COVID 19 Supply Chain

Finding New Supply Chain Muscles in a COVID-19 World

While I’ve tried to refrain from using the new cliché “these are unprecedented times,” I can’t think of a better way to describe what we are facing with COVID-19.  Like the other functions within Mercury Systems, supply chain is having to flex muscles we haven’t had to use in the past to mitigate the extreme risks this pandemic places on our business. And we’re not alone.

In late January/early February, when news of the coronavirus and its devastating wake in China became more well known, I felt a brief moment of relief that Mercury Systems doesn’t have direct suppliers from China (except for very few/one-off situations). That naïve security was quickly shattered as I considered the levels within our supply chain – our suppliers, their suppliers, their suppliers’ suppliers, etc. At some point, someone will be reliant on components from China. Supply chain managers whose previous concerns were one or two levels down into their supply chains now find themselves rolling up their sleeves and diving more deeply.

Assessing Risk

For complex systems of materials and factories, the basic assumption that underlies success is that risk is diffused throughout the supply chain and can be managed through lead-time optimizations and evaluation of individual supply chains. For COVID-19, this process proved to be not only inadequate, it also ran the risk of further exacerbating supply chain risks.

Within weeks, this was no longer a China or an Asia issue. We quickly realized the standard supplier risk management process we launched at Mercury Systems only last summer had to be adjusted, yet again, to more accurately pinpoint COVID-19-related risks to enable effective mitigation actions. Some of the criteria we are using to assess the risk of each supplier are the impact their failure could have on the business, based on the time and cost to recover, and the likelihood of failure. For COVID-19, we streamlined the model to focus on three areas:

  • Sourcing options (single/sole sourced, supplier-owned IP, availability of alternate parts or sources)
    • Financial stress on the supplier (will the supplier be able to weather this storm?)
    • Likelihood of supplier being shut down by local government

Based on the assessments of the suppliers, which are now reviewed and updated daily, we generated a heat map and focused on the suppliers in the “red risk” areas to determine appropriate mitigation plans. 

Mitigating Risk

We determined the number one action to mitigate risk would be to pull in the supplier deliveries of material required for Q4 as soon as possible, with Q1 and Q2 as a second priority. This process requires a stronger alignment across functions, starting from revenue forecasting through planning down to procurement—a precursor to the SIOP process (sales, inventory and operations planning) that is being piloted across certain sections of our business. That sounds simple, but in practice, the amount of time it takes to get information across an entire supply chain can be challenging. In this current crisis, we are able to evolve this process much faster than it would have taken under normal circumstances.

Other mitigation actions to reduce supplier risk are:

  • Identifying alternate suppliers
  • Identifying alternate parts
  • Partnering with sales, programs, contracts and engineering on expedited customer approvals for sourcing changes
  • Providing financial support to struggling suppliers (especially small businesses)

But there are many other new ways we can all consider and questions to ask as we wrestle with better managing our supply chains, including:

  • Performing a deeper analysis of our suppliers’ supply chains – where do our suppliers’ sub-tier fabricate, manufacture, assemble, test, etc.?
  • Tying the delivery of our material to the customer programs, directly linking procurement impact to revenue
  • Implementing a structured daily cadence across all procurement teams to ensure delivery to manufacturing schedules

While this pandemic is driving my organization – and many others – out of its comfort zone, we are learning to build a coalition of people and practices that will be vital tools long after this virus has been contained. Since working from home, I’ve started exercising again (more for my mental than physical health), and I am feeling aches and pains I haven’t felt in a long time.  Much the same, as we continue to flex these unfamiliar supply chain muscles to tackle the new challenges presented by COVID-19, I am certain we will become a stronger function within company operations.

COVID19 - Reigniting the Defense

Reigniting the Defense Innovation Base for a New Industry Paradigm

Our industry finds itself at a critical juncture.

In recent months, the global pandemic COVID-19 has spread rapidly around the world, infecting and killing tens of thousands of people, with few signs of slowing. The global supply chain and many regional economies have ground to a halt as countries seek to mitigate the impacts of the virus. Like many other essential businesses, our industry has had to quickly assess the impact of COVID-19 and maintain continuity of mission-critical business operations, all while focusing on the health and safety of our employees.

