roland berger operations flexibility in process industries 20110222

7/29/2019 Roland Berger Operations Flexibility in Process Industries 20110222

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OPERATIONS FLEXIBILITYIN PROCESS INDUSTRIES

1

e ruary


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Contents Page

.

B. Industry trends drive flexibility requirements 12

D. How to embed flexibility within operations strategy 20

E. Best practice flexibility levers 27

2

This document was created for our client. The client is entitled to use it for its own internal purposes. It must not be passed on to third parties except with the explicit prior

consent of Roland Berger Strategy Consultants. This document is not complete unless supported by the underlying detailed analyses and oral presentation.

2008 Roland Berger Strategy Consultants GmbH 2


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IntroductionA

33


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The study covers three process industries with similarcharacteristics in operations

Scope of the study

SIMILARITIES OF

CHEMICALS

OPERATIONS

Capital intensiveproductionequ pmen w

long depreciablelife

Broad product

Batch production

Regulatory

requirementsExamples: AdhesivesExamples: Anesthetics

Examples: H iene roducts

Globaloperations

Coatings Pigments Solutions Additives Agents

Infusions & injections Clinical solutions Tablets & pills Clinical nutrition Clinical agents

Beverages & water Cleaning agent Washing powder Foodstuffs Dairy products

4

o vents etc.

etc. etc.


5/37

We have conducted more than 80 focused interviews with senioroperations managers from international industry leaders

Study approach and participants

OUR APPROACH

Comprehensive list of flexibility levers

(SELECTION)

Consultants project history

Preparation of hypotheses by partners

RBSC Competence Center OperationsStrategy and relevant industry

practices

More than 80 structured face-to-faceinterviews with decision makers, ratherthan questionnaire based statistics

5


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Four major trends put challenges for companies in all analyzedprocess industries

Key common trends in process industries

82%

What are the key challenges your company faces today? Volatile demand patterns is namedas the highest current challenge;while at the moment most

76%

55%

61%

companies experience an upswing

and struggle to serve marketdemand there is awareness thatthe next downturn is coming

second and puts companies undera constant restructuring andreorganization pressure

markets put the challenge to limitthe upwards trend by securingbenefits from short term drops

The shortenin of roduct life leads

6MUC-

demand

patterns

energy & raw

material markets

cycles to a constant ramp up-/ down

cycle the needs to be managed


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Eight trends in the pharmaceutical industry require more and moreflexibility in operations

2 3 41

PHARMA-CEUTICALS

-les are shorteningdue to reducedpatent protectionrequires faster

standards arechanging fre-quently in thepharma industry

from health payersis ever increasingdemanding pharma-economic benefits

running out onmajor blockbusterdrugs puts pressureon operational cost

ramp-up an ramp

down of operations

requ r ng qu c

adaptations

s ruc ure a us men

85 6

-

7

acquisitions as aresult of portfoliooptimization requirequick and efficient

-

Asia is increasingrequires a moreglobal footprint(India and Asia but

is increasing dueto more and morepersonalizedproducts

nology develop-ments is increa-sing along thepharma value

7Source: Roland Berger

-integration ofoperations


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Five trends in the specialty chemicals industry require more andmore flexibility in operations

1 2 3-

sitions as a result ofportfolio optimizationrequire quick andefficient carve-out and

extending theirvalue chain andbecoming solutionproviders to evade

of manufacturingpenetration to freecash for innovation

SPECIALTYCHEMICALS

n egra on o

operations

commo za on o

their products

4 65

-Asia is increasingrequire shorterreaction time towardscustomers and thus a

availability due toincreased compe-tition and decliningcustomer loyalty

establish scalesynergies to be costcompetitive whileavoiding asset build



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Six trends in the consumer goods industry require more and moreflexibility in operations

1 2 3

patterns due tochanging consumerbehaviour andseasonal variations

life cycles due toincreased compe-tition, technologicalimprovements and

diversity due tocustomers demandingmore and morepersonalized

CONSUMERCARE

ncreas ng cus omer

requirements

pro uc s

4 65

--packagingdue to regionalregulations andincreased

availability due toincreased compe-tition and decliningcustomer loyalty

boarder activitiesdue to furtherinternationalizationand limited growth


markets


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Most companies in the process industries have recognized theneed for flexibility

