preface
Since March 2022, the recurrence of the epidemic in many parts of the country has had a huge impact on China's supply chain, and even recently some manufacturers have completely stopped production, and star companies such as Weilai and Xiaopeng have also been trapped here.
What impact has the covid-19 crisis had on businesses?
Why are the same outbreaks affecting different degrees?
What benchmarking practices to ensure supply continuity help us reduce losses and avoid future crises?
The impact of the epidemic on businesses
Can't buy it
Nio: Some parts were cut off, and production was forced to press the pause button
On April 9, Li Bin, chairman of WEIO, said:
Affected by the epidemic in Changchun and Hebei, some parts have been out of supply since mid-March, relying on some parts inventory to barely support.
Recently, affected by the epidemic in Shanghai and Jiangsu, many partners cannot supply goods, and Weilai can only suspend production.
Yu Chengdong: After May, all technology/industrial industries involving the Shanghai supply chain will be completely shut down
On April 15, Yu Chengdong, CEO of Huawei's consumer business and CEO of Smart Car BU, posted in the circle of friends:
If Shanghai cannot resume work and production, all science and technology and industrial industries involving Shanghai's supply chain will be completely shut down after May, especially the automobile industry.
The epidemic has affected almost 90% of enterprises' raw material procurement.
Factories can't do it
Head clothing company: Factory shutdown began in March for nearly a month
In March this year, Zhejiang's head garment enterprises, because the core suppliers, factories and warehouses are concentrated in Q City, and Q City due to the epidemic lockdown, resulting in supply chain disruption, factory shutdown for nearly 1 month.
Workers being isolated, missing materials or high-end equipment being unable to be maintained/overhauled can lead to plant shutdowns.
Logistics can't be handed over
Shandong S Company, logistics costs increased by nearly 40% in one month during the epidemic.
Some high-speed shutdowns in the Yangtze River Delta have hindered logistics and transportation.
Shandong S Company, in the 10 days from April 5 to April 15, a product increased the logistics cost by 70,000 yuan due to return, detour and other reasons in a delivery.
The freight cost of general goods and dangerous chemicals has risen from the original 9,000 yuan to 37,000 yuan, and the logistics cost of one month during the epidemic has increased by nearly 40%.
On the one hand, there are extremely high logistics costs, and on the other hand, there is the cost of inventory that has nowhere to go.
The epidemic crisis quickly evolved into a supply crisis, at the same time, we also interviewed Huawei, Nokia and other benchmark companies, the same dilemma showed a completely different way of coping and situation, effective management to minimize losses.
Why the same outbreak has affected different degrees
What caused our logistics crisis in the midst of the PANDEMIC:
"Can't buy, factories can't do it, logistics can't be handed over"?
With the same epidemic, why can some enterprises control the impact to a minimum, and some enterprises almost completely shut down?
After we opened up more than a dozen real logistics problems in enterprises, we found that -
Some companies have problems with their information.
Is there a premeditated, strategic sale of inventory or a product that can be delivered?
How to prioritize the protection of large customers?
Which suppliers, which materials will be affected, what are the alternative suppliers and alternatives to ensure continuous supply?
How many products are on the production line, how much inventory is in the warehouse, and how many affected products are in transit?
How to strategically secure supply?
How to strategically grab key materials, and does the one-size-fits-all zero inventory strategy still apply?
In the case of city closures, how to adjust logistics, and is there a backup plan?
Which products should be priced? Which products should be reduced in price? How to protect profits and cash flow?
How to make good use of government relations? How do I get a road pass/pass? How do I enter the whitelist for returning to work?
……….
Is there a risk response organization?
How to collect information and make decisions accurately and efficiently?
Is it to disclose information within the company, upstream and downstream, and mobilize internal and external mobilization?
……….
The problem of information flow causes real logistics problems, and real logistics problems will also cause capital flow problems.
As companies interrupt or extend cycles in raw material procurement, manufacturing and logistics deliveries, we need to pay higher raw material procurement costs than ever before.
Storing inventory of key materials or finished products and ensuring production and logistics requires several times higher costs than usual. Under the epidemic, every link and every measure will significantly increase the operating costs of enterprises.
These will put great pressure on the company's capital flow.
On February 17, 2020, the International Business School of the University of International Business and Economics released the survey report "The Survival and Development of Enterprises under the Novel Coronavirus Epidemic", showing:
A total of 761 enterprises participated in the survey, mainly medium-sized enterprises, and listed companies alone accounted for 30.86%.
The conclusion is that 70% of the cash flow of enterprises can be maintained for more than three months. In other words, without income, 30% of large and medium-sized enterprises can not survive for three months.
The quality of an enterprise's information flow, logistics and capital flow determines the degree of impact of the epidemic crisis.
8 ways to guarantee continuous supply
The outbreak didn't happen in March this year, it already happened in 2020. The history of the development of human society is simply a history of crisis. Therefore, there is a way to deal with the crisis and ensure the continuity of supply.
On March 17, 2000, the American semiconductor factory of Philips, a chip supplier of Nokia and Ericsson, caught fire.
Nokia began reformulating product designs and alternatives on the third day of the Philips fire, successfully minimizing the scope of impact.