However, even before the threat of a global crisis, companies have been operating within a new geopolitical paradigm, and the U.S. government has faced an entirely new generation of potential threats. In recent years, the global landscape has continued – if not accelerated – its shift to a multipolar structure led by a handful of primary adversarial powers. In parallel, the threats for which these powers are preparing are undergoing rapid and foundational change. From electronic warfare to space superiority, international governments are grappling with an increased set of unfamiliar risks and new battlespaces that necessitate a fundamental shift in their approach to national security.

The future remains uncertain, in large part due to this global crisis, and once we emerge from the pandemic, we must take a close look at the changes needed throughout the defense contracting industry to ensure its future success. 

A Robust Industry – With a Need for Change

A paradox is manifesting itself in the defense contracting industry. Defined by historically consistent returns, our sector has traditionally been a healthy vertical overall. Defense companies have a distinct financial advantage – particularly compared to our commercially focused counterparts – because the DoD funds much of the upfront capital, R&D expenditure and production working capital for any given project. The DoD then purchases products at higher margins for many years as programs shift to production. Coupled with infrequent – albeit relatively expensive – upgrades, high-margin international sales and the fact that incumbents hold a distinct advantage in the industry, many defense contractors find themselves operating in a business-friendly environment.

Nevertheless, we are facing several new and growing potential vulnerabilities that require an evolved approach. In addition to the unknown future impacts of COVID-19, a growing national debt, historically low interest rates and increases in non-defense discretionary spending are potential headwinds in defense spending overall. Across the industry, we have continued to witness consolidation that winnows both the volume and diversity of technology providers. From Northrop Grumman’s acquisition of Orbital ATK, to the industry-altering mergers between Raytheon and United Technologies Corp. and Harris Corp. and L3, respectively, the number of innovative public-sector specialists has shrunk considerably in just the past few years.

Moreover, from a research and development standpoint, we’ve collectively settled for IR&D and capital expenditure rates of 2–3 percent as an acceptable status quo. However, we should not and cannot settle for rates that are inadequate for the goals we define for ourselves. For example, our high-tech counterparts on the commercial side regularly invest upwards of 10 percent of revenue on IR&D. With federal IR&D rates that pale in comparison, and acknowledging that the public sector is often too small and complex for high-tech commercial companies to penetrate, the defense industry finds itself at a distinct disadvantage for readily accessing the foremost technologies for mission-critical and national security needs.

A Long-Term Framework for Success

As new, emerging threats become more prevalent and require dedicated attention, contractors must make substantive investment in new technologies and innovations a strategic priority.

Complicating matters, the continued global spread of COVID-19 has posed an unprecedented acute threat to the vitality of our business and presents an issue we will need to collectively address. In its wake, we must evaluate the industry overall and must especially consider material and fundamental changes to our approach in order to ensure our long-term success, including: 

  1. Evolving defense procurement and acquisition policies. Whether due to bureaucratic red tape, cumbersome regulatory policies or the complex nature of defense technology, there is a lack of defense industry participation among high-tech commercial companies. By creating ease of entry into the public sector, the addition of more high-end commercial expertise will challenge industry incumbents to innovate and deliver, driving the industry forward as a whole.
  2. Reestablishing and fostering a healthy, innovative mid-tier base. In some respects, industry consolidation has been a boon to the sector, increasing the scale of solutions that we’re able to provide to our customers. But what we’ve gained in scale we’ve lost in diversity and entrepreneurial spirit. In order to foster continued innovation, we must recognize the importance of and reestablish a robust mid-tier base.
  3. Making a greater effort to attract and retain talent by focusing on both innovation and purpose. Companies are only as successful as the people within them. We must not only undertake a dedicated effort to attract the foremost talent in technology, but also foster a culture of both purpose and innovation in order to retain and develop that expertise for years to come.
  4. Fostering partnerships with peers. Whether with traditional or non-traditional partners, as an industry, we must make every effort to collaborate with others – including commercial, government and academic entities – in a way that unlocks new efficiencies and increased investment to drive the industry forward.