Verbatims Kurt Hogh (Value stream optimization)"Stricter market requirements (in terms of fresh

-

Jeffry B. Kindler (CEO)

"We must reduce our absolute cost andput in place a more flexible structure"

, ,demanding customers,) and strategic targetsmean that flexibility must be at the heart of ourcompany "1)

" our business now meets allconditions for long-term success: flexibleasset structures and a global focus

" Flexibility will have an ever

increasing relevancy in order toreduce capital tie-up and to be ableto react more quickly"

1)

backed by regional flexibility"

(Annual report 2007)

"Great flexibility is really importantso that we can rapidly adapt to

how our local customers work."

Dr. Rainer Oschmann(Executive General Manager)

" Operations flexibility is a clear"

(Letter to shareholders, June 2007)

" [Our] financial strength is therefore theresult of the followed strategic course and

10

of the flexibility and speed with which

external challenges are dealt with."(Mission statement 2008)1) Translated from German source


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Participants of this study confirm the relevance of flexibility however systematic transfer into their operations strategy is rare

Flexibility objectives and operations strategy

Do you perceive operations flexibility as one of yourtop 5 priorities?

Beverage producer, Production manager

" operations flexibility is very importantin our capital intensive industry" Pharma and Chemicals Group,

11%

89%Specialty chemicals company, COO

" flexibility is much more economicalthan investing in forecastingexcellence we had to learn it the

Head of Business development

"Definitely, flexibility is among ourstrategic goals. We would soon beout of the market if we would notconstantly try to react as flexibly asossible."

noyes

Do you systematically define strategic measures toachieve this objectives?

hard way"

Consumer Care company; Managermanufacturing

"Onl when we felt the stron market ush

44%56%

and had to quickly boost our output did werecognize significant hidden flexibilitybuffers; in one plant we where able toincrease output by 15% without anyinvestments"

,Head of Strategic Planning

"Operations flexibility is soinevitably important. It would befoolish if we left it to chance."

11

noyes

Pharmaceutical producer, Head of Operations

"We do build in flexibility but it is rather a functionalresponsibility than a systematic corporate approach"

Source: Roland Berger interviews, 2008


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Industry trends drive flexibility requirementsB

1212


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Different flexibility types exist: from handling of day-to-daydemand fluctuation to strategic considerations for M&A activities

Types of flexibility

TYPE EXPLANATION EXAMPLE

Demand The capability to deal with volatiledemand patterns

Increase in the advent of a new product

or the downturn at the end of theproduct life cycle

1

Geography The capability to install necessaryoperations for a new market entry (e.g. local supplier integration)

Entry into Chinese market making use oflocal labour cost advantages (keepingup necessary ingredient quality)

2

Network

Technolo

The capability to change volume andproduct allocation within a global siteportfolio

The ca abilit to re lace old technolo

e.g. new products, market demand shiftsor currency changes might require anoptimized utilization of global sites

e. . new small batch technolo ies

3

Mergers & Acquisitions

with new technology

The capability to make use of synergies

require different skills and productionsystem set-ups

Integration of newly acquired plants into

4

13

or re a n ex s ng synerg es n e case

of investment and divestments

an ex s ng pro uc on ne wor


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For the analyzed industries, the different types of flexibility havedifferent relevancy demand flexibility is a common requirement

Relevancy of different flexibility types

CONSUMERCARE

SPECIALITYCHEMICALS

PHARMA-CEUTICALS

Demand

Low High

Demand Demand

Low High Low High

1

Geography Geography Geography2

e wor

Technology

e wor

Technology

e wor

Technology

3

4

14

Mergers &

acquisitions

Mergers &

acquisitions

Mergers &

acquisitions

5

Source: Roland Berger interview results, 2008


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1 DEMAND FLEXIBILITY

Predicting yearly flu types is very difficult for the pharmaceuticalindustry demand for one serum can be very high or zero

