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What has Covid done to our customer relations? No area of business has been hit harder.

By Hans Schmolke

What has Covid done to our customer relations? No area of business has been hit harder.

What has changed in customer relations during Covid? TIA members gave an insight that shows when you compare the areas of major challenges before and after Covid.

There were enough reasons that can seriously strain a supplier-customer relationship. Covid caused suppliers to lose up to 40% of their workforce because they were afraid of being infected in the production facilities. Where this was not the case, the supply of raw materials came to a standstill, and when supplies finally started again, prices skyrocketed. If this did not stop the delivery, all of a sudden it was no longer possible to ship. Or the customer was now restricted in his shops because of Covid in his area.

Contracts were broken at all ends, payments were suspended, orders were canceled. This leads to smaller or larger problems, depending on whether they could be repaired quickly.

 ‘Various COVID and climate events (i.e., Texas) caused disruption in supplies and increased lead times.  We had to plan ahead and deal with delivery delays to our customers because of missing supplies.’

Communication helps in difficult situations. But that has also proven to be a problem.

 ‘Service provision by means of face-to-face visit can obtain higher customer experience. However, COVID-19 reduced the possibility of visits.’

 But Covid had - and has - the ability to bring about profound changes that don't need to be fixed, but rather want to be respected in future business.

The bars in the picture at the top of the page show the key difference. Before Covid, the picture was clear. It was about sales, about understanding customer expectations and keeping the competition at a distance.

 After Covid, the biggest challenge is no longer generating income, but rather the “new buying behavior” on the customer side. This is a problem on the way to revenue as it changes the terms of revenue generation.

‘Post covid, compared to before, has significant challenges for our product mix. We need to customize to suit the current demands and expectations.’

‘Some customers are not buying from us, some are buying differently.  In order to retain business, we are dropping lead times in certain product lines and customers.  In order to do this, we will make ahead and store a significant volume of product.  This stresses our floor-space and our ability to store and maintain product according to our existing specifications and customer expectations.’

As one other member concludes: ‘Important is elasticity.’

But it's easier to talk about elasticity than finding the right level of elasticity at the right time. And that brings us back to the stress that this has caused for customer relationships. With all the broken contracts, there must have been a question of style that influenced many customer-supplier relationships to a greater or lesser extent.

What we see is just the business changes without always knowing the reason. But some members tell a story that goes down this path.

'The customer-supplier style of behavior during the crisis has a significant impact.’

‘The morals and the social elements have greater impact on the business than people imagined.’

The particular challenge for managers is that the "deep" changes do not follow a clear development process. They are the result of many small and large shifts and refractions of values that just happen. Where is this development taking us? One member has raised concerns on this and suggests another form of elasticity: ‘Risk management will be required after covid 19 is over’.

Because at this point, we don’t recognize all the details of the big challenges in the future. Some patterns however are already visible.

 

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"CoVID-19 has completely changed our business"

By Hans Schmolke

"CoVID-19 has completely changed our business"

Our TIA industry study shows the challenges that the pandemic has had on customer relations and the conditions to maintain the business.

Thinking about how to improve business, in 2019, the customer is the measure of all things, as our members describe.

The customer is a reference for quality, demanding of perfection and wants low costs.

One of our most important customers are extremely demanding and require many different additional reports, free of charge, to control every detail of our operations.

The Covid-10 crisis did not change anything from a customer’s perspective, but created significant disruption in our operations , as the pandemic hit different countries at different times.

It was very difficult to keep the production line running with limited supply

But it wasn't just the supply of raw material that was running out, Covid also caused fear and uncertainty among employees.

The material is hard to come by, prices are rising, and the personnel turnover rate is high.

2020 made it even worse as all sides wanted to stop spending money wherever possible.

Customers pay more attention to the price of the product. You need to save money for the future and curb the demand for goods and services.

 In 2021 it became clear that this crisis would not be a downturn followed by an upturn. There has been a change in values.

CoVID-19 has completely changed the business, the essential versus the insignificant, what are requirements or just wishes and much more.

But what does that mean for business after Covid, in 2022? What is already visible on the horizon? Anyone who takes on responsibility for a company thinks about this question and the challenges that come with it.

Due to the rest period of the last 2 years, all participants will be hungry for assignments. On the other hand, raw material and other input costs are also likely to rise, which will make the problem worse.

A lot more still needs to be fixed to bring the business back to the old level.

