Category Archives: Overcome Corona

Evolving from the crisis: An action plan for quick and sustainable performance

Moderne Produktion

How does your company emerge from crisis mode to productive normal mode quickly? Medicine has developed the concept of rapid recovery. The idea is: during and after a crisis, action must be taken as quickly as possible so that the patient can fully recover. Ambulances equipped as stroke units for the immediate rescue of affected patients, for example, are working based on this principle.

If your company is to return to full performance in production and the market after the crisis, thinking and acting in three different time horizons is expedient:

1. Implement immediate measures to secure subsistence

Use working capital management to optimize capital lockup and do not leave it at a mere reduction. Together with you, the ConMoto experts will consistently identify existing liquidity reserves within your company. A sustainable optimization of the capital lockup will also show you whether you have achieved real process improvements. Our short assessment includes the extent of receivables and requirements for logistics performance. We also run process simulations based on the EFQM model – including an evaluation and benchmarking. The value stream mapping covers representative material flows as well.

In addition, ConMoto uses the Failure Mode and Effect Analysis (FMEA) to identify and avoid risks. Particular attention is now to be paid to hygiene regulations as well as stricter health and safety protection at work: during and after the Corona crisis, different rules apply to production.

2. Secure your supply chain for production and logistics

ConMoto creates a comprehensive risk profile of your supply chain. The resulting risk management is controlled by strategic purchasing whilst being closely connected with production and development. We screen key suppliers and others that have a high priority for your supply chain. The assessment includes environmental and health risks, financial risks as well as strategic and performance risks. All analyses aim at shaping your processes to facilitate production at a competitive cost after a short ramp-up time.

Safe, efficient processes are paramount in ramp-up management. ConMoto relies on the adapted 5S method: Safe, Spotless, Swift, Sensitive, Stable.

3. Implement structural improvements and optimize your products

In order to enhance the long-term competitive position of your company, you need answers to the key strategic questions. ConMoto supports you in the development and implementation of your production strategy by shaping your manufacturing & logistics footprint. The correct vertical integration, the adequate dimensioning of your plants and an effective value creation network are important elements of economic success. In addition, we also address your product strategy: make your product development crisis-proof and benefit from future opportunities. We optimize your product costs with you.

The “new” normal

Roboter in der Fertigung mit Glasabtrennung

At noon today, the Coronavirus Monitor reports 15,000 confirmed people in Germany who are currently suffering from Covid-19. Altogether, 175,000 infected people have been registered since the first incidents in Stockdorf. Nearly 8,000 people died in Germany who were suffering from Covid-19 at the time.

Next Monday, all shops will be re-opened. The gastronomy is allowed to run the beer gardens again in Bavaria. A week later, the restaurants follow. All of us, at least the overwhelming majority, accept the rules and have become accustomed to covering our mouths and noses.

Starting on April 2nd and including today’s post, we have built a diary of 20 articles, which we will summarize for you again.

Also on April 2nd, the economic institutes predicted a decline in the gross domestic product of five to eight percent and estimated the cost at 750 billion euros. It was feared that between 1 and 1.8 million people would be unemployed and an additional six million short-time workers. At this point, ConMoto had already predicted a 12 to 15 percent decline in manufacturing and related services – with a peak in May and June, followed by a recovery period of five months.

Illustration from our post on April 2nd, 2020: GDP and Industry Production in Germany 2020
GDP and Industry Production in Germany 2020

As early as April 3rd, we announced that the Corona crisis will be with us for a long time to come and that we must learn to live with it. At that time, we were already calling for an integrated view of medical, ethical, social and economic issues. We also pointed out very early, that the hospitality and gastronomy sector will be affected above average, including the risk of a third of the businesses becoming insolvent. Unfortunately, the actual development took an even worse turn than initially expected.

Only very late, on May 12th, a joint study by the Ifo Institute and the Helmholtz Centre for Infection Research was completed, which looks at both epidemiological and economic variables as well as the impacts. The conclusions of the study in brief excerpts:

  • “At best, a slight, gradual relaxation of shutdown measures is likely to reduce economic costs without jeopardizing medical objectives.”
  • ”Furthermore, we cannot perceive a conflict between economic and health costs in terms of a strong easing – the costs would be higher in both dimensions.”
  • “Too much easing is therefore not preferable. This kind of policy would allow for more economic output in the short term, but according to our simulation analyses, it would prolong the phase of slight constraints to such an extent that the total costs are going to increase in 2020 and 2021.”