Our industry finds itself with a steady track record of success but also a need to evolve to realize our collective potential.

Getting there will not be easy. It will require shifting priorities, making difficult decisions, forging new relationships and transforming our approach to the industry as we currently understand it.

As we look to the future and continue to function at the service of the public sector, these are vital decisions that will determine the success of our industry, and the defense industry’s capabilities, for decades to come.

national security covid-19

The Importance of Maintaining our National Security in Times of Crisis

The United States currently finds itself in an unprecedented human health crisis that will test the collective resolve of both the U.S. government and the American public. In just a few short weeks, we’ve transitioned from a historically robust economy to one in which there is a dedicated focus on essential goods and the health of Americans. At Mercury, we’re committed to doing our part to help ensure the health and financial safety of all of our employees.

But in this time of crisis, we cannot lose sight of critical strategic priorities, including the United States’ national security. Safeguarding our nation requires continued persistence in the face of challenges. The president recently issued updated Coronavirus Guidance for America. This guidance states that:   

“If you work in a critical infrastructure industry, as defined by the Department of Homeland Security…you have a special responsibility to maintain your normal work schedule.”   

However, this is just guidance, not law. While our experience, thus far, has been state-level recognition of the importance of “critical infrastructure industry” businesses like ours, making exceptions to “stay-at-home” orders, it is still our nation’s defense being decided at the state level. We need legislation that reinforces the importance of these industries and keeps them operational and stabilized in times of crisis.

While continuing to comply with global and local health authorities’ guidance and protecting our employees remains our top priority, we must continue our work on critical programs that help ensure our collective safety and security. These are trying times, but I have as much confidence as ever in America’s ability to rally around a common goal in service of our country’s success. For our part, Mercury is committed to continuing the advancement of Innovation That Matters in support of the aerospace and defense industry, which will play a key role in America’s national security for decades to come.

coronavirus update from CEO

Message From the President & CEO – Coronavirus Update 

The COVID-19 pandemic continues to impact people and countries around the world. This is a time of extraordinary circumstances and uncertainty. It’s also a time when the work we’re doing in support of strategic national priorities is recognized as critical.

At Mercury, we remain laser-focused on four goals we established: To protect the health, safety and livelihoods of our people; to mitigate or reduce operational and financial risks to the business; to continue to deliver on our commitments to customers and shareholders; and to continue the mission-critical work Mercury does every day to support the ongoing security of our nation, our brave men and women in uniform, and the communities in which we all live. We are also increasingly focused on “leading from the front,” communicating as frequently and openly as possible to help keep all stakeholders informed of the latest developments here, which are occurring at a very rapid pace.

I’d like to lead off by saying we have no confirmed COVID employee cases and our collective goal is to do our very best to keep it that way. Even before COVID-19 was declared a pandemic, we recognized the need to take advantage of early windows of opportunity, to develop plans to possibly prevent or at least minimize the impact of an incident to employees and the business, and to have continued decisive, proactive responses to a constantly developing situation that are in keeping with our purpose, our commitment to corporate stewardship as well as our culture and values. I’d like to share the things we are doing to accomplish company goals established many weeks ago.

Teams and Communications

To best keep our company informed as a whole, from an overarching leadership perspective we have:

  • Involved our executive board, creating a steering team that meets multiple times each week;
  • Created a COVID-19 FAQ document for employees, which is updated daily to include the most recent company information as well as that of local, state and federal authorities; and,
  • Established a weekly call with all managers to discuss business continuity information, which is then disseminated across the company.

Health and Wellness

At Mercury, our number one priority is to protect the health, safety and livelihoods of our employees. As such, we have:

  • Instituted a policy of 120 hours additional sick leave for employees for Coronavirus-related circumstances to incent unwell people to stay home;
  • Increased pay for all overtime to two times the regular rate from March 28–April 13 (or beyond if we need to extend our current work-from-home timeline);
  • Established a relief fund, starting at $1M, to assist eligible Mercury employees, including temporary agency employees, experiencing unexpected financial burdens as a result of this crisis;
  • Committed to covering our employees’ base pay during the time a facility may be shut down;
  • Waived the telemedicine co-pay for employees;
  • Announced an Uber Eats account for employees to have access to company-paid meals;
  • Set up a work-from-home program, moving more than 900 employees off sites until April 13;
  • Expanded network capacity for work and home;
  • Moved to virtual interviewing and onboarding where possible;
  • Created information packets and curated online resources for managers and employees to maximize productivity;
  • Put in place segregation areas and other social distancing requirements at all of our facilities in adherence to recommended guidelines; and,
  • Placed a hold on all international and domestic travel, requiring 14 days of self-isolation after any business and/or personal travel.

