HOW TO SURVIVE UKRAINIAN MANUFACTURING BUSINESS DURING THE WAR?

           When you are desperate to survive, you don’t think about anything else, do you?

That’s the way man is. If you find water in the desert, you just gulp it down without giving a second thought to either how to ration it or how to get a few gallons of water supply. The same goes for operating businesses during the war and developing long-term strategic planning.

           If you are lucky and your enterprise has not been completely destroyed, moreover you have managed to restore its operation, my advice is first to complete unfinished deals to get at least a minimal turnover. This plan will work out better than developing unreal and complicated business chains.

           I know it first hand. At present, I have two active businesses - Pet Technologies, a manufacturer of blow molding equipment and blow molds, two restaurants, plus a few start-ups.

           Like most businesses, on February 24, we closed down. At 10 am, the skyover the town turned into a fireworks display of missiles and bombs.

           The first thing my employees did on that day, they copied allconstruction databases and 1C. It was perfect timing, since the next day we hadan electricity outage. Despite the popular idea of business relocation, I hadnot even thought about that.

           On the 16th of April, plant operations were restored, and in May, therestaurant was reopened. How did we manage to relaunch companies and at leastkeep them afloat? Here are Step-by-step instructions.

           People

           People are definitely the primary resource of the company and its weakspot. Most employees of Pet Technologies left the town together with theirfamilies on the first days of the invasion. I didn’t make any announcements.

           Nothing like “Stay and defend the town.” Nope. People’s safety hasalways come first. People and their families. But as soon as it was possible,people came back to work—no big words or calls. Workers  just came and started doing their job. Thisshows a unique trait of our resilient people: no matter how hard it is, theycan pull themselves together to do what they are supposed to do. It should bementioned during the first week of plant relaunching, there were constantenergy blackouts or no electricity at all. Getting people back to work was easy, but adapting them to a new realityafter all they had been through, looked pretty challenging. The employees werenot themselves, sometimes acting illogically.

           Here are a few examples. The employee didn’t show up to work or come at9 am instead of 8 am. When asked to explain the reason, he  just said: "But it’s war”. The employeeleft  work at 3 pm instead of 5 pm. Whenasked why, the same reason - “it’s war.I can just stay at home and not come towork at all. “ We tried to communicate with these workers with particular care.I know people who have not left the town and experienced all the hardships andhorrors of war will take a long time to recover. Some lost their homes. Somewere left without water or electricity. Some were preoccupied with survivingthe upcoming winter as long as no heating was promised.

           But every cloud has a silver lining. These crises, like previous ones,helped to spot people whose value to the company had been questionable. We hada few people like that. They all not only left the town but resigned from thecompany. The CEO claims that nothing has changed with their leaving. One way oranother, but it’s true to say each crisis benefits the employer. Companies areclosed down, and budgets are cut. No deficit in the labor market, henceemployees are becoming more loyal. At times like this, it’s crucial not toabuse, neither cutting down the salaries nor becoming imprudent with people.

           Just the other way round: encouraging them, saying - “You willundoubtedly survive this crisis with us. We are the plant, we are safe, we havethe future, we have 25 years of experience behind us, and we are presented innumerous foreign markets. We will get over that.”

           Production, raw materials, suppliers

           When the war began, we had five unshipped trucks of products. They werealmost ready to be shipped but not completed by controllers with some precisemechanisms, which had been ordered in November. They should have been deliveredto the plant in March, but the war started.

           The Austrian company, the producer of these details, was merged with alarge Chinese corporation, which controls one-third of the global market.  Our order was almost nothing for them. Wewere just told - you have war in the country; it’s force Majeure, so allsupplies are canceled. After long and complex negotiations, which lasted a fewmonths, they promised to supply the parts by autumn. But we couldn’t wait. Ourbusiness is summer-oriented; our clients are not ready to miss the season. Not to lose those existing clients, westarted looking for those parts on the open markets. Our Austrian specialist,Roland, found these missing parts on an open platform, bought them, and broughtin his backpack to where the machinery was shipped. He simply did everythingmanually. And it worked! A small victory for not a small business.

