By Stuart Harman and Rod Hozack, Partners at Oliver Wight Asia Pacific
One CEO recently asked us “how do we communicate to everyone in our organisation that they should keep running the business as usual in the current climate?” Unfortunately, you can’t communicate this, but you can leverage your existing processes to focus on navigating through this single extraordinary issue.
As governments around the globe scale up their actions to combat COVID-19 on an almost daily basis, businesses are working hard to adapt to what must seem like constantly changing circumstances. Whole business sectors have ‘stood down’ in an effort to limit social transmission, leaving many without work.
Organisations that have an S&OP or Integrated Business Planning (IBP) process in place might be considering suspending activities associated with the monthly process as focus shifts to replanning the business on a daily, or in some cases hourly basis, to keep up with the rate of change in demand, supply and the external environment.
Our advice is to resist the temptation to do so. Instead, harness the elements of your existing S&OP/IBP process and weekly planning and execution processes to help you navigate through the current crisis. Here are some key things to focus on that will help through this period:
• Get clear on your assumptions about the future
Look for lessons from the past – Everyone is wrestling with the short-term and a fear of the unknown but there are lots of lessons and data from previous global crises as well as from this crisis – you don’t need to make it up – do your desk research and then document your assumptions. Being clear about what you think will happen, as the basis for your plans is as important for the short-term (days and weeks) as it is for the medium and long-term (months and years).
• ‘Bring to life’ your risk management plans by integrating them into you IBP process as business continuity plans. Close any disconnect between essential asset and people risk management contingencies and the continuity of conducting business profitably.
• Ask ‘What-if’ – where there is uncertainty create scenarios and where the impact is significant create plans to mitigate or take advantage.
Look for uncertainty:
o Across the whole planning horizon
– which lockdown measures will be enforced and where?
– when will the lock down end?
– how may this change consumption and consumer behaviour
– for our products and services?
– for inputs to our products and services?
– what is the post-crisis environment going to look like? Back to ‘normal’ or ‘new normal’?
– next week, next month, the current quarter, next quarter, FY21, FY22
o Across the whole value chain
– supplier capability & capacity including lead times
– inputs and raw materials availability including costs (ForEx impact)
– logistics availability
– internal resource availability – production capacity, key people
– support capability – spares/service parts and expertise (flying an expert in from overseas may not be an option)
Segmenting the customer base to align supply capability with critical demand requirements is going to be a key activity for many organisations where supply capability and capacity are constrained.
Look for unfavourable and favourable impact – history shows that many organisations ignore or can’t see opportunities in times of crisis. If you can’t see opportunities, you may not be ready for them as the crisis unfolds or when it ends.
• Harness the power of your technology for rapid simulation of changing circumstances
o Can you quickly simulate and do material source lookups in your ERP system?
o Can you translate simulations into financial impact?
o Predictive analytics – if you have access to this capability get really clear on the big questions about the future that you want to be able to find answers to.
• Manage anxiety to maintain an adequate view of the future Understand how your people are feeling. Anxiety is a mobiliser, it can be positive in creating action based on current circumstances, but it reduces creative capability and recognition of opportunities.
Resist the temptation to cancel the medium-long term planning process meetings as everyone doubles down on the immediate issues in the short-term horizon.
You need to deliberately, and intentionally allocate time, even if it is just one hour a month, to maintain a view of the medium-long term, at a minimum focusing on the assumptions around recovery post crisis and preparedness to seize the opportunities that are bound to emerge. Even a constantly changing medium/long-term plan is better than none.
• Stick to the roles
As organisations and individuals scramble to deal with the implications of short-term change there is a risk that roles become blurred and communication and integration suffers, resulting in rework, frustration and a drop-in effectiveness.
The processes and roles defined in your S&OP/IBP design should provide clear direction for how everyone needs to ‘play’ and interact when times are tough.
• Prevent process ‘amnesia’
Most companies have been through tough times and crises before. Ensure that you leverage your experience and process knowledge to manage this one. Reflect on success and how the existing S&OP/IBP processes have enabled that. This is proven to create a ‘solution focused mindset’ that can overcome ‘too much dwelling on the problems’, driven by fear and potential ‘paralysis through analysis’.
It is essential to have the corporate courage to not allow ‘I am too busy to worry about the future’ to get in the way of planning beyond the next three months and thinking about how you can effectively leverage the opportunities that may arise.
Think: If you spend all your time treating the symptoms of a fever you will never develop a vaccine.
If you have a robust S&OP/IBP process design for managing the medium to long term and a tight Integrated Tactical Planning (ITP) process for managing the short-term plan and its execution, then crisis processes and teams should not be needed. The difference is that there is now a single, potentially devastating problem that you need to use your S&OP/IBP, and ITP processes to manage.