Recovery Planning – STEP 1
Focus your remote planning workforce on locating potential weaknesses in your value chain
The reality of Social Quarantine caused by the coronavirus is setting in for corporations worldwide. Demand outlook and timing is uncertain, as are logistics and supply line capacity. Finances are strained and cash is critical. But action is being taken to spur recovery: the US Senate has agreed to an unprecedented $2 trillion bipartisan economic aid package intended to help alleviate the impact of coronavirus, and many state and local governments have followed suit with grants and low interest loans. So, how do you focus down now and determine if and how you might take advantage of this?
Now is the time to plan for business recovery: What will recovery look like and how do you prepare your company to be ready for it?
Most of your indirect workforce, which likely includes the brain trust of your strategic planning functions, has been sent home to work remotely. These are the critical resources that need to be planning your company’s recovery.
In the ForeOptics blog “Recipe for Business Resilience“, we explain that the first step in this planning process is to locate and identify business risk. This activity is well-suited for remote employees since it is focused on analysis of data, sharing of insights and conclusions, and deriving a unified planning direction – all of which is critical at this time, and can be effectively completed from employee home offices.
Initial assessment of risk can be categorized in the three major planning arenas including the market and customer risks, product and demand risk, and supply planning risks that encompasses all activities required to deliver those products and services to the customer. While these three areas can be analyzed separately to begin (saving time and increasing flexibility), careful coordination between them is required since portfolio planning feeds the demand plan which then feeds the supply plan.
Market and Customer Risk: What has changed in our product portfolio?
What you sell and how you sell it may have significantly changed compared to recent history. Validating your portfolio is critical to ensuring downstream processes are aimed at delivering the right products and services, and that you can maintain a profitable portfolio over time, remember your customers are in the same boat and their essential planning teams are working remotely as well, now is the time to partner with them and make sure your priorities are aligned with theirs.
Since ForeOptics has worked with many clients through major market disruptions, we have seen product shift risks driven by many factors including: Legislative policy, financial forces, upstream demand, and Planning preparedness. Taken together, a company must review these sources of risk and model what can happen to the product and service portfolio. It is not just a matter of what will be bought and when, but also for what price, and what is expected to be the new pattern of demand – Steady state? Lumpy? Or one-time infusion before the markets settle? These are important to model since they significantly impact the profitability of the portfolio across time, driving your decision on what to sell and how to sell it
Product Risk: How has our demand changed?
In part 1, we addressed the question of “what” has changed in your portfolio. In assessing product risk in part 2, we shift the focus to the question of “how” it has changed from a demand perspective. Your demand outlook must be re-baselined, not merely refreshed, in times of economic upheaval. Up until this point, your demand plan and downstream processes have likely been geared toward a recent demand plan. This is at risk now, and that risk should be looked at from several dimensions including volume, mix, and timing.
Sales, customer service, and program management must be in contact with critical customers to understand what the new demand profile will look like across the next 2 to 12 months, and to also assess their level of confidence in that information. Understanding the rules of engagement with the different industries in which you participate will be important – who are your “essential providers” and how will demand for their products differ from non-essential businesses? Building best-case, worst-case, and most-likely case scenarios for each part of the portfolio will help quantify the risk and potential impact to financials. This can all be done effectively in a remote work setting.
Delivery Risk: Where could our supply network fail?
- The demand plan directly shapes the end-to-end supply network. Savvy supply chain leaders will be able to flex in different areas to protect service and manage cost, but risks must be identified ahead of time for them to know where to place their resources.
- External risks: what suppliers and products pose the most risk to supporting operations
- Internal risks: Classic “time-treasure-talent” approaches hold true for internal capacity, but beyond this, the supply chain leader must also consider risks that are new – for example, families that have children at home may present attendance risks.
- Financial risks: Delivering product is critical; doing it profitably is just as important. Operations and supply chain leaders can effectively assess and analyze risk from remote work locations in support of this coordinated planning effort. Use of supplier management toolkits and capacity planning approaches, coupled with coordinated remote strategic planning sessions, will provide the needed insight into the risks in the supply network during recovery.
Check in with ForeOptics for more information on how to proactively prepare your business for success through the recovery and into the future. Our clients have been able to successfully use our services remotely during these times. With a rapidly changing economic environment, the time to act is now, and ForeOptics stands ready to assist with your planning and business transformation needs.