Example: Flu serum

Back roundDemand

Serum has to be reproduced every year, as the virustransforms every year

Inventories are therefore not possibleReal demand

,

should be produced/normally three types of viruses arecovered Development of year specific serum takes up to 6 months Extremely high demand of incubated eggs for repro-

for type A

demand for specificvirus (later: type A)

demand

duction of antibodies (Impfviren), capacities are limited Serum manufacturers expect that demand will double

within the next 10 years, resulting in production capacities

restraints

ype

demandt oe C

Problem

Only one serum is really needed for one specific type Production capacities have to be extremely flexible to

t

Autumn Summer Fall Winter

15

Source: Pandemic Report 2006

react to a specific demand

Limited production capacities


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2 GEOGRAPHICAL FLEXIBILITY

Manufacturing networks will continue to go through a significanttransformation process in the future

Attractiveness of market and production environment

Existin roduction networksDevelo in countries will further increasewill transform

Rationalization of WesternEuropean industries

industrial assets and production capacities

High China

Significant development ofindustrial assets in EasternEuropean regions and Asia

India

France

will occur in Europe

Need for geographical

flexibility of operations thus

Marketattractiveness1)

CzechRepublic

Mexico

Germany

Italy

will increase

Low

South Africa

16

1) Growth, Attractivity etc.2) Labor cost, country risk, infrastructure

attractiveness2)

Size indicates market size


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3 NETWORK FLEXIBILITY

Flexible production networks allow companies to adapt tochanging market conditions on a short-term base

Manufacturing network aspects

Ex lanation

Make use of globalproduction networks,e.g. shift production

production of lowvalue-addingcomponents

100%

Productionvolume

Volatile demand

patternProductioncapacity Degree of value

added

Volatile Share ofvalue added

e a e o reac on ashort-term base onchanging businesscharacteristics

t

Use of flexibleproduction volumes

e.g. use more

volume/capacities due

for productionvolume shifton a short

term base

Production of

labour

Labor costs

value added isdecreasing

intensiveproducts

Make use ofrelative cost

17


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4 PRODUCT TECHNOLOGY PORTFOLIO FLEXIBILITY

State of the art product technologies are needed to decrease costs product technology flexibility is seen as key enabler

Example: Energy consumption and costs

10 Energy consumption is growing

steadily

Energy consumption[Terajoule]

Costs[Eurocent/kWh]

1,000

6

8

Energy costs rose with a CAGRof 12,7% from 2000-2007

The ca abilit to re lace old with

600

800

2

4

new technology will increaseproduction efficiency anddecrease costs

200

400

1994 1996 1998 2000 2002 2004 2006 2008

Eurocent/kWh

1994 1996 1998 2000 2002 2004 2006 2008

Manufacturing industries

18

Source: Statistisches Bundesamt / VCI-Chemiewirtschaft in Zahlen 2007 / BDI


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5 BUSINESS PORTFOLIO FLEXIBILITY

M&A activities and value chain reconfiguration require operationsto be flexible towards portfolio changes

Business portfolio flexibility

Drivers for ortfolioM&A transaction value Euro e USD m

Businesstrends

changes

M&A activities

Until 2004: mainly cost-focused -

100,000

Consumer

oriented

Ongoing changes in Value ChainConfiguration Competition of value chains

,

40,000

60,000

oo s

Pharma

Forward and backwards

integration and des-integration

1994 1996 1998 2000 2002 2004 2006 2008

20,000

0

Chemicals

Ops chal-lenges

Manufacturing: Process for product transfers, modular value chain, flexible support functions,

Supply chain management: Scalable distribution infrastructure, standardized processes and systems,

19

Purchasing: Global and regional sourcing strategy,

R&D: Platform strategy, alignment with manufacturing,


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How to embed flexibility within operationsC

strategy

2020


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Choosing the most suitable flexibility levers is often prevented byfour common ruptures along the strategy process

Ruptures along the strategy process

1st common rupture:

Business flexibility needs are notsystematically assessed for top downstrategy development

.BUSINESSSCENARIOS

Businessscenarios

Businessscenarios

flexibilityneeds

Business flexibility needs are notsystematically transformed into operationsflexibility needs

2nd common rupture:

