Stabilizing Manufacturing Operations in Response to COVID-19

The human toll of COVID-19, the disease caused by the novel coronavirus, is staggering and now spreading quickly across the globe. Even as they cope with the human dimensions, manufacturing executives must make rapid decisions in an effort to stabilize their operations. Our colleagues have already offered insights on the implications for supply chains and how companies can respond. Additionally, BCG has launched a web page that provides insights on the pandemic’s implications for a wide range of business decisions. Here, we focus on factory operations. 

Unprecedented Impact

To date, the evolution of factory shutdowns and re-openings has followed the evolution of COVID-19 cases in a given region. In Asia, where confirmed cases have already peaked, more than 80% of automotive plants have reopened. In contrast, nearly all plants in Europe and more than two-thirds of plants in the US are closed as these regions climb the steepest phase of the infection curve. The losses in terms of profits, revenues, and units are unprecedented. (See Exhibit 1.)

A Three-Phase Lockdown Cycle

In coping with COVID-19’s impact as infections in their region increase, global manufacturers transition through three phases: 

1. Pre-Lockdown: Contain Impact. Initially, manufacturers adjust operations and processes to minimize contagion and overall impact on the production workforce.
2. In-Lockdown: Stabilize Operations. Once the lockdown begins, manufacturers seek to maintain production at sufficient yet sustainable levels for workforce viability. As shown above, many companies need to fully close their factories. Those companies need to think about how to best deal with the production workforce. It may be possible to reassign some workers to maintenance tasks. In some countries, governmental assistance programs may be available to relieve cash pressure.
3. Post-Lockdown: Ramp-Up Post-Crisis. After the crisis subsides, manufacturers return production to pre-crisis levels or higher to capture pent-up demand. A strong continued and dynamic response is required during this phase to avoid a second lockdown.

In countries across the globe, companies are mainly in the pre-lockdown or in-lockdown phases today. Only in China, Japan, and South Korea have companies emerged into the post-lockdown phase. (See Exhibit 2.)

Five Workstreams for Stabilization

To enter and transition through these phases, a manufacturer must set up a rapid-response team with clear decision rights to take control of the situation. It needs to create transparency along value streams by monitoring operational and financial KPIs in real time. Scenario updates and decision-making should be based on the dynamics of each lockdown phase. It is also critical to establish priorities for activities in each workstream.

The effort to stabilize operations should occur in five workstreams, each having a distinct set of imperatives:

1. Take care of your people. Update the hygiene program to ensure a safe work environment on site. Implement social-distancing strategies to protect your workforce when traveling from door-to-door and on-site. Monitor employees' morale and performance during the crisis period and plan for relief measures. Additionally, understand the availability of employees and potential staffing throughout the crisis (such as for maintenance activities). It is also critical to plan for the restart of operations—understand the resources required to prepare for restart and to operate once it is underway.
2. Ensure material availability. Shorten production planning cycles and create contingency scenarios. Review and adjust supplier orders, line schedules, and call- offs based on a new production plan daily. Identify and track critical suppliers and materials on a daily basis.
3. Safeguard Your Assets. Focus all engineering and maintenance efforts on maintaining critical processes and keeping systems running, Create backup plans for critical maintenance services for equipment, utilities, facilities, and IT systems. Execute with rigor to protect production capability throughout all three lockdown phases.
4. Be compliant. Defer non-critical compliance audits and licensing requirements for the next 30 to 90 days. Check for necessary approvals to run operations outside of normal hours. Designate a single point of contact to interact with government bodies. Seek financial or tax support from the government.
5. Communicate. Design a strategy for communicating with employees and all stakeholders, including real-time communications channels to keep everyone informed. Update communications on a daily basis and increase frequency if the situation warrants.

Distinctive Actions Across Dimensions

The actions related to these workstreams differ depending on the lockdown phase and the operations dimension. (See Exhibit 3.) We have prepared checklists to assess and manage risks within plants during each crisis phase.

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Although the COVID-19 outbreak has led manufacturers into uncharted territory, there are many lessons to be applied from previous pandemics and other crises. Those manufacturers that understand and apply best practices during each phase of the response will be better positioned to survive the crisis and meet the surge in demand when the pandemic subsides.

Thanks to my co-authors Claudio Knizek, Stefan Vos, David Ryeson and Qian Xu.