Politicians certainly acted correctly and consistently in the first phase. Exiting the lockdown was understandably much more difficult for policymakers than the decision to initialize the lockdown.

At last, now we may restart! Are we going to restart?

Of course, we restart! But what about the pace – and the costs? Which lessons will we have drawn from the biggest economic crisis of the last almost 100 years?

In recent days, we have learned a great deal about an economic sector and its precarious conditions that affects us all: slaughterhouses and meat processing. Most plants are certainly safe from a hygienic perspective, whereas regarding the spread of epidemics, especially the housing conditions of the predominantly Eastern European workers are not acceptable! The schnitzel from the discounter now incurs follow-up costs that are not included in any price. Occupational health and safety are fundamental things that are non-negotiable! It makes no sense to introduce minimum wages if they are being reduced to an effective four euros per hour by work contracts and gagging leases for inhumane housing.

When the heavy blows are over – also thanks to very effective state aids such as tax deferrals – strategic issues are on the agenda:

What needs to be changed in which way to make us more resilient to such events? How does a production in Europe look that will ensure our prosperity? What are the growth areas? How do we maintain the competitiveness of our products? How are organizations changing? From an economic perspective, we must significantly reduce the cost of infrastructure in order to avoid tax increases

We wish you the best of success with your activities and would be pleased to accompany you on your journey.

Accelerated consolidation in the automotive industry

Nicht abgeholte Neuwagen auf einem Werksparkplatz

The Corona crisis is accelerating the upheaval in the automotive industry because the sales gap creates additional pressure. As a result, consolidation will proceed faster than has been apparent up to now. This applies especially to small and medium-sized suppliers, which have long had far too little return on investment. The declines in sales have left them partly in the red. This has two very different effects: OEMs organize acquisitions by strong partners for strategically important products. And investors specialized in difficult cases are going bargain hunting. Of course, Chinese companies play a major role in this.

A current example also shows how active Chinese companies are: Daimler Truck AG and the Volvo Group are setting up a joint venture to develop hydrogen drives for commercial vehicles. The two partners each hold 50 percent of the new company, and Volvo buys in with 600 million euros. Volvo and the Chinese electric car manufacturer Geely have the same owner. These two companies are now planning a merger. Geely, on the other hand, holds 9.7 percent of Daimler shares through its investment company “Tenaciou3”. At the same time, Daimler and Geely have been setting up a joint venture for Smart for about a year now. As from 2022, the Smart will be produced as an electric car in China. Unlike BMW and VW, Daimler does not have a domestic anchor shareholder in Germany.

Changes always lead to market adjustments

A dramatic upheaval is also emerging in the car trade. Trading portals that take the problems, in other words: the cars, out of the yards of brick-and-mortar retailers, will gain as much significant market share as direct marketing. The car dealers are virtually caught in the vice: customers are postponing major investments and at the same time, there is a threat of competition from new players in the seller market. Smaller retailers are under pressure from online car portals and large retailers that give significant discounts.

Upheavals have always led to market shakeouts. Now it is important to prepare your own company for the future – whether you are working in automotive production or automotive sales. The end-to-end processes from order intake to delivery to the customer must be well aligned. High speed paired with flexibility and efficiency is crucial. The products must be competitive in design, function and price. Innovation becomes a decisive competitive advantage. Competitive prices require optimal costs. No matter how good a production system is, it still cannot compensate for the disadvantages that have already been “built in” by design.

Put everything to the test. Times are not going to be easy.

The shutdown is over!

Shopping mit Maske wieder erlaubt

Politicians have cleared the field for the economy – conditionally, of course. The final decisions are to be made regionally. Wise and quick decisions and actions are important now to minimize material damage.

