Practical steps for responding to the coronavirus crisis
The coronavirus (COVID-19) outbreak is causing widespread concern and economic hardship for consumers, businesses and communities across the globe.
As the pandemic disrupts business as usual and throws the economic outlook into uncertainty, the automotive industry is on the front line. Some of the most affected regions are major production hubs and home to key links in the sector’s global supply chain. Typical contingency plans help enable operational effectiveness following events like natural disasters, cyber incidents and power outages, among others. They don’t generally take into account the widespread quarantines, extended school closures and travel restrictions that are being instituted in countries around the world to help stem the spread of the virus. With production shutdowns taking effect, automotive companies need to remain focused and nimble to better navigate this crisis.
The situation is fast moving with widespread effects. That’s why we’ve prepared this guidance which can help automotive companies to adapt the 'new normal'.
How Can We Navigate Through This Turbulence?
In order survive and strengthen themselves, automotive companies can have a phase wise plan in line with demand recovery, covering: strategic response, managing liquidity, workforce, supply chain and IT readiness.
There are many issues the automotive sector might face during COVID-19.
- The outbreak and resulting economic uncertainty may likely affect consumer demand.
- The motorbike market also struggles due to new options (electric vehicles) and saturation.
- There is also a temporary decline of four-wheeler market due to COVID-19 and increase in uptake of used automobiles.
Steps to consider:
- Careful scenario planning is crucial so automotive companies can sense and respond quickly. Plans should include customer segments, products and launches, channels and ecosystems.
- Being able to sense demand signals and prioritise target customer segments will help companies invest effectively while leveraging digital sales and promotion channels to enhance engagement with customers.
Visibility is key to managing liquidity.
By knowing what your cash position and cash flows are, you can prepare for, respond to and ultimately emerge stronger from this ‘new normal’.
Steps to consider:
- Take step by step to plan the “what, how and when"
- Implementation of a cash conservation and liquidity management office gives better control of the organisation’s cash position
- Develop a dynamic, rolling 13-week Short-Term Cash flow Forecast and ongoing process
Employees’ welfare is the top concern for corporate leaders.
A significant share of those people do jobs in factories where components and vehicles are assembled and so cannot be performed remotely. If infections spread and a large percentage of the workforce gets sick, it could drastically reduce production capacity. That means keeping the big picture — a safe, healthy workforce — in focus may also be what’s right for the bottom line.
To prepare for the long haul, here are some key focused areas:
- Remote working enablement and compliance
- Build a business continuity planning
- Provide continuous communication and connect
- Cost and productivity
- Virtual capability building
- Transitions management
- Urgently ‘rewire’ HR policies for relevance
- Employee health and wellness
COVID-19 urges automotive companies to rethink their supply chain model.
The crisis will continue to be very disruptive for supply chains due to decreasing demands and unpredictable buying behavior, supply delays or cancellations, supply bankruptcy, delayed deliveries, limited workforce or shut downs, etc...
A few key things to consider during this period:
- Have you established a cross functional task force?
- Have you performed an operational and financial risk assessment across the supply chain and supporting business functions and updated your contingency plans?
- Have you established a short-, mid- and long-term mitigation plan for demand, supply and workforce?
- Have you conducted scenario planning exercises to understand the operational implications, both financial and non-financial, of various scenarios?
- Have you set up a temporary inventory recovery and evaluation process?
- Have you leveraged the latest tools, technologies and data analytics to create ongoing transparency as rapidly as possible?
- Do you have track and trace solutions in place at your manufacturing sites or delivery centres?
- Have you evaluated strategies for alternative sourcing, including the impact of tariffs to cost?
- Have you accessed governmental support and cross industry synergies and partnerships?
- Are you preparing for the up-swing? – “History shows that SC struggle most with the up-swing”
Automotive companies are now embracing digital transformation at an accelerated pace.
Amidst the unknown variables of COVID-19 and the new reality, one thing is certain: organisations are now embracing digital transformation in everything they do at an accelerated pace. And automotive company is not an exception.
More than before, businesses need to create a differentiated experience for their customers in the digital marketplace. As the world moves into adopting new ways of virtual working, cybersecurity, digital finance, data optimisation, digital upskilling and transformation are now key pillars that need to be embedded across organisations to better enable both businesses and their clients to work together and co-create solutions.
Key focused areas:
- Target 'Work from home' workforce and functions
- IT and security tools
- IT and cyber security governance
- Hardware and data centres
- Software and licensing
- Bandwidth sizing and data backup
- Cyber security considerations
- Remote working ways
How PwC can help
- In short term
- In the long term
In short term
- Review your workforce and travel
- Identify potential points of failure
- Evaluate the supply chain
- Revisit your crisis and continuity plans
- Use scenario analysis
- Get communication right
- Manage risks
In the long term
Strategy
- Create independent scalable business units with resiliency for future
- Leverage low valuation to acquire capabilities for future through M&A
- Identify low performing business and assets to sell for improved liquidity
- Develop new products considering new customers (tier-II & III), health, hygiene and connectivity needs
Front End:
- Shared mobility concerns can open up increased 2W, PV & used vehicle sales and pay-per-use model
- Concerns to visit showroom will lead to online! digital sales and marketing processes (manpower & OH savings)
- Network footprint and showroom sizes revaluated considering dealer viability
- Vehicles serviced and sanitized at door step to bring in hygiene transparency; reduced service center footprint
Supply Chain and Operations:
- Consider financial viability for future decide on ops restructuring, leadership and investments on hold
- Build digital thread across Ops. for faster decisions, lower human intervention, financial loss preemption, remote support
- Redesign supply base (on/off-shore, critical parts, alternative matl.) with real-time risk profiling (e.g. integrate blockchain)
- Reduced opex (e.g. lease, energy, supplies) considering optimized mfg. (lower prodn.) / office space (remote work)
Workforce:
- Restructure HR policies (e.g. health, remote working, travel, visitors, immigration, leaves, pay) through crisis learning
- Revisit labor union contracts (e.g. pay, leaves, benefits) for shared risk impact ownership for collaborative crisis mgmt
- Savings through shared services (legal, tax, finance, admin)
- Build scalable IT backbone for online and remote needs
- Convince need for multi-skilling and conduct relevant training programs
(e.g. coding)
We look at all components in the business, including the strategy, capabilities, cost and organisational structure and leveraging a standardised approach to support you in your journey to adapt to and thrive in the ‘new normal’.
Our approach
Example of PwC’s standardised approach to enable companies to design a ‘resilient supply chain’
