Five actions to avoid Covid-19 disruption

27 March 2020

Firms must safeguard their supply chains and keep employees informed and engaged to avoid business disruption during the coronavirus pandemic

In a report, consultancy The Hackett Group said the virus has caused “sudden and dramatic disruption across all industries and markets”.

The report said: “Companies must respond effectively moment to moment as they receive insights with each news cycle. They must also be prepared to act swiftly and aggressively to counter each disruption and protect their most valuable assets, while anticipating the next turns and moves ahead.”

In order to manage business disruption in the short term, Hackett shared five actions firms should be taking:

1. Protect your employees and keep them informed and engaged

“First and foremost, companies must prioritise the health and safety of their workforce throughout the pandemic,” the report said. 

While many firms have been forced send employees to work from home, it is important to ensure they have the resources and systems required to be able to work effectively. 

“Communication that is timely, transparent and two-way is essential to keep employees informed and sustain their connection to the organisation,” the report said.

Hackett also recommended engaging with HR departments to conduct workforce-related scenario planning and build contingency plans to ensure preparedness amid novel and uncertain circumstances.

2. Defend your financials

“Decision-making under conditions of high uncertainty requires taking calculated risks predicated on imperfect and ever-changing data. This will require frequent scenario planning and simulations to test multiple planning hypotheses, making optimum use of the best information available,” the report said. 

Firms should prepare for an environment of tighter credit and investigate ways to secure additional funding sources at a reasonable cost.

The report added: “Take immediate and aggressive cost-out actions to reduce expenses for example, travel and expenses, hiring freezes, operating expense/capital expense diligence, and consolidation of work,

“Evaluate your labour costs and current workforce management processes and practices for opportunities to reduce cost.” 

3. Safeguard your supply chain

“This environment poses a unique need to manage both demand shocks and supply disruptions. To counter demand shock, companies must proactively identify and analyse an array of scenarios and use that analysis to prioritise and plan their response,” Hackett said. 

In the short term, firms should develop a rapid demand-shock response plan and analyse supply and demand scenarios to project shortages. 

“Understand the percentage of suppliers in high-risk regions and prioritise options and define allocation rules,” the report said.

The plan should also consider which resources need to be mobilised to closely manage the situation and how decisions are made and tracked centrally. 

4. Preserve your cash

“Companies may find that to deal with disruption they need to inject liquidity into the end-to-end supply chain through customer and supplier terms management and/or strategic inventory builds,” the report said. 

Firms should monitor daily fluctations and supply limitations to ensure cash is not invested in the wrong inventory and tighten up end-to-end procure-to-pay processes, “especially around invoice timing and payment terms operations to minimise leakage”. 

Product portfolios could also be temporarily streamlined to allow the buffering of strategic stocks. Businesses may also want to identify alternate supply sources or substitution opportunities for stock-keeping units at risk. 

5. Fortify your infrastructure

“While the focus understandably has been on short-term business continuity, it is important to consider the demands on the information technology function over the coming months and reprioritise effort and investments quickly,” the report said. 

Focus should be on fortifying the infrastructure to sustain virtual work and collaboration. Agility will be key to achieving this. Connectivity, throughput and productivity must be monitored and adjustments rapidly made if needed.

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