Tactical Responses With Strategy In Mind

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• Stating the obvious, for most of the industry, this is a Force Majeure event.   Even if you are currently not under a Shelter in Place order, your suppliers are.   We suggest getting with your legal counsel and considering the merits of issuing official Force Majeure notices to your customers.   This will help mitigate any late delivery charges during this crisis. 

•  Use the slowdown to get your MRP system aligned.  Many of you have gone through years of rate increases.   Certain tasks inevitably get pushed off when that happens that cause your system to have problems.   Concrete suggestions are: 1) validate your inventory – both crib and WIP.   The best time to do that is when parts are not moving as quickly.   Wall-to-wall if you can, accelerated cycle count if you can’t.   Don’t forget your product at outside processors.  2) clean up your work orders.   Look for old orders and ask why they aren’t moving.   Look at your split orders and make sure that they aren’t really parts that should be in MRB. 

• Sweep through your MRB crib.   When you are ramping up, it is very difficult for QA to find the time to disposition MRB.   Now is a good time for them to go in and make a definitive determination of scrap or submit for rework/use-as-is.   Note: we do not recommend submitting the request for customer disposition at this point.   Just get the package prepared.   There will be a time in the future when your customer is more likely to have an interest in getting the part.   The problem is that point in time is also probably when it will be hardest for you to find the time to prepare the package.   Hence the value of doing it now.

• Don’t waste the crisis.   Many of these actions will result in needing to write off charges from your books.   Now is the time to do that.   It doesn’t affect your cash and the P&L hit will be lost in the noise of the crisis. 

• Devote a lot of time to coordinating your supplier’s schedules, including processing.   As we come out of this, you can’t rely on your normal supply chain functions.   Just issuing orders will not be effective.   Some suppliers will be ready and will ship.   Others will not. You can only go as fast as your slowest supplier.   You will need to assess the supply base holistically to determine what rate you can achieve.   Otherwise, you will tie up cash unnecessarily when your prepared suppliers ship while you wait on the suppliers that are not ready.   Do not forget your non-production suppliers when you do this. 

•  View customer schedules with skepticism.   The customers are or will be pushing schedules to the right.   If you are delivering to a customer’s min-max, pay more attention to what is actually being issued to WIP than their forecast delivery schedule.   When the ramp up starts, keep in mind that their supply chain, like yours, is compromised. 

There will one day be a ramp up again.   We know the primary task right now is to conserve cash and live to fight another day.   With that in mind, some companies simply won’t be able to devote resources to some of these recommendations but those that can will reap benefits from doing so.