The impact of COVID-19 lung disease on the economy is growing. Companies have to deal with possible short and medium-term problems. The Federal Association of American Management Consultants has published an emergency checklist.

Even if the companies were surprised by the short-term nature and severity of the corona crisis: The most important thing now is that planned action is still guaranteed. The companies have to set up a rough concept for the next few weeks and months that depicts the expected development – possibly in scenarios. This is the basis for deciding what to do. Both short-term survival and medium-term development must be kept in mind. Both have high priority. In any crucial circumstances, consult a professional bankruptcy attorney.

The Federal Association of German Management Consultants recommends considering at least the following six points in the rough concept in its emergency checklist and adding company-specific measures.

1. Liquidity:

Examine your financial situation completely and honestly. Eliminate all unnecessary expenses and investments. Negotiate longer payment terms with suppliers.

2. Customer management:

Actively approach your customers and work with them to find the best possible solutions in the crisis situation. This can include, for example, renegotiating order sizes, delivery dates, and conditions.

3. Supply chains:

Check your supply chains and look now specifically – for example Europe instead of Asia – for alternatives. Train your purchasing staff.

4. Capacities:

Analyze critically whether and to what extent you can shut down capacities. Worth considering: reduce shifts or temporarily introduce 2 or 3-days a week.

5. Employees:

Adjust your personnel planning and find situation-appropriate solutions for the deployment of employees. The spectrum is wide and ranges from home office regulations to the use of working time accounts and short-time work.

6. Loans:

Organize the necessary loans to ensure the continued existence of the company. The federal government’s liquidity support should be used quickly. And: actively seek discussion with the house bank and think about factoring solutions.

How companies should put their supply chains to the test

Covid-19 lung disease disrupts supply chains in the industry. Professional risk management helps to identify problems at an early stage. With these three steps, companies can identify and eliminate weaknesses.

The sports goods manufacturer Ferrari is closing its plants in Italy for two weeks due to the corona virus. “The first serious problems in the supply chain” would have made further production impossible, the Italian company announced in a press release last weekend. Production is currently also at a standstill. To reduce the risk of getting into such a situation, purchasing companies should act now and review their supply chains. How this can work? We have described below into 3 steps:

Step 1: Create transparency in the supply chain

First, companies should get an overview of their suppliers and their subcontractors. This requires an overview of all open orders and the productions for which the ordered components are required. “On this basis, the company can then determine which suppliers are delivering urgently needed goods and which suppliers are located in areas heavily affected by the coronavirus,” says Frank Sundermann, managing partner of the Attorney Debt Fighters. The company should contact these suppliers and ask whether there are any problems with production and whether there are suppliers in risk areas.

If either of the two is the case, the company should look for alternative suppliers or products and also speak to its own end users that production may be delayed because there are problems with the supply chain. “In such a crucial situation, business people often ignore or forget to talk to their own customers,” says Sundermann. “This transparency is important in order to find solutions together with customers.”

Since the situation can currently change constantly due to the coronavirus and more and more risk areas are added, the supply chain should be constantly monitored. It is best for the company to choose an employee to coordinate the matter. In addition, a Google alert on the respective suppliers helps to keep track of things. If this is activated, the company will automatically receive a message by email when there are new posts on the Internet in which the supplier is mentioned. 

Step 2: look for alternatives

If problems arise with the supply chain, it is important to act early. If a supplier or an important subcontractor of theirs is located in an area severely affected by the virus, it is very possible that sooner or later there will be delivery problems. The customer should therefore look around for alternative suppliers and examine whether it is possible to refine the specification for the components required for production. “Sometimes, for example, plastics can be replaced by other plastics,” says Sundermann. 

Important: In some sectors such as the automotive industry or aviation, components and suppliers must be approved by the OEM (original equipment manufacturer). Therefore, before exchanging components and suppliers, companies must speak to the end-user. Since the latter is of course also interested in ensuring that the supply chain does not collapse, he will – whenever possible – agree to such a change.

Step 3: Reach an agreement with suppliers if possible

Another way of reacting to emerging bottlenecks is to order larger quantities from the supplier in advance, which the supplier produces by running additional shifts. Although this burdens the liquidity of the ordering company, it ensures its own ability to deliver. 

If the coronavirus does lead to delivery problems, both parties should try to find solutions by mutual agreement and, for example, waive contractual penalties. Because it can take a long time to resolve a possible legal dispute about whether or not there really was force majeure and the relationship between the two companies is likely to be burdened in the long term. “There is no better way to increase customer loyalty than to prove in a crisis that you work reliably and in partnership with one another,” says Sundermann. Besides loyalty and providing sincere services/products, it is important to keep in mind that there are other thousands of companies that have tremendously progress during and after the pandemic lockdown is lifted. Therefore, it indicates that the world economy still works or you can say has progressed/improved.