Covid Economics: 3 Ways OEMs Can Reduce Margin Erosion
by 
Brian Obinna Obodeze
As the spread of the coronavirus outbreak continues on a meteoric rise, and its toll on human health mounts, the economic effects of the crisis are lining up. Businesses are tasked with several issues to address – guaranteeing the safety of their workers, yet ascertaining operational viability which is now coming under strain given the recent global developments.
Short-term responses are being set up by business owners to manage the crisis. The focus must now shift to medium and long-term responses, the necessary preparation needed to thrive throughout this period, and the mental readiness that would see the company to the other side.
Here are some suggestions on mitigating the impact of the coronavirus, if an outright stifling would be a stretch.
Accessing all inventories
Businesses should consider an estimation of all available inventory to gain an insight into the worth residing in their value chain. This estimation should be arranged alongside a transparency chain exercise that would be discussed below. There are quite a several sub-sections to be considered during this procedure – products held in the warehouse subjected to testing and quality control; supplies with customers reviewed to ascertain it poses no health risk or possibly recalled; speeding up the arrival of products in transit, especially if from high-risk geographical zones. Overall, the goal is to ascertain that the theoretical value of inventory is indeed realistic.
Supply chain transparency
Transparency is a vital word for staying above board economically. First, businesses must work towards a transparent view of their different supply levels. Identification of suppliers who operate from locked-down or critical zones, during which suppliers have to be forthcoming with data providing the company’s exposure to health threats, should mark the beginning of business mapping. Businesses must determine, by analyzing their supply network, which suppliers, products, and sites are at risk, extracting useful information to highlight most critical suppliers, thus minimizing the probabilities of hazardous purchase. This allows them to be ahead of the pack to secure contained inventory.
Optimizing production
Employee safety lies at the heart of this process. Engaging special analytics data, businesses should determine the parts of the production and distribution processes subject to optimization while considering the implications financially and operationally. Employees require proven trust to commit themselves to work conditions at a time when home and remote working are the order of the day, and clear communication needs to be established to notify all parties of the infection risks, the precautions necessary for the continuance of work, and the option to go remote. Businesses should highlight the effects of an extended shutdown of operations based on present operational capacities – available inventory and numerical workforce strength are vital factors to consider. Using operational capacity requires an analysis to determine the possibilities of building a team that cuts across different functions, highlighting products offering the highest values, based on present and future projections and earning potentials. Priority should be given to such products, so long the health risk is minimized.
Funds management
Businesses are prone to projecting and clinging on to optimism, but a pragmatic approach is essential for subsidizing costs and expenses for the considerable future. With slow sales and strained supplies possibly continuing, the pressure to break even or stay afloat mounts. Businesses will need to engage all probable forecasting to highlight the foreseeable financial future, on monthly as well as daily bases.
Supply-chain managers can highlight the causes of infrequent purchases, draft up plans to minimize capital costs such as on logistics. This could be by partnering with brands that provide these services to create win-win scenarios for both parties involved, allowing businesses to divert capital without tampering with customer service. The inventory management system could be subjected to review and plans created to pitch sales of high-value products while minimizing the purchase of nonessential goods which do not hold a significant contribution to the infusion of cash into the business.
A resilient outlook
Perhaps more than any other factor, businesses should possess an overall positive view of the unprecedented coronavirus crisis, and a sustained preparation for the aftermath of the crisis. Strategies engaged to banter the dip in business should be modified and introduced into daily operations. In time, analysis of the vulnerabilities and weaknesses of companies should be carried out to pre-empt last-minute preparations toward events that could generate the same impact as the coronavirus outbreak. These reviews could also suggest major opportunities and partnerships accessible to businesses that once were not under consideration.
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