We have to convince our customers that the challenges in the supply chain have stabilized and that we can deliver on time. Then hold the line on price drop requests to get back the margins that eroded during Covid.

But overall, Covid also has positive effects, especially in the telecom sector.

Covid has helped us to focus on the importance of communication and networking in our time. Service providers have invested a lot of capital in 5G licenses and now the need is to maximize ROI. The risk is choosing the best price, which can affect efficiency and reliability.

But no opportunities come without risk and new obstacles. To summarize it:

Our chance: The telecommunications infrastructure will be given more importance, which may lead to higher prices / revenues.

Our challenge: the silicon crisis and the resulting shortage.

But there is still an argument for the pessimists among us:

The economy may not recover.

But that is more of an individual's opinion. The challenge is not in the ups and downs, but in the adjustment of how to do business.

 

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Employee politics in times of Covid - The vulnerability of people and the vulnerability of businesses

By Hans Schmolke

Employee politics in times of Covid  - The vulnerability of people and the vulnerability of businesses

Our TIA industry survey shows that Covid has shifted the focus to employees like never before. In 2019, before Covid, the company's focus was firmly on the customer. In the times of Covid, employees were by far the greatest challenge. And in 2022, after Covid, the focus seems to shift to value creation and innovation. This evolution highlights several impacts.

The challenge was to maintain social distancing and other COVID requirements in remote, outdoor locations where troops of workers and cabling supervisors worked side-by-side over long distances.  - ‘Without access to hardware sites it is not possible to manage performance '-' We had to reorganize the shifts to send enough people home to keep everyone safe. 

From an employer perspective, our employees are not only vulnerable and needed to be protected, they are usually also a heavy cost item.

‘Because our customers reduced their orders, we lost sales. But there is a limit to how much a company can afford to lose. We unfortunately were forced to lay off many of our employees. ‘

The cost reduction was a relief initially but became a source of new challenges as the times changed.

‘As work picked up again very quickly, it got to the point where we had to hire new employees. But it's hard to find time to train the new people. In addition, it takes longer to find new qualified employees, which makes it even more difficult for us to ramp up the upcoming workload.’ ‘And when we were able to find sufficient new staff, we have too many new people with little knowledge of the way we work.’

This is a new challenge for many, but not all follow the same path. ‘We weren't able to recruit, so we had to rebuild the knowledge base with the remaining team.’

But challenges don't stop there. In China, it is ‘also a great challenge to find talent because the younger generation in China does not want to work in the manufacturing industry.’

For this reason, Chinese members are building production facilities in countries such as Vietnam and Cambodia. This solution to the talent problem is a fine example of how overcoming a challenge can create an unexpected new one. ‘We cannot copy the operation and the process flow (from China) to these new locations. These three locations operate according to different rules, and internal communication costs us a lot. ‘

After all, employees and employers are also something like the nodes of an economic network. The resilience of these network relationships - as our study demonstrates - is, as our last comment shows, a first-class security against the vulnerability of everyone.

‘Our customer trusted us, kept ordering and let us produce. And even though we couldn't deliver as contracted, he still orders, continues to do business with us. This made it possible for us to obtain our knowledge base from experienced employees over the whole time of crisis. ‘

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From match to mismatch – Covid has attacked all international supply chains

By Hans Schmolke

From match to mismatch – Covid has attacked all international supply chains

Stories from our TIA Industry Feedback from high tech suppliers

'First, the freight cost of transporting goods from Asia has increased 3-4 times. At the same time, the capacity was greatly reduced. We pay VIP prices today, but we only get standard service. '

'Then there is silicon availability, where the suppliers reduce our promised offer by more than 30%, while at the same time we have to pay more for the reduced allocation.

Ultimately, the availability of sea containers has an impact on the on-time delivery of inexpensive bulk cargo.'

Imagine that you manufacture in India, assemble in China, and sell in the USA. Then comes Covid. It happens in China first, so assembly is blocked. As a result, the supply chain to the USA comes to a standstill. Fortunately, the situation in China will then normalize. At the same time, the pandemic is reaching the West and subsequently affecting the supply chain itself. Due to the health situation of the staff, the services cannot be maintained while capacities are empty. When finally - after several waves of Covid - business is ramped up in the west, the pandemic hits India hardest.

There are different reasons for the vulnerability of supply chains.

Imagine how Chinese suppliers with assembly contracts for a US company experience the same situation. In the first phase, you cannot deliver due to the lockdown around you. Your customers are far from amused. You have to accept penalties.

