Recovery Planning – STEP 2
Use synchronized planning to produce realistic strategies for the recovery and beyond
Government and industry actions being taken to stem the economic damage from Covid-19 are happening in unprecedented volumes and at a rate not seen before. For example, Lockheed Martin announced $50M+ in advances to ensure its supply network has the means to continue to operate. With these unprecedented steps being taken, the question on the minds of business leaders now is “What strategy do I take action on in order to take advantage of these recovery actions?”
In the ForeOptics blog “Recipe for Business Resilience” we explain that the first step is to quickly identify risk areas within your value chain. The second step is to anticipate potential future scenarios and produce a unified action plan to move forward. This planning activity can be well executed by remote employees since this all can be done with teleworking strategies and tools. Further, many of the roles involved in these activities may not have been co-located to begin with, making this activity even less impacted by social distancing.
Designate the Planning Team: Put the strategic planning activity into capable hands!
A recovery strategic planning activity such as this requires tight coordination, even orchestration – it is critical that everyone knows the part to play and when. Designating a planning leader will be key to focusing the overall effort, fending off “analysis paralysis”, and forging a strategy and action plan in a timely manner.
Supporting the leader should be capable and authorized functional leaders such as sales, customer service, program management, supply chain/operations, and finance. Since speed and flexibility will be key, these leaders need to be prepared and have the support to work quickly and dynamically together in a coordinated fashion.
Define Demand Scenarios: Make sure you really know what your customers need and when!
The future will not look like the recent past during this economic recovery. Because of the scale of the economic impact on the market, demand will need to be fully re-baselined, not merely refreshed. There certainly are lessons to be learned from other recessions such as 2008, 2001 and 9/11, and even WW2. Use a multi-faceted demand planning approach to combine the lessons learned from these recoveries with internal detailed knowledge of your customers and products. Demand managers must consider business and product prioritizations invoked with government actions, such as military DX rated suppliers and medical priorities. Building several scenarios that describe the range of near- and longer-term futures will help clarify actions you should consider. Capture and document key assumptions in your process.
Remember to leverage the opportunity to refine these models with input and feedback from your key customers – now is a unique opportunity to focus on building strategic downstream relationships to understand what is really needed and when.
Execute Supply Modeling: Make sure you can really build what your customers need!
In addition to examining the internal bottlenecks and opportunities from a machine and labor capacity perspective, one of the keys to success in a recovery is understanding the capabilities of your first and second tier supply network. This is a critical area since getting all you need in the BOM except one part will cause real pain: increased inventory from what you were able to get and a missed opportunity to build something you could have actually sold. Implementing tools such as supplier risk analysis and delivery assurance provides data-driven insights and recommendations. By defining different paths to meeting the demand plan, you should be able to outline the timing, costs, and risks associated with those plans.
Take advantage of this unique time to partner with your supply base. Understand their strengths and challenges, identify opportunities for mutual success, and lay a foundation for future partnerships.
Review Financial Impacts: Directly link financial projections to demand and supply scenarios!
It is not enough to be able to deliver what is needed and when, a company must have line of sight to doing that profitably. Developing pro forma projections of cash flow and income will provide clarity on which planning scenario is worth pursuing. By using the team’s best-informed judgement on the potential upsides and downsides of the planning models, you provide leadership with a view of financial risk, adding transparency to the plan, and enabling the organization to move forward to the action phase.
It is important now more than ever to have a S&OP-style planning process guiding your organization – knowing what to sell, what the demand for it will be, how to make and deliver it, and knowing the impact on the financials will be critical. Having this insight into how your business can move forward will help you position yourself to take advantage of recovery actions and continues to engage your most valuable asset – your people. Stay tuned into ForeOptics for more information on how to proactively prepare your business for success through the recovery and into the future.