Facility Protocols

Because much of the critical work we do cannot be done from home, we have implemented the following preventive measures at all of our facilities and are working every day to improve upon these measures.

  • Limited non-essential site visits by internal and external visitors;
  • Limited essential site visits to specific conference rooms/areas;
  • Implemented environmental cleaning and disinfection protocols based on CDC and other recommendations;
  • Instituted a no-physical-greeting policy, i.e., handshakes, etc.;
  • Ordered masks and sanitizers for all on-site employees;
  • Posted COVID-19 CDC information sheets throughout all facilities; and,
  • Created plans and protocols for confirmed-case and site-shutdown scenarios.

I’d like to offer my most sincere gratitude to the people working on the frontline of this crisis who put their health at risk every day. Their selfless acts serve as inspiration. For our part, we will continue to lean forward and continue to take care of our employees and customers, but in keeping with our culture and values, we ask that you continue to help those in your communities who are in most need during this crisis. There are many people and companies in our communities who will be impacted more severely than we have been thus far. And it is in times like these that we so often see the best in people. Let’s work together to be agents of good.

The Role of HR in a Time of Crisis. It’s All About Trust

Over the past few years, the Mercury HR team has been focusing on building strong relationships between us and leadership, employees and external business resources. It may be an odd thing to think about, but the COVID-19 pandemic has now shown us the importance of that focus. In a time of stress and the unknown, those relationships are helping us be a critical part of what is going on in these unprecedented times. It has allowed us to make innovative decisions quickly with input from multiple sources, to get information out to our employees faster than ever, and to be there for them as they deal with the unknown by providing reassurance that the company will take care of them. Given the massive and rapid changes to workplace culture, we now find ourselves with a need to further commit to a trust-based workplace culture: Business and management trust employees working from home to be productive; HR trusts our external providers of work-from-home (WFH) technology to deliver; employees trust HR to keep them informed, protected, and engaged. #OneMecury thrives on trust.  

The coronavirus has imposed a WFH culture on myriad businesses in many countries. But this has allowed HR professionals to lean in – to put our education and training into practice by providing information, protection, and engagement to our employees who look to us…who trust us. 

There are several things we are doing at Mercury specific to recent COVID-19 developments that nurture our new, trust-based workplace culture.

Working from Home – Protected, Engaged, and Connected

Nearly everyone is doing this now. Placing the care and protection of employees as priority one was an early signal to them that trust is foundational; that we are committed both to protecting them and to treating them as the professionals they are.

However, there are several intricacies that we incorporated with our WFH program to better reinforce our commitment to living up to the trust placed in us. So, yes, we employed the tools we have been investing in over the years, although on a much larger scale than perhaps originally planned, to help our people work ably and comfortably from home. However, it seems we are now understanding their value in new ways.

For years, Mercury has used Skype—the communications app that provides video chat and voice calls between computers, tablets, mobile devices—and Basecamp—a project management tool that helps create efficiencies—among other tech tools. And our teams have continued their use during our current mandatory WFH policy, but what is emerging is a new value beyond business applications. We’re seeing these business tools put to use to remain virtually connected, helping combat a feeling of social isolation since we are no longer collocated. Our managers are hosting daily video check-ins with teams – seeing their faces, sharing their days, sharing their struggles. And now we are seeing the rise of virtual happy hours hosted by management/leadership, with families and friends welcome to attend. Project management platforms are becoming spaces for casual chats, places to post pictures of WFH setups, inspiring stories of service, and tools to share cartoons or memes related to the challenges of working from home while your whole family is hunkered down with you. By supplying our employees with tools like these, we are earning the trust they have placed in us to help them still feel engaged in a moment of crisis. Using connection for connection.

