well a supplier from Eastern Europe or Asia could be empowered with immediate measures or, alternatively, whether a new supplier can be integrated. Instead, companies must engage someone locally who can get an idea of the prevailing conditions there.

    The government requirements in connection with the coronavirus are highly likely to have impacts on the conditions on the factory floor itself. This applies in particular to contact restrictions. Businesses will likely not be able to restart production operations without face masks and other personal protective equipment. Whether this equipment is available in sufficient quantities is a question whose answer will have to wait, given the bottlenecks in the output of medical-technology companies.

    A crisis involving many questions

    Restarting production comes with risks for many companies due to the unclear supply situation. These risks could put a considerable limit on their ability to operate, even after the crisis-prompted shutdown ends. Delays in restarting and the resulting shortfalls in the production-quantity curve can involve far-reaching consequences. For this reason, decision-makers stand before a range of complex questions that must be answered quickly and prudently in light of the cost pressure created by the crisis:

    • What options exist if a supplier is unavailable for the time being? Can we, for example, ramp up and empower local second-source suppliers at short notice?
    • How can we design international supply chains to be more secure, using an appropriate risk assessment?
    • Is there a possibility to give new suppliers local support at short notice with fast-response teams and/or task forces active globally?
    • How can we accomplish a controlled shutdown and, later, a restart of manufacturing facilities while safeguarding supply?
    • What remote methods can help keep project work going in crisis mode?
    • What sales approach do we use to increase revenue again?
    Whitepaper

    White Paper "Supply Chain Security in Times of Crisis"

    If you would like to find out more about how you can safeguard your supply chain security in times of crisis, we recommend you our white paper “Supply Chain Security in Times of Crisis”. It provides even more detailed information about the actions that we speak about in this post.

    Download

    Seven measures for controlled postcrisis restart management

    To manage the manufacturing restart (and the time after it), target-oriented measures are needed and must be suitable for safeguarding supply as quickly as possible. The following seven elements with an operational focus are particularly well-suited to navigating the current bottlenecks:

     

    1. 360-degree analysis of the current situation

    Companies first need an overview of the potential risks that could limit the security of their supply. A suitable method for this is the 360-degree analysis, which visualizes all risks in the form of a matrix and assesses them using supply-chain risk indicators (SCRIs). This transparency supports the fast, structured development of risk-mitigating measures that improve the reliability of supply over the short and long terms.

     

    2. Ramp-up and ramp-down management

    A systematic, planned shutdown of manufacturing divisions is essential for manufacturing to restart loss-free. It requires judicious ramp-down management that includes a risk analysis for all affected resources (human, production tools, and know-how) and of customer and supplier structures, among other things. This facilitates planning and the implementation of operational ramp-down measures. Doing this also means that companies create the basis for adapted solutions that are tailored to the restart. Risks and losses are minimized as a result. The basis will underlie preventative measures in the future too.

    Businesses can react to government restrictions that influence production even after restarting, for example, by providing protective equipment (distance sensors, protective glass, face masks, etc.). It is also plausible that the tasks worked on could be restructured based on the restart curve so that worker safety is ensured in all cases (e.g., by adjusting shift-scheduling models).

    3. Create transparency in the supply chain

    To ensure the security of their supply, companies must identify potential weak points within their supply chain. To do this, they need a transparent image of their own manufacturing and their supply chain. The solution is to collect and visualize all data about the company’s factory floor, suppliers, and purchased parts and organize it within a KPI structure. The objective is a standardized information platform that networks all companies within the supply chain (from tier 1 to tier n).

     

    4. Development of inventory and progress control through dashboard solutions

    Being able to react to risks and interruptions proactively is a key factor in the success of manufacturing companies, especially in times of crisis. A requirement for this is dashboard solutions that make it possible to follow and analyze material flows, stocks, and movements and supplier performance in real time. As a result, problems that affect supplies for production can be identified even before they arise. They can then also be prevented through fast, appropriate action.

     

    5. Local fast response, task-force deployment, and resident involvement

    To safeguard the availability of parts and components, companies must support their suppliers, including locally if applicable. This is difficult due to the current travel restrictions. Our consultants are active at many locations throughout the world (including in Eastern Europe, China, Mexico, and the United States), so we can offer our clients a task-force toolbox. It consists of a fast-response team that plans and implements immediate measures for foreign suppliers, a task force that carries out escalation projects, and a resident engineer who provides suppliers with long-term support mitigating supply-chain risks. This is how we build a bridge for communication. A bridge that is available globally to assess and improve the supply situation facing international suppliers.

     

    6. Identify alternative supplier structures and develop second sources

    Disruptions in a supply network cannot be fully avoided in times of crisis. That is why it is important that manufacturing companies progressively add second sources to their supplier mix in a targeted fashion. To do this, they must identify, analyze, and empower alternative suppliers. The objective is to integrate permitted and qualified alternatives into the existing supplier panel as quickly as possible.

     

    7. Project management

    The measures described here are most effective when they are accompanied by high-grade, digital, and efficient project management. Such management makes it easier to safeguard and manage remote work.

     

    Conclusion

    The consequences of the coronavirus pandemic will keep manufacturing companies busy for many months yet. This makes it all the more important for decision-makers to initiate measures as soon as possible in order to safeguard the company’s supply, even in difficult times. Such measures require a transparent overview of the processes within the supply chain. Secondly, the current situation requires clean project and restart management, alternative supplier structures, and the ability to support suppliers locally. Many risks created by the crisis can be reduced to a minimum through the above actions.