Manufacturing SCMPurchasing

Operations flexibility needs2. DEDUCTFLEXIBILITYNEEDS

Operations flexibility needs are not

3rd common rupture:Flexibility lever toolbox3. SELECT BEST

FLEXIBILITY

system of flexibility levers Overlapsbetween levers generate a hidden flexibilityLevers applied

LEVERS

EBIT

21

Neither a systematic forecast nor controllingof gains from flexibility is made

.IMPLEMENTATION

tActual

Source: Roland Berger


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DEVELOP BUSINESS SCENARIOS1

Establishing flexibility starts with creating different business scenariosand assessing the related cost and benefits of flexibility

Determinants of flexibility value

to evaluate cost and effects of becoming moreflexible. Business scenarios can be calculatedwith different time horizons and incidentprobabilities

Scenario A Occurswith

The cost of becoming more flexible aredetermined by the actual degree of flexibilityand the cost of implementing additional

Noinvestment

Incident

PA

flexibility measures. The type of measures tobe implemented crucially depends on the timehorizon of the business scenarios

The benefits from flexibility are the effectsresulting from the measures implementedduring the realization of one of the possiblebusiness scenarios

investmentin flexibility

Scenario B

withprobability

PB

22 Airbusinterview

Gains from flexibility scenario BGains from flexibility scenario ACost of becoming more flexible

EBIT development scenario A EBIT development scenario BTIME



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DEDUCT OPERATIONS FLEXIBILITY2

Business flexibility needs are often not systematically derived fromthe company's strategic objectives

Link between strategic objectives and measures

Strategic objectives could be able to

cope with demand increase of 10% Further divestments of operations

The majority ofparticipants confirmflexibility to be part of

Is flexibility part of yourstrategic objectives?

assets; increase of outsourcing levele r s ra egy%

39%

Demand fluctuations of -5% without

Independent OP objectives

Yes No

Is flexibility transferred as

an objective of your

purchasing price effect

Develop second supplier for keycomponent

Compensate 5% volume reduction in

On the other hand a lot

of companies lack theopera ons s ra egy

41%59%

-facturing

cost per piece

Prepare to insource 30% of volumefrom contract manufacturer

Build task force to prepare integrationof potential acquisition

desiered flexibility oftheir operations

23 Airbusinterview

Yes No SCM Demand changes of 5% without

decreasing service level

Source: Roland Berger interview results, 2008


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SELECT BEST FLEXIBILITY LEVERS3

Selection of flexibility levers is not always based on the respectiveimplementation cost and time

Levers selection matrix

Hi h

MANU-FACTU-I Use of multi-purpose plantsI.2

Optimize production footprintI.1

I.9 Kanban utilization

I.8 Define pull/push pointsCost of implementation

I.3 Buy options on infrastructure/real estate

I.4 Joint facility utilization

Keep options on future technologiesI.6

Use modular/flexible manufacturingI.7

I.10 Optimize change-over time and cost

I.11 Consider total lifecycle costs

I.13 Introduce advanced operating schemes

I.14 Postpone product differentiation

I.12 Reduce lead time in productionI.5 Make-to-order

I.1

II.11

III.5

III.1 IV.4

II.10

IV.3

II.1

PUR-CHASING

IIMultiple sourcingII.2Global/cross-regional sourcingII.1

II.3 Peak sourcing

II.4 Negotiation/reflex

II.9 Sale & lease back

II.8 eProcurement

II.10 Standardization of product structure

Make-or-buyII.7

I.6

I.2

I.5 II.14

.IV.1

II.12

III.3

III.3

I.13I.12 II.8

e . Risk sharing partnershipsII.5

Supplier collaborationII.6

SCM/Logistics

III

III.3 Supply chain collaboration

Flexible warehouse dimensioningIII.2

III.1 Warehouse footprint optimization

II.11 Modularization

III.5 Advanced planning systems

III.6 Optimization of contractual conditions

for assets

I.4

I.3

II.12 CLB organization

II.6 III.6

II.5 III.4

IV.8

IV.9III.7

IV.6

III.8

I.7II.2IV.2

IV.6

I.11II.7

III.4 Outsourcing

GENERALIV IV.1 Partnerships/JV

Monitoring systems/KPIIV.2

.

