A medium-sized German company develops, designs and produces optoelectronic products. The coronavirus lockdown caused considerable difficulties for the internationally active company. The interim manager was tasked with responsibility for engineering and operations (project management, procurement, HSE, legal & compliance and assembly). His goals: To stabilize project progress rates, save costs and improve the strained liquidity.
Lockdown and stagnating project progress rates put considerable pressure on liquidity
At the beginning of 2020, the company had a high order backlog for customer-specific development projects ranging from engineering to assembly. In April, the projects were abruptly interrupted by the COVID-19-related lockdown and could hardly be completed until June. All employees were sent to work from home. Additional engineering service providers had to be terminated.
Expected loss of more than 30 percent of annual revenue
The loss of more than 20 percent of external engineering capacities as well as the organization and IT infrastructure not designed for working from home led to a loss of productivity of more than 30 percent of the company's total output in the current financial year.
After the gradual resumption of business activities in summer 2020, the company faced particular challenges. In addition to complying with guidelines for the prevention of COVID-19, the suspended business activities had significantly strained liquidity.
Development projects exceed deadlines and budgets
All development projects were characterized by deadline and budget overruns after the lockdown. The promised degree of completion of highly complex products was far from being achieved and milestones were not met. Even with increased capacities, the delays could not be made up. It was necessary to find compromise solutions with customers for new delivery dates. In addition, customers postponed new projects that had been promised.
Payments on account and agreements with customers secure liquidity
The delays resulted in the non-payment of partial results for numerous projects. These changes to the plan and the postponement of planned sales in the future increasingly dramatized the tense liquidity situation. After a tough struggle, however, it was possible to agree partial advance payments with the customers.
At the same time, the interim manager scrutinized all cost items. He aligned the ordering of materials and the commissioning of external engineering service providers with ongoing project requirements. He realized further savings in material costs. He also intensified the control mechanisms for orders and approvals.
The willingness to compromise and the customer's trust in the company's ability to recover, as well as the interim manager's negotiating skills, made a significant contribution to improving the company's liquidity in early fall 2020. At the end of the mandate, the interim manager had stabilized the situation in close cooperation with the CEO and CFO and professionally handed it over to a permanent successor. The company is looking forward to new orders with confidence.
Organization better prepared for renewed lockdown with remote processes
The day-to-day business of the interim manager was also characterized by meeting the COVID-19-related hygiene requirements in order to avert a temporary shutdown of operations by the authorities. The elimination of inadequacies in the existing IT infrastructure with external IT service providers was another special feature. In order to be able to access processes more flexibly from outside in future, the interim manager initiated initial approaches to remote monitoring of the test and production facilities.