Since Monday, ConMoto has been sensing that our clients are preparing for the ramp-up. The focal topics are:

  • Re-engineering of the processes of the indirect areas. These areas need to be resized considering the expected competitive situation. To reduce the risk of infection, shift operation and/or remote work must be organized.
  • Clocking of production. The new distancing regulations are changing the production systems. One-way traffic must be set up as free of crossings as possible.
  • The operation of the factory canteen and staff catering must be organized.
  • Shift start and change must be handled contact-free or at least low-contact.
  • Delivery and shipping must be compliant whilst remaining both economical and reliable.

In addition to these organisational priorities, costs and prices must be thoroughly examined.

Overall, the entire ramp-up must be coordinated with suppliers and customers. Communication with all involved parties is particularly important for this coordination. The companies that were already “under special observation” of their customers before the shutdown will now have to solve old problems very quickly. Otherwise, the redesign of the supply chains can result in a fast supplier change – especially in the automotive industry. This will, of course, also generate new opportunities.

Take your chance to enter new markets. This requires quick reactions to requests. According to ConMoto’s observations, many companies often fail in this because there is not enough qualified capacity for the required calculation. The same applies to the short-term necessity of new supply sources and suppliers, e.g. when suppliers from abroad are not yet able to resume production.

What really helps the economy and companies now

Infrastruktur

Currently, the whole economy and individual companies are experiencing a unique constellation: a supply shock coupled with a demand shock. Production is suspended because the supply chains are disrupted. At the same time, there is no demand because consumers do not buy due to income losses. Also, they do not know how their personal economic situation is developing. The online retailer Zalando does not have a record turnover. They suffer from the lack of demand.

The automotive sector is calling for a scrappage incentive. We know from 2009 that this is (at best) a straw fire. In the short term, it even prevents purchases, because many potential customers are now waiting for the bonus. If purchase premiums are useful: Why are there no incentives for buying kitchens, buying underwear, or buying a schnitzel to help the troubled restaurant owner? And who should pay for these incentives? All of us, of course.

Investment incentives instead of consumer incentives

Consumption incentives are tempting, but their effect is doubtful. Promoting investment is certainly more effective in the long term: Investments in infrastructure, production facilities and private investments that serve the environment. There are considerable reserves in public and operational infrastructure investments. By comparing the price development for cars, consumer goods and similar items with the costs of construction and other infrastructure, it becomes clear quickly that infrastructure has become constantly more expensive, whereas most everyday items cost not only less in terms of inflation, but even in total. The findings of product cost reduction must also be incorporated into road and bridge construction as well as into production infrastructure. Why are methods such as standardization and value analysis not used there? This is particularly important with respect to the considerable public investment needs in Germany. In the municipal sector alone, they do sum up to EUR 600 per inhabitant per year.

What really helps the economy and companies now

ConMoto presented its approach to infrastructure investment savings at the Infrastructure Summit back in 2012. We have applied these methods in bridge construction for and with a very large company that invests significant amounts in infrastructure. With great success! We have standardized and logistically optimized the construction sites for a company that builds poles for power lines. With great success!

Politicians have rightly pointed out time and again in the recent weeks that our hospitals have been better equipped for the crisis than in many neighbouring countries. Nevertheless, the number of intensive care beds is still to be increased to be on the safe side. Correct. But why are the costs so high? We should strive to get more necessary infrastructure with the same quality from every euro, be it in a hospital or in an industrial company. Whether it’s public infrastructure or that of a private company, the solution is: plan, shop, create and maintain more efficiently.

What really helps the economy and companies now

Realizing potentials in organization and processes

During the crisis, private public companies have been helping the public sector functionally with purchasing skills. Very good! Now, the public sector needs qualified purchasing at all levels. This brings us to the important question of whether administrations at all levels are sufficiently prepared for future tasks. Our experience with similar organizations shows that personal qualifications and motivation are absolutely comparable to successful industrial companies. But in organization and processes, there are reserves in public and private companies.

It would be desirable to work on these issues. We need a strong and functioning state. This is what the last few weeks have shown very clearly: Sustainable investments instead of short-term straw fires. And targeted, cost-consciously used capital – that is the right way to go from ConMoto’s point of view.