Economic Well-Being – Offering Another Level of Protection

Our continued support also means addressing and helping remove undue burdens that are outside of our employees’ control – especially those that are financial in nature – caused by the change in landscape due to COVID-19. Navigating this uncharted territory has particular challenges. Perhaps our employees are juggling responsibilities with limited or no childcare, taking on home-schooling duties they never anticipated, dealing with the stress of a partner who finds themselves temporarily unemployed, or suddenly having more family members at home to care for. With this comes unexpected financial strains. At Mercury, we have established the Mercury Employee COVID-19 Relief Fund, an employee reserve initially capitalized at $1 million, to support those in most need. This includes an immediate relief payment for hourly employees who are not able to work from home. It also includes discretionary funds to be allocated to those hourly employees struggling with severe financial challenges brought about by COVID-19. While there may be more to do in the coming days and weeks, our hope is that this financial relief fund will help mitigate impacts of the virus on our most valuable stakeholders – our employees. We also updated our PTO policy to include an additional 80 hours of sick leave for those with Coronavirus-related circumstances. We didn’t want our employees to lose well-deserved vacation time or burn through regular sick time because of this unexpected crisis. We want them to trust we always have their overall well-being in mind – financial or physical – and rest assured they can count on it as we move forward.

Communication

How else can we live up to the trust our employees have in us to keep them informed in times like these other than to communicate – early and often. As our HR policies rapidly evolve to keep up with changes necessitated by this pandemic, our employees will understandably feel uncertain and look to us for ongoing and clear communication of policies. At Mercury, we placed an easily recognizable link to COVID-19 resources and documents on our company intranet, accessible with just a click. This includes the following:

  • FAQs that are regularly updated, with update alerts emailed companywide
  • Social distancing guidelines
  • News articles
  • A link to the Centers for Disease Control and Prevention (CDC)
  • Company documents
    • CEO messages/videos
    • How to submit time-off requests due to COVID

In addition, we employ Everbridge, an application that automates and accelerates our operational response to critical events in order to keep people safe and business running. During public safety threats or critical business events, this mass alert system enables us to quickly and reliably aggregate and assess threat data, locate people at risk, identify responders able to assist, automate the delivery of pre-defined, secure communications to a variety of employee devices, and track progress on executing our response plans.

I believe we are at a crossroad with COVID-19. As HR professionals, we should use our experience with COVID-19 as an opportunity to lean in to developing and nurturing a trust-based workplace culture, inventing new and different ways to convey this to our employees. At Mercury, we believe the opportunities presented us by the challenges of this new landscape will only reinforce the values of our culture and the purpose to which we are all committed: Innovation That Matters.

Mercury Commitment - COVID-19

Our Commitment to Combating COVID-19

As the world – especially government and business leaders – continues to respond to the novel coronavirus taking center stage on the global agenda, we recognize that these uncertain times require an even greater responsibility to our people, customers and partners.

As ever, we remain focused on the health and safety of our teams – and supporting them through myriad ways in keeping with our culture and values as well as our purpose.

From promoting social distancing through flexible work from home arrangements and suspending nonessential travel, to establishing a cadence of regular communication and conducting deep cleaning at all of our facilities, we have taken immediate action to help ensure our workforce’s safety.

Our continued support also means removing undue burdens from our employees that are outside of their control – especially those that are financial in nature.

As a step in that direction, we have established the Mercury Employee COVID-19 Relief Fund, an employee reserve of up to $1 million USD, to support those in most need. This includes an immediate relief payment for hourly employees who are not able to work from home. It also includes discretionary funds to be allocated to those hourly employees struggling with severe financial challenges brought about by COVID-19. While there may be more to do in the coming days and weeks, our hope is that this financial relief fund will help mitigate impacts of the virus on our most valuable stakeholders – our team members.

These are trying times and uncharted territory for businesses around the world. The days ahead will be challenging, but now more than ever, I am proud to represent an organization defined by a collective spirit of compassion and steadfast resolve in face of adversity. As One Mercury we are working hand-in-hand – both internally and with our customers – to ensure our continued success. Thank you for your continued support.