Economic recovery remains uncertain with COVID-19 restrictions continuing to change. With one-third of UK businesses telling us they have closed, suspended or reduced the capacity of their operations, Oliver Bridge, Business Consulting Director at Grant Thornton, looks at the role operations can play in safeguarding a company’s future.
The regular COVID-19 restriction changes bring added challenges to business leaders navigating their organisation through the global pandemic. The impact of new restrictions varies between sectors and there is no one-size-fits-all approach to creating an effective operations strategy. However, there are three main concerns we see from mid-market business leaders; having the ability to continue delivering, financial flexibility, and operations supporting business continuity.
Delivering to stakeholders
Many businesses have had to change their model as a result of lockdown and are likely to continue with the new model once the pandemic is over. Even those intending to return to their pre-COVID-19 model are entering a market where customers’ needs and expectations have undergone a radical transformation.
In light of these changes and anticipated further restrictions, it is vital to review assumptions about the nature and scale of future operations.
For example, is the business looking to diversify into more stable sectors or to spread risk by using assets to supply a broader group of customers? If so, are operations set up to support the future strategy and deliver for clients and stakeholders?
With a clear understanding of future operational requirements, consider whether any new divestments or investments are necessary. The current disruption means there may now be opportunities to pick up businesses with assets and capabilities that can help meet future needs.
Flexibility in your cost base
Minimising the need to raise debt, either to survive ongoing disruption or to seize new opportunities, means retaining cash in the business. A serious effort to drive down costs, with a strong focus on operational efficiency, could be the starting point.
Some of our manufacturing clients tell us their customers are buying in smaller volume and that producing smaller batches is reducing efficiency. If this is the case in your business, optimise output to reflect current levels of demand.
This does not have to result in lowering profits. Removing non-profitable products from production and selling only to profitable customers optimises output at a level that delivers higher profits. Make sure you pass rising costs on to customers.
Business continuity
The pandemic has exposed the risks inherent in complex, global supply chains. A common strategy is to source from suppliers closer to home, to improve resilience and establish a clear understanding of where supply chain risk lies. One solution is to use specialist software, such as Llamasoft. The AI-powered platform provides transformative insights, such as early warning of supply partners at risk of failure, allowing for timely action to protect the supply chain.
Get ready for recovery
Changing restrictions mean significant uncertainty is likely to be a feature of the trading environment for some time. Leaders need to be planning now and looking to operations to play their part in supporting future strategy, strengthening the business’s cash position and enhancing resilience.
For advice on planning the future of operations contact
Grant Thornton at www.grantthornton.co.uk
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