Ericsson did not deliver the purchase order a month later, and only began to realize that Philips was out of supply and began to talk about the transfer of factories, and at that time the chip resources were already at full capacity.
As a result, Ericsson suffered a huge loss of sales revenue, and its market share was surpassed by Nokia in one fell swoop.
Can companies respond quickly in the context of the pandemic crisis and compete for the golden hour, 12 hours, 24 hours and 72 hours to minimize the impact of the crisis?
The risk management system of the enterprise affects the quality of rapid decision-making and the efficiency of execution.
Short-, medium- and long-term crisis response methods, strategies and mechanisms determine the supply continuity, business continuity and even whether enterprises can overtake in curves under the crisis.
Coping Method 1
The first in command was responsible for setting up the War-Room
The chairman or president took the lead in quickly establishing War-Room, leading the company into a wartime state, insight, prediction, decision-making, and grasping the execution of key matters.
The number one is responsible for ensuring the normal operation of production, supply and sales, and he must undertake the supply guarantee of key raw materials. Enterprises with government relations should keep the normal start of work and the smooth flow of logistics and transportation.
Coping Method 2
Prioritize the supply of key customers/value customers
When the supply chain is affected, the company-wide end-to-end collaboration will give priority to ensuring the supply of large customers and strategic customers with limited resources.
Strategic resources are invested in strategic tracks.
Coping Method 3
Timely adjustment of product sales lists and sales strategies
Production, supply and marketing coordination, timely adjustment of supply strategies, production plans, delivery plans.
According to the supply of raw materials, production capacity, profitability, etc., adjust the product sales list and sales strategy that matches the supply capacity, pull through production and supply, and focus on matching the availability.
Coping Method 4
Quick reactions in hours outperform opponents
Internet crawler technology is mature, and any wind and grass can be quickly captured.
When the risk occurs, it should be quickly pushed to the risk management department of the enterprise, so that the risk can be mastered within 1 hour, not the next day.
Compete for gold 1 hour, 12 hours, 24 hours and 72 hours. You can run through the crisis, but you have to run past your opponent.
For example, when an earthquake occurred in Taiwan, TSMC was significantly affected by the event, which occurred during the daytime, which happened to be the night in the United States.
Whether the relevant industrial chain company can respond quickly within 1 hour, find the corresponding alternative supplier within 12 hours, purchase within 24 hours, follow up within 48 hours, and so on.
A domestic excellent enterprise has done a better job than its U.S. counterparts in coping, robbing it of precious supplier resources.
After the crisis, sales, planning, products, supplier management, HR labor, including whether the finance can release the risk reserve, so that everyone does not need to pass the approval of the rapid response.
After such a set of processes, the business of the entire enterprise can be relatively well guaranteed.
Coping Method 5
The supply chain moves from the backstage to the front office to play the role of a combat unit
Supply chain business management proactively moves forward, and the reactive supply chain transforms into a continuous, efficient and proactive supply chain.
1. The supply chain business takes the initiative to move forward to the market line, pulls through the sales and supply chain, and ensures the coordination, rapid response and decision-making of production, supply and marketing;
2. Procurement for key and risk devices to do strategic reserves, take the initiative to extend to the upstream of suppliers, draw a multi-level supplier distribution map of the key device industry chain;
3. Rational layout of manufacturing plant network and reserve ODM suppliers, balance supply chain costs, efficiency and risks, optimize the reasonable layout of warehouses, summarize and assess logistics risks, formulate corresponding plans and verify them.
Coping Method 6
Rational and effective use of government relations
In response to a crisis, we maintain contacts with governments, associations, etc.
On the one hand, we must handle the relationship with the government, on the other hand, we must also make reasonable use of such resources to avoid our enterprises from being hit by mistake.
Therefore, information flow is very critical, and it is highly recommended that enterprises have their own information flow management processes and tools that can enable enterprises to obtain and process information in a short and fast manner.
Coping Method 7
Guarantee a good flow of funds
Cash flow is protected first and then developed, and if conditions permit, reverse investment. Cash flow is the blood of the enterprise, like the cotton jacket of winter. In the very cold winter, it is obviously difficult to borrow cotton jackets.
Therefore, it is the consistent practice of excellent companies to take a first-time protection and make contrarian investments when conditions permit.
When the risk comes, most people will be pessimistic about the mood of the market, and therefore, there will be sufficient talent spillover in the market, and potential opportunities will spill over. At this time, it is easier to obtain first-class talents through capital.
Coping Method 8
Gradually build a risk identification and response mechanism
Risk identification/response strategy/resource assurance through SP&BP.
Every year, the company reviews the crisis in SP&BP, conducts a comprehensive risk identification by each department, formulates relevant coping strategies and plans at different levels, and invests appropriate strategic resources at the company level as a guarantee.
Build a business continuity management system.
Construct management systems, establish organizational and operational processes, assess risks, develop emergency response plans and plans, and conduct drills.
Normalize short-term, medium- and long-term crisis management, implement entrepreneurs' crisis awareness into crisis response mechanisms at the organizational level, monitor and analyze abnormal times such as risks and crises, and establish crisis trigger mechanisms to provide information support for coping with decisions.