Plan Recovery, Set up a Task Force, Conduct a Risk Assessment of the Supply Chain, Plan Ramp-Up Scenarios
Identify all risks along the value chain, and make the networks of production and suppliers ready for a rapid ramp-up in order to prevent production down-times or to manage these more effectively.
What has to be done now
- Identify critical supply chains quickly and with a good focus. From our experience, much attention needs to be paid to suppliers from upstream supply stages (Tier 2-n) in addition to the direct suppliers. From the manufacturer's point of view, there is often a lack of transparency for these levels, as the management of sub-suppliers usually lies in the responsibility of the tier 1 suppliers. Disruptions have a delayed effect here, and in many cases they are detected too late. Consider also further dependencies in the ecosystem, which, depending on the industry, can extend to the raw material producer.
- Focus on suitable criteria. From our experience, possible indicators for high criticality are:
- Critical Supplier regions (e.g. Italy, Spain)
- Long supply chains (e.g. supplying the US from EU area)
- Financially weak suppliers
- Suppliers under development or in start-up situations or suppliers who have already been critical to supply in the past
- Critical basic industries (e.g. electronics, plastics)
- Dependencies due to complex and cross-regional supply chain integration
- Working as partners is essential. Cooperation with direct suppliers for mapping the respective supply chains and identifying critical elements and stages is an important first step to prevent production downtimes and supply bottlenecks. In addition, explore other ways to work with companies in your ecosystem to optimize resources.
- Create transparency about your supply chains. Demands, inventories and capacities on the different levels of the critical supply chains must be determined and evaluated. If not already in place, a common data basis for demands, inventories and capacities must be continuously updated in cooperation with direct suppliers. Also take into account current sales developments in your target markets.
- Evaluate the flexibility of your suppliers concerning deliveries. The flexibility of the supplier’s capacity in ramp-up has to be examined in addition to comparing the supplier inventories with expected requirements and order volumes from the manufacturers. This can only be done by working as equal partners with all parties involved in the supply chain.
- Focus wisely. Initially, focus only on the critical supply chains, otherwise complexity will get out of hand! An existing Supply Chain Reporting (BBM/BKM) is helpful here, and is an important prerequisite for acting quickly.
- Take immediate action with critical suppliers. With our 360° Supplier Health Check we create transparency about the current situation by doing a combined on site/off site assessment – of course with due regard to any regional COVID-19 restrictions.
- Get a quick overview of key fields of action for critical suppliers. Our 360° Supplier Health Check creates a comprehensive overview of current fields of action, such as
- Supply Chain Performance – supply planning, inventories in the various stages of the value chain
- Operations performance – capacity restrictions and output, flexibility in quantity, delivery quality, etc.
- Pre-supplier management – particularly securing the pre-supplier chain by an active management of suppliers and emergencies
- Setting up a management of the COVID-19 situation – both central and decentralized crisis management, substitution for absent knowledge carriers and decision makers, scenario planning
- Business situation with focus on maintaining liquidity and continuation
- Quickly devise first measures with a tried and tested approach. Our 360° Supplier Health Check follows a strictly standardized and well-tested procedure, takes one to two weeks (depending on the size of the company or site), and provides a well-structured and scheduled set of measures.
- Translate this approach into a standard process. A continuous evaluation and re-assessment of the supplier network’s status should be established in parallel. In our experience, transforming this approach into a continuous and standardized process and adhering to it even "after the crisis" is the key to securing supply chains in the long term.
- Identify critical production sites in your own network. The status of your own production network also has to be examined. Identify production sites that need to be considered critical for the approaching ramp-up phase. These include, for example, sites in regions that are heavily affected by COVID-19 and those with a high degree of localization or many local suppliers, as well as your own component plants in critical regions (internal suppliers)
- Start a 360° Plant Health Check for critical sites in the production network ("Ready for Ramp-up"). The 360° Plant Health Check for critical sites in your own production network evaluates their current condition and their fitness for a quick restart. The focus lies on:
- Current order backlog
- Flexibility of products
- Production capacity and flexibility of quantities
- Current inventories and coverages in all stages of the value chain
- Availability and flexibility of staff
- Set-up for management of the COVID-19 situation, crisis management
- Economic situation and cost structures
- Quality of the processes for planning and controlling production, and their responsiveness
- Risks in relevant indirect areas
- Proceed in a structured manner. Similar to the Supplier Health Check, the Plant Health Check is a standardized assessment of one to two weeks’ duration and involves the main internal partners in the value chain.
- Think in scenarios – have a "Plan B". After creating transparency about the status in the supply chain and your own production network, it is necessary to establish end-to-end scenarios for critical value chains and to evaluate them from the perspective of a "Plan B". From our experience, the following elements have to be taken into account for the timing and phases of ramp-up when developing best case, base case and worst case scenarios:
- Expected sales development by region and resulting demands
- Necessary capacities of own and supplier production in order to supply the regions
- Staff structure and requirements (internal/external)
- Required inventories in the supply chain and value chain
- Reaction lever
- Select the appropriate level of detail for your scenarios. You are not aiming at a 100% simulation but at a rough, albeit meaningful, impact analysis that allows the derivation of pragmatic and quickly implementable measures, in order to ensure the restart. We have extensive experience in this matter and can quickly start together with your team.
- Make scenarios tangible – underpin them with measures. Subsequently, define measures for your own production network like moving orders to other plants until a COVID-19 affected plant can restart, building up stock, balancing of stocks between plants. Scenarios for stabilizing critical supply chains have to be developed accordingly, for example by relocating production to other supplier locations, taking stock build-up and possibly higher logistics costs into consideration. Scenarios for launches of new products that are massively affected by COVID-19 are to be supplemented. Possible launch postponements due to, for example, a lack of available tools or disruptions in delivery have to be evaluated as well, based on the influence of the crisis on plans of sales, and their effects need to be taken into account in the above scenarios.
- Transfer the scenarios into your PPC systems. An essential element and factor of success in this context is the inclusion of the scenarios in your production planning and control processes and in the parameters and core data that underpin them, for example, by adjusting planning cycles, safety stocks or target coverage.
ROI-EFESO has many years of experience and highly specialized instruments for identifying and assessing supply chain risks. Contact us for fast and pragmatic support with your supply chain challenge.