A new focus: In the current crisis situation, the focus remains strictly on cost management for the time being. This can be seen consistently in all the companies we advise. Only then do topics such as supply chain optimization with OPEX and CAPEX move up.
How important is the realignment of strategy in the Corona crisis?
Interview with Managing Director Michael Braunschmidt on the topic of realignment and strategic approach for production and logistics chains.
The production specialist and logistics expert reports on the current situation in companies and why focusing on strategy plays an important role right now.
Mr. Braunschmidt, as the managing director of a management consultancy in the field of production and logistics, you are in the thick of things right now. To what extent do you see imminent change coming to businesses in all industries as a result of the Corona crisis?
In the current crisis situation, the focus remains strictly on cost management for the time being. This can be seen consistently in all the companies we advise. Only then do topics such as supply chain optimization with OPEX and CAPEX move up. And another observation is that here, in particular, the risk assessment of the supply chain network (keyword supply chain mapping) plays a major role for the companies.
Companies also had different consulting requirements at the beginning of the crisis, e.g. short-term adjustment concepts for a temporary lockdown were initially required. There were many trouble spots at the same time that had to be dealt with at short notice. Lack of transparency and unclear priorities had to be eliminated in order to remain capable of acting at all and to avoid a chaotic restart. Now, however, the situation has changed in a different direction. Instead of thinking about shutting down production systems, companies want to get back to a changed normal quickly. Suddenly, factors come into play that mean a 180-degree turnaround for everyone involved.
Can you give examples of this?
While in the past more new locations abroad were in the planning stages for most companies, it is now the case that more thought is being given to regional production, storage and purchasing. So the new hype is all about regionalization – that was not foreseeable before the crisis. We had advised a number of companies on the subject of insourcing, but such a turnaround in the reassessment of local and global sourcing strategies came as a surprise even to us.
Does this mean that companies are trying to become completely independent of China or the USA?
You certainly can’t expect that. Neither is this possible in the age of globalization, nor does it make sense. But what we’ve been recommending for some time is a reversal strategy to the outsourcing we’ve been doing. Here we expect profitable advantages for production and logistics, which in addition to autonomy over the processes also brings the recovery of know-how. Thus, by insourcing production logistics, the entire value chain can be designed according to the company’s own needs. An important keyword in this context is: data ownership. For the companies, this means that all data, meaning the 1st party data of the delivery process, can again be collected and evaluated by the company itself. This, in turn, opens up completely different optimization possibilities, which, especially now in the Corona crisis, also lead to new options for action.
Besides regionalization, are there other priorities that are now being set in production and logistics?
For many years now, medium-sized companies have wanted to catch up with the big players in the area of digitization. This process was rather slow before the crisis. The production area in particular was two steps behind the topic of digitization. That, too, has changed as a result of the Corona crisis. SMEs are being pushed hard right now so that they can fall back on such concepts and measures more quickly in the event of another lockdown. However, the focus is primarily on virtual collaboration in the indirect area, which is a consequence of the high proportion of home offices and low travel activity. For many companies, the networking of machines, plants and systems is still pending or has just begun. In the event of another pandemic, this poses an enormous risk for SMEs. After all, the ability to act can only be maintained in such a situation if the processes are digitized and can thus be controlled remotely. Here, in addition to complete standstill, we currently see areas that burn just as much money with blind actionism as those that are completely inactive. Neither of these is, of course, purposeful. Even though we were caught by surprise by a virus, targeted strategic action should once again determine the company’s fortunes.
So you think that a consistent strategy is important right now. Why do you recommend this at the moment, when quick action is the order of the day?
The crisis triggered by the pandemic in many companies is, absurdly enough, the ideal time to reorient oneself. Now the corporate strategy must be examined and, if necessary, adapted and, in special cases, completely rethought. If this knowledge is available, I can only advise from my years of experience to start this process methodically structured, with a view beyond the horizon quickly. So that, and this is often forgotten, a crisis is also accompanied by a strengthening of the company and the business success.
More than ever, this requires strategic alignment based on methods such as SWOT analysis to then create an action plan that prioritizes, catches up and enables a quick ramp-up.
Let’s take the digitization strategy for example. Despite all the quickly demanded availability, it is necessary to consider exactly where the company wants to go? What are the weak points of the company? Which strategy is suited best for the defined goals? Only with a planned and structured course of action is the achievement of future corporate goals realistic. Hands-on mentality helps to get the ball rolling in the first place – but for companies to develop viable concepts now, the necessary step of strategy formation must not be skipped.
And not to be underestimated is the involvement of the executives in this process, as well as the intensive exchange with the workforce, so that the necessary change management is not skipped. Otherwise, implementation will lack the appropriate determination and speed.
Mr. Braunschmidt, the business community is now trying a restart that takes into account the changed situation and makes companies capable of acting again. There’s not much time for workshops and elaborate meetings. What specific advice do you have for companies in the current situation?
Despite all understanding of the operational, often time-consuming issues, it is advisable to consciously devote time to and intensively engage with the strategy process. External support for the development of the methodology is helpful, also in order to use the experts for knowledge transfer. Once the database has been collected, the next step is to prioritize. In this way, the individual arrives at a suitable action plan, which we work out, for example, in the ifp Strategy House.
Thus, even in large companies, agile project work and focus can result in a good strategy after just a few weeks, without having cut back on methodology or content. Of course, this period always depends on which area is most affected by a possible realignment of the strategy and change management.