Corona and the costs of the crisis

Internationales Geld

Professor Jens Südekum teaches International Economics at the Heinrich Heine University in Düsseldorf, Germany. He is a member of the Scientific Advisory Board at the German Federal Ministry of Economics and Energy (BMWi) and of numerous research institutions. In particular, the professor is concentrating his studies on the impact of globalisation on the world of work. Now he has commented on the cost of the Corona pandemic in Germany: it is 60 euros per day per German citizen. That sums up to 5 billion euros on every calendar day, or 150 billion euros a month. Südekum also says that “with uncontrolled relaxation of measures, a second wave and a new lockdown in the summer, everything could become much more expensive.”

Who pays this huge sum? In the end, all of us and the companies in Germany – by the enormously growing public debt. A company that no longer exists in the future cannot repay its debts! This results in the elementary task of all people involved in companies and of their management to do everything possible to master this crisis. Policymakers will now very quickly ease restrictions, given the continuing improvement in numbers. Afterwards, the ball is in the businesses’ field. Our clients start preparations intensively. It does not function smoothly always and everywhere. Ramping up a company after a shutdown is complex. And the reinitialization of international supply chains is even more complex.

In addition to all production and logistics requirements, complete and utter occupational health and safety must be guaranteed. If this does not happen, production must be stopped again, and further costs will incur. Due to the complexity and often, also the sheer number of tasks, even very large companies with their numerous staff are overwhelmed. This is even more applicable for medium-sized companies. Obviously, it is better to get it right the first time. Corrections take time and cost money. Money you need to keep together now! We are ready to support you. We provide custom-made programs composed of reliable elements that can be utilized immediately and effectively.

For a limited period until July 30th, we offer these programmes at special prices. Of course, we will be pleased to make you an individual offer.

Becoming productive again – now!

Ingenieur vor Produktionsmaschine

In May, the production in many companies will ramp-up again. ConMoto’s consultants accompany this process with their expertise. For the tough and competitive months to come, every company needs a short- to medium-term strategy – as well as strong, feasible plans. Due to the great uncertainty, it makes sense to develop and calculate scenarios for the performance of your business. These scenarios should include the following objectives:

  1. Liquidity protection
  2. Value creation ramp-up, considering the Corona regulations
  3. Stabilization of supply chains
  4. Customer supply according to strategic priorities and market-oriented pricing
  5. Sustainable stabilization and continuous improvement of competitiveness after the ramp-up

In order to efficiently implement the resulting goals and tasks, ConMoto recommends to staff your internal steering board across functions and hierarchies. Pragmatic methods, such as the FMEA and the Quality Function Deployment (QFD), help to work through your action plan. Do not forget the employees and their representatives. Not all measures will be popular. Inform your employees as early as possible to prevent resistance and any possible friction losses. You want to proceed according to the five phases of the problem-solving cycle:

  • Identification: describe the problem
  • Analysis: causes/quantity structure
  • Planning: solutions/measures
  • Introduction: implementing measures
  • Review: measure success

The ConMoto consultants contribute expertise, methodological knowledge and evaluation from a neutral perspective. Our approach creates transparency, prioritizes tasks and ensures rapid implementation successes that motivate your employees.

The facts and evolving from the crisis

Maske tragen wird zur Pflicht während der Coronakrise

(English translation in progress)

Die tägliche Bekanntgabe des Reproduktionswerts durch das Robert-Koch-Institut trägt mittlerweile eher zur Verwirrung als zu Klarheit bei. Man fragt sich, ob es sich um Schätzungen oder Berechnungen handelt. Bei den neuen Medienstars, den Virologen, gewinnt man zunehmend den Eindruck, dass es vor allem darum geht, Aufmerksamkeit zu erregen. Der öffentliche Streit dieser Experten verunsichert eine ohnehin verängstigte Bevölkerung. Spekulationen und Hypothesen statt Erkenntnis und Methoden.

Wir verweisen erneut auf unseren Beitrag vom 2. April. Bereits damals haben wir eine sehr valide Aussage zum Ausmaß des zu erwartenden Einbruchs der Wirtschaft gemacht.

Was sind die Fakten?

