Supply Chain & Operations

Secure procurement, strengthen resilience

Your expert for questions

Stefan Schrauf
Supply Chain & Betrieb, PwC Deuschland
Tel.: +49 151 46123326
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The COVID-19 pandemic is putting pressure on supply chains worldwide

What’s important during the acute phase of the crisis: Reliable analyses and effective immediate measures

The COVID-19 pandemic jeopardises supply chains on an unprecedented scale. Demand is falling or rising exponentially, companies are cancelling orders, suppliers are suffering delays and, in the worst case, they may be forced to file for bankruptcy. Manufacturing facilities are also facing challenges: poor forecasting and planning accuracy, limited labor availability and supplier constraints. Questions are arising which also need to be answered: What are the implications for the supply chain? What tax challenges need to be considered? How should risks associated with products, suppliers and production sites be assessed? How can production and the engagement of suppliers be controlled sensibly and flexibly?

How you can stabilise your company: develop scenarios and gain control over the situation

In the midst of the crisis, immediate crisis management should clearly be the first priority. What alternatives do I have for failed or delayed suppliers? How can I stabilise my production and sensibly satisfy demand with limited resources? To answer these questions, transparency over individual components is critical. It’s also extremely important to commit to medium-term goals, including already looking ahead to resuming production gradually, and systematically enhancing transparency when still needed. Which contractual options enable the best ramp-up management? Which tools should be deployed? Does production need to be relocated? Which transfer pricing options offer opportunities to secure liquidity? How can your company emerge from the crisis stronger and secure competitive advantage?

Why you should focus on strategy now: Don't miss the next wave of transformation

History and experience show that supply chains need to be reconfigured after every crisis. During this process of redesigning supply chains, a number of questions will arise that need to be addressed and answered: How can you make your supply chain more robust while ensuring resilience – can forward-looking technologies such as artificial intelligence and blockchain help? How can you resolve conflicts and calculator damages fairly and accurately, for example in purchasing?

Current economic and sector developments

Steering and controlling operations

You can control operations and keep your supply chain fluid. Insights from China and a look at the automotive industry can help.

Download PDF (2,58 MB)

Secure supply chain, stable supply chain

What supply chain measures do companies need to introduce to emerge from the crisis and ramp-up as intact as possible? Supply chain management is currently at the top of the agenda for CEOs, COOs and of course for supply chain managers. We’ve put together an initial overview of key considerations for you.

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Getting through COVID-19 in three waves of response

Mobilise, stabilise and strategise your business. Together we can overcome this difficult situation. We provide tailored services and support to help you navigate your organisation safely through the COVID-19 pandemic. What you will need: an understanding of short-term priorities and a long-term vision.

Mobilise

1. Supply chain and supplier risk management

What companies need now is fast and efficient risk assessment of suppliers in order to create transparency - for example, about how different sourcing regions and products are affected by the COVID-19 pandemic; or where there are risks associated with single sourcing or just-in-time deliveries. A supplier and supply chain risk assessment, based on artificial intelligence, provides quick answers and enables a 360-degree view. It takes into account regional and geographical considerations, as well as regulatory influences and financial risks. Data collection from a wide range of sources provides a comprehensive view, enabling targeted and focused decision-making to keep the company's operations and business running and secure.

Contact

Jan Joachim Herrmann
Tel.: +49 211 981-5890
Email
 

Stefan Schrauf
Tel.: +49 151 46123326
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2. Tax Compliance

For many organisations, supply chains and distribution networks have been disrupted as a result of the COVID-19 pandemic. Consequently, companies have experienced production shortages, sales reductions (e.g. due to business closures instructed by health authorities) and / or restrictions on employee mobility. Further, governments have implemented short-term tax reliefs (e.g., temporary reduction of VAT rate in Germany). Despite these unplanned and largely unforeseeable developments, tax compliance remains mandatory - both nationally and internationally. One challenge in such a crisis situation is to quickly identify the tax consequences of new rules and of business disruptions and interruptions to the value chain. This is essential to mitigate the relevant tax burden (including indirect taxes and customs duties) or claim possible losses for purposes of tax relief.

Contact

Jan Becker
Tel.: +49 211 981-7378
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Hansjoachim Köhler
Tel.: +49 69 9585-5039
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3. Production and Supplier Ramp-Down

There are several reasons for a production and supplier ramp-down in a crisis like the current one: a collapse in demand, supplier failures, political shutdowns or those resulting from COVID-19 cases. In such a situation, it is important to control the ramp-down as effectively as possible while weighing customer satisfaction against cost optimisation. This requires synchronisation of the ramp-down across the entire value chain. For example, you must ensure that suppliers can deliver the components required for the controlled ramp-down. Otherwise, customer demand cannot be satisfied. At the same time, it’s important not to neglect what’s needed for a ramp-up late should not be neglected; for, example, parts may need to be produced during the crisis to have on hand. However, the ultimate success factor during this process is agility, as significant changes can repeatedly arise on short notice. Modern technologies, increased flexibility in production and continuous coordination with customers and suppliers assist in an agile, customer- and cost-optimised ramp-down plan.

