ANALGESIC FOR FACTORIES IN COVID-19

Within a few months of the outbreak of the COVID19 epidemic, there has been a huge change in demand and supply on a large scale, and will have a profound impact both in the short and long term. In the immediate future, manufacturing businesses can apply instant noodles solutions to ensure the survival of the business:

• Promote internal communication about compliance with preventive measures: wear a mask, wash hands frequently, avoid close contact with strangers.
• Limit contact of company personnel with outsiders, if required to contact, must follow the epidemic prevention process.
• Allowing office workers who are not directly related to production to work online at home, and only come to the company when really needed.
• Cost optimization: detailed statistics of costs, thereby controlling and reducing unnecessary expenses for the survival of the business.
• Inventory inventory, minimize semi-finished goods manufactured in progress between stages.
• Human resource planning, skill banks, from which to classify key personnel and seasonal personnel.
• Systematize production processes and standardization to reduce dependence on individuals or skills.
• Negotiate with suppliers to reduce raw material prices, delay importing dates or extend payment
• Find alternative products and services.
• Find a replacement market or customer
• Negotiate with customers, proactively reduce prices so that they do not cause difficulties because of small errors
• Look for investment opportunities, buy ineffective factories or go bankrupt with cheap prices
• Increasing production capacity, developing capacity of the team is ready to occupy the market share of companies that can not stand.
• Production partnerships for sufficient orders exist.
• Eliminate operational waste: waiting, damaged goods, defective goods, overproduction, transportation.
• Digitizing production management to be able to operate remotely.
• Establish a quality management system at source.
• Inform the situation and update as soon as possible, and as soon as possible with the company team as well as partners, suppliers so they have the best preparation.
• Set up a War room, which displays all the information to help with quick decision making.
• Restructuring debts to ensure short and long-term liquidity.

Depending on the industries and products, services that the level of influence will vary, I would divide them into 4 groups of influence:

• Group 1: Direct effects due to isolation orders, travel restrictions, meetings and blockage.
• Group 2: Indirect effects due to supply chain disruption.
• Group 3: Indirect impact due to reduced market demand.
• Group 4: Suddenly increasing demand, which cannot be met. Long-term solutions for each group are described in detail below:

1. Direct influence due to isolation, travel, meeting and blockade orders:

Enterprises in the tourism, service, hotel, passenger transportation, restaurant, entertainment and retail sectors will be directly affected. Some businesses with infected or suspected F0, F1, F2 people will also be forced to blockade. A majority of revenue will immediately approach zero.

These businesses should stop operating, go into hibernation, cut all unnecessary expenses. Should switch to the mode of “survival”, “cut losses” as soon as possible, the more damage lingers.

These enterprises need to be prepared for the translation spirit which will last more than 6 months to have a plan to face the worst case.

Lesson for all businesses: have emergency cash reserves to last at least 6 months, and plan to respond to emergencies. Building production and business capacity under Just In Time model to increase – decrease capacity with high flexibility, and minimize inventory. The less the intermediate inventory in production, the healthier and less risky the case is.

2. Indirect effects due to supply chain disruption

A number of businesses are and will be affected in this form, that is, a link in the supply chain, some suppliers are in category 1 above or also in type 2, so they cannot afford to supply. in terms of quantity and schedule. That link may be raw materials, details, packaging … and even lacking only a small part can not produce and trade.

A number of businesses use raw materials imported from factories located in the blockade of epidemic areas such as China, Korea, India … and in the coming time when the epidemic in Vietnam will reach its peak and blockade measures stronger applications will also be in this category.

These businesses need to quickly find alternatives: design other products so that they no longer need the missing link, find replacement suppliers, negotiate with existing suppliers for more details. missing.

For example, some businesses change products to adapt to supply chain fractures and change market needs: garment enterprises turn to cloth masks, car businesses like GM, Tesla move into production. ventilator.

Enterprises in FMCG industry, food can choose alternative suppliers in Vietnam or Thailand.

Lesson for all businesses: There should be more than 1 supplier for each type of detail, material, or at least a list of backup replacement suppliers. Quickly capture information, and build lean product development capabilities to get new products as soon as the market changes.

3. Indirect impact due to reduced market demand

Because businesses and factories are seriously affected by factors 1 and 2 above, the needs of businesses, factories and employees of these businesses are also seriously affected.

In the immediate future, the industries that are seriously affected may include luxury products, apparel, footwear, cars, real estate, petroleum, freight … We can see immediately that the immediate price is gasoline oil is falling sharply, because the demand for production, business and transportation has plummeted on a global scale. Vietnam is just a boat in the middle of the global economic sea.

When demand decreases, even though customers signed a contract, they will try not to pay. In this case, I often encounter at export garment and footwear factories. When the market is good, lots of orders are not in time, B-quality is also ok, late delivery is ok. When the market is difficult, customers will dig for traces to avoid buying. In this case, businesses should proactively negotiate discounts with customers to avoid being returned or rejected orders due to quality or schedule errors.

Lesson: Enterprises should build their lean production and business capacity, so that when the market rises, we have enough capacity to meet. When the market is down, the cost, quality and progress are enough to survive and ready to expand the market when the epidemic is over. A series of competitors will fall and open a series of space for businesses struggling after the crisis.

4. The demand increased suddenly without meeting it

The group of medical devices directly serving epidemics and treatment, food and essential consumer goods will have a spike in demand. Then businesses in these industries will face the problem of overload and not meet the needs of customers.

The demand of the market is shown under the sine wave, the current production capacity of the enterprise is only enough to meet the red line.

Then if the business wants to increase production without increasing production capacity, there will be an option to produce in advance to reserve for the peak season. This is shown by the diagonal line below the red line. Pre-production has caused a series of problems such as high inventories of finished products, if the market has a rapid change in styles and models, these products will become obsolete and cannot be pushed away.

This practice is also common in seasonal industries such as garments and Tet products. My clients have but before #OPEX consulting, they still have not handled all the Tet goods of 3 years ago.

The best way to avoid doing things before, do without orders, or overproduction is to really improve the production and business capacity of the business. When the market is good, the order increases to increase the output, the market decreases, the capacity is reduced as shown below.

Just In Time production and supply capacity as above is very important, helping businesses increase resistance to external changes. Major crises such as the COVID-19 pandemic this time are both a tremendous challenge, but also a once-in-a-lifetime opportunity. After the epidemic will be a completely new market, open and full of opportunities to wait if we live and preserve forces to fight after the opponents have fallen.

Comment if you see an opportunity in this crisis or contact OPEX directly to advise on the cases of your businesses.

OPEX Consulting – Operational Excellence Your Business