An operational response to the coronavirus crisis

An operational response to the coronavirus crisis

March 27, 2020

Surviving Covid-19 and preparing for recovery

The coronavirus pandemic is a challenge neither governments nor companies around the world anticipated or were prepared for, a rare black swan event. On the corporate level, Covid-19 has quickly turned into an existential threat for many. But there are ways through and out of the crisis. From helping secure an immediate survival to quickly and efficiently assisting with a recovery program for the ramp-up of business once the crisis has peaked, Roland Berger knows what works and how to create an impact when failure is not an option.

Our approach helps companies get through the crisis and return to profitability.
Our approach helps companies get through the crisis and return to profitability.

There are just three certainties for companies and organizations when it comes to dealing with the coronavirus. The first one is that the pandemic curve will come to its peak and the dynamics of the curve will reverse again. A second aspect is that the corona pandemic will attack organizations and industries with different degrees of intensity. And finally, the fact that a crisis is always followed by a redistribution of market share. Therefore, companies must make sure that they survive the tough phase before the peak. Equally, they must be able to ramp up their recovery program quickly and efficiently at the reversal point of the crisis, so they can switch to growth as soon as possible and take strategic advantages out of that. This requires the protection of critical resources – especially talent and competitive knowledge, strategic partners in the value chain and supply sources, essential production and logistics capacities and, of course, enough liquidity to remain capable of operating.

Stop the bleeding through cost compression and quick wins

In exceptional situations, rapid action is crucial. The extreme dynamics of the Covid-19 crisis, in which supply shocks and demand shocks are combined with massive psychological and political effects, make it necessary to stop non-essential expenditures quickly and radically and to consistently exploit the possible one-off effects. The Roland Berger Spend Compression approach will "stop the bleeding" through the application of our holistic savings formula: Needs x Specs x Quantity x Price = Maximized savings. It is an ad hoc program that, through a bundle of concentrated and aggressive measures, allows indirect costs, project costs and CAPEX to be reduced by 15 to 30 percent within a very short time, depending on the industry, and has an immediate P&L impact. We use a mechanism based on eight central drivers to achieve a sustainable reduction in external spend over a period of 3-9 months. All effective savings result in immediate budget cuts to safeguard the P&L and cash effects – fast and sustainable.

Additionally, to exploit possible one-off effects across all direct and indirect cost areas, our "quick wins program" can help your company generate savings of 3 to 6 percent within just 12 weeks. Roland Berger's unique approach to realizing quick wins is on the one hand based on applying the classic levers of price and quantity. On the other hand, we combine a holistic set of classic and highly innovative savings levers, extensive industry knowledge, risk management tactics and AI-empowered digital tools with a systematic and differentiated approach to their application.

Decelerate and secure the value chain through standby mode

The extensive shutdown of global production requires a synchronized and extremely well-orchestrated deceleration of value chains. Companies are faced with the demanding task of resolutely reducing costs without irretrievably disrupting the supply networks. It is therefore essential to put the supply chains into a standby mode and to ensure the vital functions and survival of strategic suppliers.

To achieve this, it is crucial to obtain full transparency of the suppliers' situation as quickly as possible, to identify the most serious risks, to design a sustainable plan for the standby mode and to initiate support measures where urgent action is required. This involves classic instruments such as loans, guarantees or the optimization of payment terms. In the current situation, however, these approaches quickly reach their limits. This is because the financial resources and cash flow of OEMs are also under massive pressure.

Currently, several public support initiatives (e.g. state guarantees and support programs) are being set up at transnational, national and regional level. The dynamics associated with this will most likely lead to overload in processing and considerable waiting times, with the result that timely, efficient and effective application may well be critical for survival. Our Operations experts are working hand in hand with our Restructuring and Performance Transformation team to support companies not only with restructuring and corporate finance approaches but also with best practices in procurement, production and supply chain management.

Returning to Growth: How we can support your recovery phase

Roland Berger's global Operations team will continue to support companies with effective levers during this crucial recovery phase, linking them with activities in other functions within supply chain management, service, R&D or production. We combine sustainable cost-oriented measures such as procurement and supply chain cost reduction to ensure the liquidity needed for recovery. And we rely on our expertise as a leading global performance expert to ensure the high intensity and effectiveness of the ramp-up through comprehensive efficiency programs in the areas of operations efficiency, engineering efficiency and plant performance boost.

Our key measures to help you survive the crisis and return to profitability
1. Spend Compression

A radical way to immediately slash external spending for indirect material/CAPEX of up to 30 percent. Eight elements creating a new "spin". For more information please contact Marcus Schüller or Thomas Totzeck

2. Procurement Quick Wins

Realizing quick wins on the direct and indirect material spend, which typically accounts for 40-75 percent of COGS - Thus, THE profit improvement lever. For more information please contact Oliver Knapp or Sven Marlinghaus

3. Value Chain Stand-by

Longer exposure to crisis profitability and liquidity challenges will force companies to take deeper ramp-down actions. Effective ramp-downs can "hibernate" up to 50-70% of the monthly cost structure, while sustaining critical operations. For more information please contact Jochen Gleisberg or Oliver Knapp .

4. Value Chain Recovery & Ramp-up

Ending the hibernation as the crisis ebbs and preparing readiness of the value chain is crucial for all companies. Assessing the state of hibernation along the entire value chain enables a tailor-made program of measures for Day X preparation. For more information please contact Jochen Gleisberg or Oliver Knapp

5. Operations Efficiency

An integrated approach to optimize material, structural and personnel cost across Engineering, Procurement, Production & SCM. For more information please contact Jochen Gleisberg or Christian Böhler

6. Engineering Efficiency

Get familiar with our framework to optimize the engineering function within the industrial sector. Our approach realizes up to 15 - 25% of efficiency gains. For more information please contact Jochen Gleisberg or Carsten Bock

7. Supply Chain Cost Reduction

Your Supply Chain is the heartbeat of your company – the current situation of lock-downs with collapsing global production and delivery chains poses an unprecedented challenge for Supply Chain & Logistics management. No matter if a company is forced to shut down or drastically reduce production, or actually profits from the crisis through a rise in demand: cost controlling the inbound value chain is utterly crucial to a company's survival. With our effective toolset of slashing Supply Chain & Logistics cost, we support the effort of avoiding and expunging exorbitant cost positions in your supply chain. Talk to our experts today to instantly minimize your cash drain! For more information please contact Sebastian Feldmann or Michael Pleuger

8. Service Profitability

Professionalized Service undoubtedly is a huge profit driver - and already key to sustainable success. But there is a double-digit savings potential that lies within current service / AS operations. We can tackle these costs with our unique 360° approach. For more information please contact Sebastian Feldmann or Simon Tonat

red background
White paper

How a company's operations can navigate the Coronavirus crisis


Our bundle of measures help companies radically reduce spend in a crisis and quickly return to profitability when it ends.

Published April 2020. Available in
Subscribe now!

Further Readings