Contact

Jan Joachim Herrmann
Tel.: +49 211 981-5890
Email
 

Stefan Schrauf
Tel.: +49 151 46123326
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Stabilise

1. Transfer Pricing

Securing liquidity has been at the top of the to-do list for most companies during the COVID-19 crisis - because now more than ever: cash is king. Generally, this requires a review of existing intercompany charges to avoid liquidity outflows due to tax payments, allocate fresh liquidity from the capital market, banks or government institutions within the group and avoid distortions in the group tax rate when "restarting" business activities. For all of these considerations, the arm's length principle plays a central role.  This is because the distribution of profits or - more recently - losses during and after the crisis must be in line with the arm's length principle and documented for subsequent tax audits, so that unnecessary (additional) tax payments or double taxation can be avoided during the recovery phase. Changes in the supply chain, such as the transfer of intangible assets or functions, must be assessed from a tax perspective.

Contact

Axel Eigelshoven
Tel.: +49 211 981-1144
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2. Supplier management during ramp-up

Almost all production and service companies are currently facing immense supplier management challenges. In order to successfully tackle these difficulties, tailor-made checklists can help companies find the right aspects of supplier relationships to tackle throughout the entire crisis cycle. Good supplier management is characterised by being a first mover during an economic upturn, meeting demand with secure materials, reliable capacities and fair prices. The aim for companies is to be able to meet demand with their capacities and avoid being forced into accepting any price tag for the required materials.

Successful negotiation management in turbulent times (PDF)

Contact

Norbert Fischer
Tel.: +49 69 9585-3898
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Jan Joachim Herrmann
Tel.: +49 211 981-5890
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3. Ramp-up Management

Restarting production should be planned as early as possible. Experience shows that the ramp-up of the supply chain is a major challenge. Normally, it’s important to synchronise a production restart across the entire value chain; however, it will be almost impossible to ramp up all plants in parallel during a pandemic like COVID-19, which is happening in waves. Juggling uncertainty on one hand and the necessity of a planned and cost-optimised ramp-up on the other will be a difficult balancing act. Active control of the ramp-up using measurable targets, a detailed timeline and corresponding KPIs, proactive identification of supplier weaknesses / bottlenecks and the production disruptions which could result and – perhaps most importantly – developing various possible ramp-up scenarios and corresponding plans will be important keys to success. Modern technologies can help to quickly model capacities, critical processes and ramp-up scenarios.

Contact

Reinhard Geissbauer
Tel.: +49 89 5790-5692
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Ralf Walker
Tel.: +49 30 88705-933
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Strategise

1. Conflict resolution and damage assessments

As companies navigate the COVID-19 crisis, they must not ignore seeking compensation for damages incurred and defending against possible future claims for damages from business partners. In particular, supporting measures, such as the collection of relevant documents and information, should be initiated immediately, as it is much more difficult to collect such information retroactively and in full. Experts from PwC's Forensic Services team provide companies with technology-based support and digital solutions, both in handling and quantifying their claims for damages and in defending themselves against the claims of their business partners.

Contact

Irina Novikova
Tel.: +49 69 9585-6070
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Jan Joachim Herrmann
Tel.: +49 211 981-5890
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2. Realignment of Product and Value Chains

COVID-19 represents a stress test for global supply chains. Because many factors are difficult or impossible to plan, product and value chains often have to be restructured to operate effectively. A look at the supplier side - think: delivery capability, raw material availability, personnel capacities, and more - is just as relevant as the political regulations that may impact supply chains, such as increased border checks. What is needed now are structures that enable the quick implementation of short-term measures while simultaneously providing insights for the future. That’s made possible by a systematic risk assessment of the end-to-end supply chain - across all areas (planning, purchasing, product, distribution) - along with the identification of potential risks in terms of demand, raw materials, labour and infrastructure.

Contact

Reinhard Vocke
Tel.: +49 211 389-0303
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Stefan Schrauf
Tel.: +49 151 46123326
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3. Technological resilience

In times of crisis, the technological basis of a supply chain gains enormous importance. Technologies like data analytics, artificial intelligence (AI) or blockchain enable transparency and make it possible to immediately generate high quality forecasts and other support that can help companies initiate appropriate measures. It’s particularly important to have established a solid data basis (data network) and to make use of powerful supply chain and advanced analytics platforms. By the time the crisis ends, it’s also the right time to develop a technological vision for the entire value chain so that supply chains can become an autonomously functioning network.

Contact

Martin Whyte
Tel.: +49 022 1208-4564
Email
 

Holger Röder
Tel.: +49 69 97167-487
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Stefan Schrauf

Stefan Schrauf

Supply Chain & Operations, PwC Germany

Tel: +49 151 46123326

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