    If the business requires significant cost reductions to ensure its results, zero-base budgeting (ZBB) offers the ideal approach to challenge the budget in a radical way.

    Using this cost-planning approach, budgets are planned and approved for the relevant planning period completely from scratch (zero-base) in line with the defined performance levels instead of being based on the preceding period. Additionally, this is done in short cycles on a monthly basis instead of once per year. Doing this creates transparency for costs and contributes significantly to the efficient use of available funds. This approach must be applied for all overhead costs and serves as strict control tool for liquid funds in times of company crisis. Zero-base budgeting additionally helps to disrupt established structures of thinking.

    ZBB supports a complete paradigm change within the planning process and must therefore be established top-down, unconditionally. In the first step, the management resets all budgets to zero (zero-base) instead of just freezing them. The framework for the new budget planning is laid out in accordance with the economic situation by defining the performance level.

    › Performance level 1 – minimal performance to maintain the business operations necessary for survival

    › Performance level 2 – regular services in accordance with the work and position specifications

    › Performance level 3 – measures required to ensure a long-term future

    Business divisions are strictly required to comply with this framework when re-planning their budgets for the next month. The management’s approval of the budgets is done centrally after a conclusive explanation and check of the performance level. This process is repeated at a monthly interval.

    The ramp-up booster ensures an efficient and effective return to operations when the overall conditions are difficult. The transparent and open communication with customers, operational divisions, and suppliers guarantees success in a volatile environment.

     

    Ramp-up management

    Systematic and planned restart of production areas of business.
    → Loss-free restart!

     

    Creation of transparency in the supply chain

    Collection of relevant supplier data and information about procured parts (supply-chain cockpit, forecast models).
    → Key-figure structure and overall networking!

     

    Workforce scheduling

    Establishment of simple and effective scheduling for focused HR management in accordance with the Covid-19 protective measures adapted to the overall conditions.
    → Optimal workforce scheduling!

     

    Resource-shortage management

    Continous short-cycle capacity planning, review of resource availability.
    → Best-possible output!

     

    Fast response, task-force deployment, resident work on site – part hunters to ensure supply

    Country-specific availability to ensure the activites on site.
    → Supply ensured!

     

    Ramp-up Project management

    Quick launch of operational project management team to oversee the implementation of defined activities.
    → Project-management office installed within four days!

     

    Component quality assurance

    Systematic and fast correction of quality issues through rapid identification of errors (AI for error identification), cause analysis, and permanent resolution of them.
    → Supply ensured when there are changes in the supply chain!

     

    Quick supplier substitution in case of failures

    Short term on-site or online basic supplier qualification.
    → Supply ensured and cost reduction!

     

    The cost-performance booster is an uncompromising approach to ensure the end-of-fiscal-year results.

     

    Benchmarking of figures relevant to results

    Comparison of the top three result-relevant figures with benchmark values of comparable companies. Definition of realistically achievable parameters based on them by the end of the fiscal year.
    → Required parameters are defined on a monthly basis

     

    Establishment of commitment at management level

    › Determine lead managers, define key figures, and create commitment to parameters.
    → Commitment to parameters achieved!

     

    Commencement of a war room

    Establishment of reporting on direction on daily, weekly, and monthly bases. Definition of the required communication, meeting committees, and participants.
    → Overall conditions for effective work created!

     

    Identification of key areas of action

    Identification and ranking of the top three disturbances for each key figure defined. Definition of countermeasures for the time trajectory based on the disturbances to achieve the defined parameters.
    → Measures prioritized by effectiveness!

     

    Realization and efficacy control

    Realization of the measures and ongoing monitoring of their success as measured against the defined parameters. Immediate implementation of special measures in the instance of variances.
    → Efficacy ensured!

     

    By creating targeted efficiency programs and accompanying qualification measures, the potential for a moderate period of growth is utilized. The sustainable self-support ensures world-class performance in the business.

    Operational-excellence initiative

    Customer-focused value-adding through standardized work systems, low-waste value flows, and result-oriented shop-floor management.
    → Increased efficiency in operations!

    Machining-excellence initiative

    Flexible, synchronous, trouble-free, transparent, and lean production processes through the ongoing, integrated development of lean management and digital transformation.   
    → Increased efficiency in manufacturing!

    Administrative-excellence initiative

    Professional service delivery through the establishment of lean office management, business-process optimization, and automation and digitalization of processes.
    → Increased efficiency in administration!

    Project-management-excellence initiative

    Structure, commitment, transparency, and success for the project through the application of modern and digital project-management methods.
    → Improved performance for the planning and implementation of projects!

    Supply-chain-excellence initiative

    Highly secure supply, low inventories, and short lead times throughout the dynamic supply chain through transparency and agile synchronization.
    → Improved supply-chain performance!

    Supplier-excellence initiative

    Professional selection, empowerment, integration, and ongoing development of suppliers for lasting decrease in procurement costs and lasting risk mitigation.
    → Improved supplier performance!

    Quality-excellence initiative

    Excellent customer satisfaction through the efficient interplay of value-oriented processes, structures, and competencies in a learning organization.
    → Improved quality!

    Lean enterprise

    Cross-functional company focus for the successful integration of digital elements into the lean-excellence philosophy.
    → Business with world-class performance!

    Andreas Grundnig

    Andreas Grundnig

    Ingenics

    Partner, Director
    Phone: +49 731 93680 226

    Alexander Gottwald

    Alexander Gottwald

    Ingenics

    Associate Partner, Director
    Phone: +49 731 93680 226