III.8 Risk sharing with logisticsservice providers

IV.6

IV.7

Flexible working hours

Temporary workers

II.4

I.8

I.9

II.9

I.10

II.3

24

Low

Short-term Medium-term Long-term

IV.4 Modularization & standardization ofprocesses

.

Continuous improvementIV.5

IV.9

.

Orientation on industry standards

Time to implement



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MEASURE IMPLEMENTATION4

Decisions regarding flexibility are made with limited knowledgeabout cost and gains; effective measurement is neglected

Transparency of flexibility

Do you measure flexibility of your internal

QUOTES

"We build buffers and flexibilize

CONCLUSION

The majority of companies

operations?

47%31%22%

wor ng ours a t oug we are notreally sure these efforts pay off ..."

do only have a rough ideaabout their internalflexibility

Most companies cannot

Do you measure the flexibility of yourexternal supply chain?

NoPartlyYes

"Often we are not exploiting ourflexibility potentials where we couldbecause su lier are not trans arent"

flexibility because they donot measure it

Consequently decisionsregarding flexibility aremade with limited know-ledge about cost and gains

Effective measurement

systems are not fully

55%35%

10%

NoPartlYes

Do you know the cost of being moreflexible?

60%

" We tackle flexibility needs whenthey occur, then we make a businesscase and calculate cost implications"

"What is more complex then

25Airbusinterview

10%

NoPartlyYes

ca cu at ng ex ty cost s to get toknow the benefits of flexibility"



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Using a systematic four step approach, the four common ruptures canbe overcome and the full value of flexibility can be utilized

Four step approach

DEVELOP SCENARIOS CLUSTER OPERATIONS SELECT BEST SET OF CONTROL FLEXIBILITY

Cancel

high

Probability x Size

high

Cost of implementationEBIT

No Best caseScenario

A

Condideronly

mediumcost leversbut allow

medium

medium

-ment in

levers

Incident

ScenarioB

all

leverswithshortimpl.time Be selective

for moretime to

implement

low

longmediumshort

Time to scenario

low

longmediumshort

Time to implementt

investmentin levers Worst case

cenar oC

and reviewcontin-uously

Evaluate different businessscenarios

Derive of flexibility needs foreach business scenario

Cluster specific flexibility needsfor each scenario along theproduct of probabiliy and size(benefit/risk) and time tillpotential occurance

Select levers that reflect theprobability x size category as wellas the time horizon of the scenario

Detect hidden flexibility bycom arin feasible levers with

Constantly review flexibiltygains and cost

26

those already implemented andcancel those

1st rupture closed 2nd rupture closed 3rd rupture closed 4th rupture closedSource: Roland Berger


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Best practice flexibility leversD

2727


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DEMAND FLEXIBILITY LEVERS

Levers to tackle demand flexibility are well known, though theirimportance in the eyes of operations managers is changing

Top levers address demand flexibility

Rank # General Purchasing Manufacturing Supply chain

1 Temporaryworkers

Multiple/dualsourcing

Reduce lead timein production

Push-pull-pointdifferentiation

IV.7 II.2 I.12 III.4

Suppliercollaboration

II.6 Subcontractoruse

I.15 OutsourcingIII.4

2 Flexible workinghours

Global/crossregional sourcing

Multi purposeplants

Advanced planningsystemsIV.6 II.1 I.2 III.5

Buffer stocksIII.10

Com-ments

Temporary workers andinternally flexible workinghours in the most common

means to tackle demand

Multiple sourcing or dualsourcing is applied forcritical materials

For materials/services

Lead time reduction isclearly highest on theagenda of manufacturing

responsibles

A differentiated definitionof push-pull-point (make-to-order vs. make-to-stock)

has risen in the attention

Models of both leversstrongly depend on locallegislation

collaboration models up toJV approaches are applied

For suppliers where secondsource is too expensive

by using subcontractors forvolatile/peak demand

Multi purpose plants areconsidered where

established lever to sharevolatility risk with serviceproviders

Buffer stock is used to

2828

production at supplier is

requested/ supported

potentials though focus is

on lead-time reduction inproduction instead



29/37

M&A FLEXIBILITY LEVERS

With regard to establishing flexibility to better handle divestmentsand integrations, the clear focus is on more standardization

