Supply chain is now of utmost importance - Keeping an eye on the future

28 May 2020

Supply chain is now of utmost importance - Keeping an eye on the future

Capacity and supply bottlenecks, shutdowns in production and market slumps bring supply chains out of sync and sometimes to a standstill.

Sascha Hackstein, Managing Director Berndtson Interim, and Stefan Treiber, Managing Director candidus management consulting, recommend to prepare for the end of the crisis.

Companies are currently in crisis mode. Which challenges do decision makers have to face?

Stefan Treiber: The shutdown essentially presents companies with three challenges. Firstly, they have to assess whether the reduction in sales as a result of the crisis will be temporary or permanent. For example the automotive industry, which is market-driven and unlikely that anyone is thinking about buying a car, not to mention that the sales offices are closed, one must question what will happen after the crisis? Secondly, the supply chains are breaking down. It's difficult to react because there is often a lack of transparency. OEMs have their Tier 1 in mind, but no longer Tier 2, 3 or 4. Alternative suppliers must first be qualified and furthermore suppliers that are not affected by the crisis will be difficult to find. The third challenge concerns the employees. There may be quarantine cases and in order to maintain the necessary distance, work organization may have to be changed.

Sascha Hackstein: Securing the supply chain during the crisis and making adjustments from day to day is crucial. Critical components must be identified, the origin must be recorded and the risk of failure must be calculated. If the suppliers are located in areas severely affected by the virus, alternative sources should be sought as a precaution. Stocks must be checked and market scenarios evaluated in order to make a realistic order forecast. Other logistics capacities may need to be secured. In addition, the development of liquidity must be checked and kept in mind. Cash flow must be guaranteed should sales decline or fail to materialize at all. Costs must be reduced.

Re-assess the risks in your supply chain and keep close contact with suppliers and customers.

At some point the crisis will end. Will it things then continue as before?

Stefan: The question is how we can use the crisis as an opportunity for competitive advantage and which lessons learned can be used to strengthen the supply chain in the long term. We need to start thinking about this right now. We cannot get lost in crisis management, but must be future-oriented, even during the crisis. The focus must always be on what brings added value. It is already foreseeable, for example, that the crisis will bring a surge in digitization with a focus on the automation of business processes. Our collaboration will also change; virtual meetings and their effectiveness will increase significantly as the crisis has forced everyone to improve this aspect.

Sascha: I don't believe that things will continue as before the crisis. It has proven  weaknesses in the supply chain that we must deal with. We have been given the opportunity to rethink procedures on the basis of our experience during the crisis, to reassess them, and to position ourselves better than before. Our companies as a whole will change - structure, leadership, cooperation, communication. The earlier we prepare for this, the better.

What concrete measures do you propose?

Stefan: Companies should prepare a recovery program early on. I see five fields of action for this: assessing customer needs and mapping them in scenarios, ensuring material availability and checking supply chains for resilience, planning and controlling production capacities, providing motivation and leadership with regular communication, closely managing cash flow and prioritizing strategic initiatives with regard to opportunities.

Within these fields of action, an increase of agility by shortening reaction times is a strategic competitive advantage.

In the medium term, the aim is to use experience gained during the crisis to strengthen one's own competitive position permanently and sustainably. We are happy to support you by creating a modular, individually adaptable recovery program by using our Recovery Scan.

Sascha: In a crisis, the weaknesses of an organization become apparent, be it on the process, organizational, management or financial level. It is essential that we detect and eliminate these weaknesses. At the same time, however, the crisis offers the opportunity to get out of the daily grind, to set new priorities, to consider other instruments, working methods and procedures. We can learn to break down barriers, promote independence and lateral thinking and try things out. In times of crisis I recommend to take time for innovation. Experienced Berndtson Interim Managers will support you both in creating and implementing your recovery programs and in developing new business models and innovations.

Stefan: The core message is that there are always winners and losers in a crisis. If you want to be among the winners, you must prepare a master plan now so that you can implement it when the crisis ends.