  1. Eine Durchseuchung der Bevölkerung bis zur sogenannten Herdenimmunität würde je nach Ausbreitungsgeschwindigkeit zwei bis drei Jahre dauern.
  2. Ein zugelassener Impfstoff ist kurzfristig nicht vorhanden.
  3. Bei Medikamenten gibt es hoffnungsvolle Ansätze aber noch kein konkretes Ergebnis.
  4. Die einzig bekannten wirksamen Maßnahmen sind Hygiene, Abstand, Mund- und Nasenmaske.
  5. Die Arbeitslosigkeit wird durch Kurzarbeit vorübergehend abgemildert, steigt insgesamt aber sprunghaft. Für Deutschland meldet die Bundesagentur für Arbeit von März auf April einen Anstieg der Arbeitslosenzahl um 308.000 auf, 2,644 Millionen. Im März und bis zum 26. April gingen darüber hinaus 751.000 Anzeigen für Kurzarbeit ein für insgesamt bis zu 10,1 Millionen Personen. Das heißt aber nicht, dass diese Menschen auch alle kurzarbeiten werden. Diese Zahl übersteigt aber um ein Vielfaches die Anzeigen während der Großen Rezession 2008/2009. Im gesamten „Krisenjahr“ 2009 gab es lediglich Anzeigen für 3,3 Millionen. Zum Vergleich: In den USA haben sich in den vergangenen sechs Wochen 30 Millionen Menschen arbeitslos gemeldet.
  6. Deutschland steht vor der größten Pleitewelle seit der Weltwirtschaftskrise in den 1920er Jahren.

Der Weg aus der Krise

Es gibt nur einen Weg aus der Krise: Einen geordneten, aber zügigen, Ausstieg aus dem Shutdown. Das kann nur verantwortet werden, wenn alle bekannten Regeln zuverlässig angewendet und nachhaltig eingehalten werden.

Arbeitsschutz bekommt hier eine zusätzliche, existenzielle Bedeutung. Es geht um die Rettung von Arbeitsplätzen und Unternehmen. Es geht um die Rettung unseres Wirtschaftssystems!

Bundestagspräsident Wolfgang Schäuble sagt völlig zu Recht, dass staatliche Hilfe auf Dauer Umsatz nicht ersetzen kann. Das derzeitige Vorgehen bringt die Staatsverschuldung auf über 80 Prozent des Bruttoinlandsproduktes. Diese mehr als 700 Milliarden Euro zusätzlicher Schulden werden am Ende von den Unternehmen gemacht, die die Steuern und Sozialabgaben nicht abführen oder sogar direkte Unterstützung in Anspruch nehmen. Dieses Geld muss ja zurückgezahlt werden. Der Anteil der produzierenden Wirtschaft am BIP beträgt rund 18 Prozent, bzw. etwa 600 Milliarden Euro. Der Anteil an der produzierenden Wirtschaft am Schuldenanstieg von 700 Milliarden ist deutlich überproportional. Bei 25 Prozent wären es 175 Milliarden Euro, bei 30 Prozent bereits mehr als 200 Milliarden Euro! Wir sprechen hier über neue Schulden in der Größenordnung von mehr als 25 Prozent der gesamten Wirtschaftsleistung in einem Jahr. Und das bei durchschnittlich völlig unzureichender Eigenkapitalausstattung und Umsatzrendite.

Jetzt auf den Wettbewerb nach der Krise vorbereiten

Der Wettbewerb nach der Krise wird dramatisch. Unternehmen, die nur noch wegen der externen Finanzierung existieren, werden mit allen Mitteln, sprich Kampfpreisen, um ihre Existenz ringen. Darauf müssen wir uns alle einstellen. Effizienz und Effektivität sind wichtiger denn je!

  • Gehen Sie an die Kosten ihrer Produkte, hier stecken erhebliche Potentiale.
  • Verbessern Sie Ihre Beschaffung. Senken Sie die Kosten bei größerer Robustheit ihrer Versorgungsketten.
  • Steigern Sie die Produktivität ihrer Wertschöpfung.
  • Hinterfragen Sie konsequent, wofür der Kunde bezahlt und wofür nicht.
  • Verkürzen Sie die Entwicklungszeiten.
  • Optimieren Sie ihren Vertrieb und ihre Logistik.

Und last but not least: sichern sie den Hochlauf!