           Before the war, everything was well-oiled. Most of the prominentmanufacturers had their own representatives in Ukraine. They worked without ahitch. Goods were always in stock; we bought in Ukrainian currency with VAT andcould quickly get all documents and certificates at our request. Moreover, theyalways had some volume in reserve just in case for us since we proved to be areliable client. Now the part is these companies are out of the market, or theyshortened their warehouses or closed down warehouses. What’s more, they alldemand advance payment only. What previously was in abundance is now inshortage. You have to preorder, pay in full, and wait for your order to bedelivered. Yet again, you have to wait two weeks at best instead of two days,as it was before the war. Bear in mind, since the currency rate is not stable,the suppliers fix the rate to the shipping date. And no one cares that you paidtwo weeks ago. You will be charged to pay the difference at the end if the ratehas increased. But on the contrary, if the rate has decreased, no one willcover the difference. Consider it bad luck.

           Before the war, I got an upfront payment for my machines at 31 UAH/1EUR.Now we buy accessories at 45UAH/1EURO since 10% is added by the supplier forlosses. That’s what we’ve got. It is what it is.

           Logistics

           The situation with logistics is similar. We used to ship our goods bysea. The container used to come from Illichivsk or Odessa. The procedure wassimple and well-oiled: to get the goods loaded, stamped, and shipped. As easyas that. The price per container was $1000 top. Containers were available inabundance. They would arrive at the requested number on the first call. Now thesea is closed. The nearest ports are in Poland or Germany. The price per truckis about € 6000, as opposed to € 1200 before the war.

           Moreover, the trucks are in short supply. On top of that, it now takestwo weeks instead of 2 days as it was before the war. And don't forget aboutthe queueing process for freight vessels. In a nutshell, you can no longerguarantee any deadlines to our clients. However, this is a global crisis, somost clients are flexible and understanding.

           Clients

           To be frank, the situation is not that bad when it comes to clients.After the invasion, clients fall into two categories: those who pay no matterwhat. They want to support us. They know it was hard to survive, hard to keepthe company afloat, so they show their loyalty and help to keep on working. Thesecond - they try to rob you.

           Regarding Pet blow molds, we have main competitors - Italian and Polishmanufacturers. The latter produces decent molds, a bit more expensive thanours. We have consistently won two out of three tenders run by Ukrainianclients. But this year, one of our Ukrainian clients (Western Ukraine) chose aPolish company. How come? We were at a loss. And we were utterly dumbfounded,to say the least, when we got our compatriots' explanation - «But you have awar down there in Chernihiv. We doubt we will get our order at all”. Justthink, “ YOU HAVE A WAR DOWN THERE.” FYI, we have a 20% price difference with aPolish competitor. But such “rare types” are, more likely, an exception. Themajority of our Ukrainian existing and potential clients, on the contrary, madea decision to buy only made in Ukraine goods.

           Management and business operations

           It’s been two years since I went out of operations management.  As the war started, I was tempted to comeback, to take the wheel and to steer the business out of hardships, anti crisesmode on. Thank God, I changed my mind. At present, Pet Technologies, as it was before the war, works without mydirect role in operational processes. And I believe if it works, no matter howcomplicated the situation might be, you should not step on and spoil thegame.  If it seems they won’t copewithout you, believe me - it’s nothing but self-delusion. Stay out of it unlessyou are asked for help. It's essential to give people the opportunity to showthemselves and to act independently. A few words on the restaurant businesshere. It was just the approach I mentioned above with relaunching my restaurantafter the war began. The employees turned to me, asking if they could give it ago, requested for €2000 for a start, and just did it, all by themselves and atits best.

           We changed the system of motivation for our employees. Each employeecoming to work at the restaurant get 500 UAH at the end of the day, no matterwhat the revenue is. It’s a new practice for us, but it works.

           Setting Long-term goals

           My wartime business strategy is the following: “Do your best to surviveuntil the moment is right. “ You have to survive mentally and physically. Yourbusiness has to survive. You have to do what you are supposed to do the bestway you can do it to keep your company afloat. I presume this strategy won’twork for everyone. But in my case, it never fails. It helps me to avoidself-punishment, moreover, prevents me from falling into uncontrolledhyperactivity, which, if the timing is wrong, in its turn, can lead tosignificant damages and losses.