You can finally resume your service, but then not deliver because your customers and your freight forwarders are locked down. Finally, all of these deals are slowly coming back, but then the wave reaches India and with it the raw material you need for the assembly service. All this time you have not been able to deliver in accordance with the contract and this gap is not being filled by other stores.

The Indian producer was spared Covid for a long time but was blocked by the other partners for much of the same period. While local business was down for a limited time everywhere, international supply chains get sick when one of its many arms gets sick.

There is also an indirect effect that TIA members report. Due to the low production and supply during the waves of the pandemic, there is a shortage of materials and supplies of all kinds in the emerging business phase. This leads to price jumps in many markets. At the same time, logistics are far from being balanced again and can only be resilient to a limited extent.

'First, the freight cost of transporting goods from Asia has increased 3-4 times. At the same time, the capacity was greatly reduced. We pay VIP prices today, but we only get standard service. '

'Then there is silicon availability, where the suppliers reduce our promised offer by more than 30%, while at the same time we have to pay more for the reduced allocation.

Ultimately, the availability of sea containers has an impact on the on-time delivery of inexpensive bulk cargo. '

In the end, there is one experience that could be central: when a perfect supply chain match meets a problem, the result is not a less perfect match, but a perfect mismatch.

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Life outside the metropolises is becoming more attractive

By Hans Schmolke

Life outside the metropolises is becoming more attractive
The trend towards ever larger and more densely populated metropolises is stalling. Smaller cities will be among the winners of the post-corona era. The need of many people for a life in the country, in which many routes can be covered by bike, has grown significantly through personal experiences in the past weeks and months.

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In the Search of Opportunities

By Hans Schmolke

In the Search of Opportunities

The expression 'Futuraise' stands for 'laying the ground today to grow tomorrow (and beyond)'. It mainly concerns the evolving ways of doing business successfully (business models) to changing values. Everybody by now knows that the coronavirus will change life and business in various ways. Like every other 'earthquake' it creates new conditions with new opportunities.

 

But to get the benefit from them is not too easy. The biggest blocking point is our own mindset. Looking for new ways of doing business requires casting aways our convictions. 'Convictions of the past' tend to colour our view of the future.

Here, in this blog, we want to gather cases that may inspire ways to overcome the durability of old convicitions.

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Ghost Kitchen - from the Covid Business Model Breeding Ground

By Hans Schmolke

Ghost Kitchen - from the Covid Business Model Breeding Ground

Value only exists in the eyes of a customer who is paying money for it. This is such a trivial phrase that one does not think much about it. Every business is built on this idea.

But what it really means becomes drastically clear when value is overwhelmed by a risk, and customers stop appreciating the value. In no time what was a high-tech kitchen costing 250,000 $ turns into a useless assortment of metal.

What can we do? Find other customers? Not at all, because all competitors suffer from the same effect. The only way is to re-think value.

 

Now the trivial sentence at the beginning of this chapter becomes the blocking point. If there are no customers of any kind, then there is no value.

 

When customers turn away, they do not cease to exist, but the business flows are diminished. This again does not mean, the flow of value has ceased to exist, but rather that it is going somewhere else i.e. wherever the conditions are more favourable.

 

The search for a new business model, a new way of creating value, starts with analyzing the new flow of goods. As a second step we might imagine how part of this flow would find favourable conditions passing through our kitchen. And only then think about the rest.

Thinking from end to start sometimes is the most difficult exercise. But not impossible. It has lead restaurant owners to the Ghost Kitchen business model, which is flourishing during the pandemic. (https://reeftechnology.com/kitchens/what-is-a-ghost-kitchen/)

 

The fact that we don't go to restaurants does not mean we have stopped eating; not even that we have stopped eating out. It is just a question of finding the flow.

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Will re-thinking supply chains lead to de-globalization?

By Hans Schmolke

Will re-thinking supply chains lead to de-globalization?

Cheap, quick, JiT: the focus of supply chains used to follow a simple pattern, using a complex and finely tuned worldwide network. The pandemic however has cast a new light on supply chains. In a standard industry scenario, a single supplier can bring production to a halt.

If you ask the managers after one year of the coronavirus experience about their future design requirements for the production process, almost two thirds ask to reduce their dependency on suppliers.

Awareness has strongly shifted to security as a direct reaction to the effects of the coronavirus. In other words, this means that in the next few years we can expect a pushback on outsourced structures, at least for key products. In addition, 62 percent of the same managers would like to intensify their local relationships with suppliers.

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