Dangers during the crisis: Obligations and tasks of the management

Gefahr in der Krise: Pflichten und Aufgaben der Geschäftsführung

Time and again we hear that the strict liability for managing directors is suspended during the Corona crisis. This is a misconception that can have serious consequences. ConMoto does not provide legal advice. Still, it is necessary and sensible from an economic point of view to continuously obtain clarity about the risk situation of your company.

We strongly recommend you to create alternative business scenarios for the company: with and without the effects of the Corona crisis. Thus, each person responsible can keep track of the current situation for themselves and is also always verifiable. Government contributions and aid are, of course, extremely important in the context of falling turnover. But of course, they must be repaid later. Therefore, they do increase the debt before repayment.

Making decisions under uncertainty is characteristic of these times. And it is precisely for this reason, that every effort should be made to reduce the uncertainty created from the outside as much as possible. The best way to achieve this is by transparency – and the topicality of your key figures. Currently, you need an overview of your value streams more than ever. A value stream analysis across your entire supply chain provides clarity. With our reliable methods, we show you not only the risks. Moreover, we support you in avoiding or at least minimizing them. We will gladly compose a program at Corona conditions that is optimized according to your requirements.

The debates intensify

Die Diskussion wird schärfer

Current news reports reflect a worsening situation:

  • The EU Commission approves further state aids. The EU Commissioner for Competition, Margrethe Vestager, says the EU endeavors with its member states to support businesses.
  • Germany is about to reach its limits. The Ifo Institute forecasts that the economy will contract by 12.2 percent in the second quarter, based on surveys of 8,800 companies.
  • The President of the German Bundestag, Wolfgang Schäuble, says: “The state cannot compensate for turnover in the long run.” This was not a long-term solution.

These are just three examples. We do also consider the particular importance of Wolfgang Schäuble’s statements on Fundamental Rights issues: “Fundamental Rights are mutually restrictive. If there is any absolute value in our Basic Law, it is human dignity. It is inviolable. But it does not rule out the possibility that we must die.” The Chairman of the German Ethics Council, Peter Dabrock, and the former constitutional judge Udo di Fabio have expressed similar views. di Fabio considers the current measures to be constitutional, but also says: “We have to live with certain socially appropriate risks. Otherwise, we would have to completely ban road traffic due to 3,000 deaths on the roads. The constitutional state always holds the balance between freedom and security, and it balances in such a way that accountability is given.”

We need a credible plan

In this context, we refer to an earlier article on our Corona page: the pandemic is now followed by the pancession. Even then, we expected a decline of 10 to 15 percent for the industry in Germany in 2020. This is virtually unavoidable but can still exacerbate if the shutdown in May is not significantly reduced. On April 2nd, we have already predicted the insolvency of 30 percent of the restaurants. Retail is struggling to survive. People’s consumer sentiment has fallen to a minimum, with the Ifo Institute measuring historic lows of its indices. We need a credible, confident plan now! Of course, this means taking risks. But we do so by getting in the car in the morning – or going to a hospital for treatment with more than 20,000 people dying from hospital germs each year. It is important that all risks are made transparent and that everyone is sticking to the measures recognised as effective: hygiene, distance, masks!

In your company, you must ensure this as well. Often, the devil is in the details here. The virus can only be combated with coordinated and targeted measures. We need the Corona app now. We need reliable distances and low-contact collaboration in shops and businesses, where contact-free work is not possible. Geriatric care does not happen from the home office. But caring for the elderly is systemically important work. Both public and private employers have a duty to protect their employees.

Flexible working time rules prevent infections

We need new working time rules for the coming months. If work is allowed on weekends without exemptions, the attendance density is reduced by more than 25 percent. Therefore, flexible working time models help to reduce infections. That companies enjoy great advantages from already having increased the flexibility of their production becomes even clearer now. The flexibility of production creates room for maneuvers allowing for increased distances – and thus, the reduced risk of infection.

It is true that we must live with Corona for even longer. Therefore, we must prepare all systems to pave the way. Here, too, the experiences from the 1990s apply: the fast ones will be the winners, not automatically the big ones. We wish you the best of success with the examination, and if necessary, the re-organization of your value creation system! Of course, we would very gladly support you.

Link in this article: https://www.conmoto.de/en/setting-priorities-now/