An organization’s operations are rife with interdependencies. Levers of supply, demand, materials, and products ideally support business activities in equal measure. But in difficult times these levers move out of synch. With the global economy under pressure and financial markets buffeted by wild swings, so much feels out of our control. Predictions, expectations and plans for the future become at best challenging, perhaps irrelevant, or worse still, dangerous.
For leaders who are used to making quick decisions and marshaling their forces for the greatest impact, the impotence endemic to this crisis can feel discomforting, numbing, humbling. Still, there is no time when leadership is more important. Identify and focus on what you know, what you can control, and act accordingly.
This is where a mindset of agility and adaptability proves so central, so critical. For individuals as well as organizations, we need to develop resilience to disappointment, nurture optimism in the face of challenges, and through it all maintain a steely-eyed view of the on-the-ground reality, so we can appropriately balance opportunity and risk-avoidance. Three areas encapsulate this most: supply chains, production lines, and distribution channels. All three are dependent on each other, and interdependent on others and on the larger economy.
Here are some policies and practices organizations should already have in place:
-A crisis-management “control tower” that brings together key leaders to ensure a single point of response and companywide messaging
-Robust digital platforms, optimized for spikes in volume with dependable order management and multi-touchpoint fulfillment, which also employ data to identify hyper-local patterns in demand, to match resources and needs
-An ongoing system of constant assessment of inventories, supply chains and your upstream ecosystem, paired with an early-warning system that expands to second and third levels of both supply and demand
-An ongoing exploration of staffing models, leverage of variable workforces that can be crowdsourced, new digital capabilities, and automation/AI opportunities
-A clear assessment of P&L and balance sheet implications, with a set of defined “tripwires,” and both short- and mid-term plans to address any exposure
These near-term priorities will continue to be central, as conditions evolve and business needs shift—right through the toughest days and into recovery. But once an organization gets a handle on these practices, there are also next-stage options to consider. Supply chains are an obvious starting point. The knock-on impacts of China’s shutdowns early in the year already began to spark interest in geographical diversification of supply chains. In fact, 94 percent of Fortune 1000 companies have supply chain exposure to coronavirus impact in China
At the same time, there’s been a heightened premium on speeding up or driving greater agility into supply chains to deal with fast-changing situations: Some European firms are moving from ocean freight to rail transport
from China, which cuts transport time in half. Perhaps the most resilient course of all may be teaming up with supply chain partners to establish a coordinated crisis-support system. In these sorts of situations, partners will likely rise or fall together, and sharing information and ideas in that climate becomes highly valuable.
Every company should leverage this situation to “virtualize” their operations with digital technologies as much as possible. Those organizations that address this with urgency, in the short-term, will find themselves with a sustainable advantage going forward. Executives should look at permanently shifting workflows, so that work comes to people wherever they are, instead of the current deployment of people coming to work.
Other mid-term steps revolve around re-assessing inventories. Some industries (oil, iron ore, steel) have already chosen to begin building up inventories
, as they wait for demand—and pricing—to recover. This is leading to increased utilization of warehouses. Meanwhile, construction projects are being paused, accelerating the demand slowdown. Not surprisingly in this environment, cash preservation will become increasingly critical. That will underscore the need for optimized finance processes.
Overall, the just-in-time nature of our economic system will become even more expected, needed, demanded—but hardened to encapsulate even greater agility and responsiveness. This is accomplished through actions that matter. Times of crisis are an opportunity to demonstrate those actions.
With demand for some industries stalled, there will be capacity that can be put to new uses—potentially, in the long run, remaking expectations: What once was confined to one business, may now be more multi-faceted.
In China, for instance, several auto manufacturers have shifted to producing surgical masks
. In part, that is a reflection of intense need for masks, but it also offers a window into how open-minded managers and leaders might find new opportunities—and fast. Automaker SGMW (a joint venture that includes General Motors China, as well as Liuzhou Wuling Motors and SAIC Motor) moved from concept to manufacturing in just three days, producing an initial batch of 200,000 masks. They now have 14 production lines with a daily capacity of 1.7 million masks. Automaker BYD’s founder Wang Chuanfu led a team of 3,000 engineers to build production lines that use 90 percent in-house components; they now produce 5 million masks a day—a quarter of China’s total production capacity. Similar initiatives are also underway around the world. At the same time, companies need control tower capability to remain alert and prepared to pivot production back to core products as and when demand returns to the market.
5 core finance and operations questions organizations should ask themselves regularly throughout the crisis
1.Are you creating the visibility across your operations to make informed decisions?
2.Are you segmenting and analyzing your customer base to understand new and emerging needs?
3.Are you coordinating closely with strategic partners to drive digitization, agility and efficiency?
4.Are you optimizing your finance processes to manage cash, credit and risks?
5.Are you maintaining optimism, taking control of those areas that can be controlled, while remaining realistic about risks and perils?