Manufacturing Supply Chain Stress

Leaders of major manufacturers have stated that COVID-19 related shutdowns have caused material impacts to their operations and financials. During earnings calls, many executives stated that the second quarter is expected to be worse than the first. While our hearts are with those affected by this illness, we as supply chain professionals must continue remain vigilant and mitigate potential impacts. Please click here for a complimentary copy of our Manufacturing Supply Chain Stress Report. Please contact us if you feel you need more visibility into your suppliers' financials. Our predictive cash flow modeling approach for public and private companies not only identifies which suppliers are at risk, but provides the details and reasoning behind the assessment.

  • Production Restart - Plants have begun to reopen; however many are taking a phased approach. Several OEMs have delayed openings due to lack of supplier readiness.

  • Earnings Calls Comments - Most executives expect Q2 results to be significantly worse than Q1. Many companies drew down credit lines and issued bonds to increase available cash. Cash and liquidity were discussed more often by companies that may be at higher risk if the economic situation does not improve within the next year.

  • Supplier Stress - Before the crisis, most reviewed companies could cover interest expenses, however many may not be able to meet obligations and debt covenants if sales decline by more than 30%.

  • Supply Risk - Companies should review their supply base for critical suppliers that will lose large amounts of revenue and have low cash levels. Suppliers’ approaches to COVID-19 risk mitigation should also be reviewed. In addition to financial risk, companies with low cash levels may have additional difficulties rapidly reopening.

  • Supplier Financial Risk - Companies will undergo varying degrees of stress if operations remain suspended over the next few weeks and months. Public and Private suppliers’ financials should be reviewed to determine exposure to the industry, cash reserves, and available means of mitigation.

Please click here for a complimentary copy of our report.