Top levers applied to address mergers & acquisitions

Rank # General Manufacturing Supply chain Mgmt. Purchasing

1 Orientation onindustry standards

Optimize produ-ction footprint

Warehousefootprint

Corporate LeadBuyer organization

IV.9 I.1 III.1 II.12

Productionsystem

I.17Outsourcing

II.7StandardizedMonitoring/ KPI

IV.2

2 Standardized&scalable ITsystems

Standards oncommodity codes&use of databases

IV.3 II.13

sys ems

Com-ments

Industry standards is widelynamed as key to be flexible

Often though standards are

country specific and the

Clearly still on the rise isthe introduction ofproduction systems

Even if implementation will

In the context of PMI oftenoutsourcing is helpful,provided the contract is set

up in a flexible way for such

A corporate lead buyerorganization is consideredby most of the participants

as highly adaptive to

Standard KPI systems area key lever to quicklyintegrate new companiesand make them

company that has one isachieved much faster

Often companies take thechance to outsource duringM&A situations as thejustification case with

The increasing use ofstandard commodity andsupplier codes also is veryhelpful in integration

29

IT standards are an

advantage but depend onthe target company's setup

built more easily



30/37

During the interviews companies across all industries analyzedand gave an insight into how they establish flexibility

FLEXIBILITY TYPES

Geo- Tech- M&ADe-1 2 4 5Net-3

INDUSTRY

Pharma Consumer Chemical

Overview flexibility cases

1. Central coordination department 1

.industry

3. Fast growing markets inconsumer good industry

3

. External intermediate business asa buffer

4

network and service provider

7. Network and geographic flexibilityto satisf lobal customer base

6

30Source: Roland Berger interviews, 2008

8. Selective M&A Strategies to reacton changing business environments

7


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1

A manufacturer of pharmaceutical products uses a centralcoordination department to react to short term customer demands

Interview example: Pharmaceutical industry

SOLUTIONSITUATION/CHALLENGE

High volatility in demand Fast chan in customer

Central coordination department

Complex market conditions Close working relation-ship with customers andfast communication of

Central coordination department as an "earlywarnin s stem" to react to trends

Coordination

department

needs/preferences

Short product life-cycle

R&DProduc-

tionMarke-

tingCus-

tomers

organization via centralcoordination department

Enhance production capabilities Continuously improve production technology (e.g.

cross industry benchmarking for production

technology of flavors)

Best practice technology

is key important React to specific country regulations, produce big lot

sizes for one country and minimize set-up times

Standardize products in close relationship withcustomers to improve planning flexibility

Improvetechnologyand planning

Contract manufacturingwith high volumes

Special regulations forindividual countriesBest practice

31

n ance wor orce ex y; mu -purpose use oworker capabilities (can operate all lines)

production strategy



32/37

2

A consumer goods producer uses a mixture of measures to dealwith volatile demand

Interview example: Consumer industry


Volatile demand pattern

Demand

Studies on market development and trends on aregular basis

For selected products customer forecast on weekly

Closecooperationwith the

Time

For selected products only make-to-order

customer

Flexible machinery Set up APS to get overview on global [?] capacityFlexible

during change-over

Flexible maintenance contracts with service provider(maintenance during time of low demand

andproductioncontrol that is relatively predictable

ex-t me wor ng ours account

Job sharing (partly hob in production/partlyadministration)

Usage part time employees (5-20%) depending onHR-Management

32 Airbusinterview

Very "flexible" workers (e.g. students) for high peaks

(up to 10%) "Hausfrauenschicht"

measuresTime

Scenarios



33/37

3

A consumer goods and a pharmaceutical producer use a four stepapproach to deal with fast growing local markets

Interview example: Chocolate industry

SITUATION/CHALLENGE SOLUTION

Fast growing local markets Supply of the customer in fast growing markets bydistributor

Distribution to the county is organized by chocolate

Contractswith localdistributors

pro ucer to secure ats e very t mes

Jointventures

In several countries the chocolate producer has jointventures with local companies

that are relatively predictable

Demand

eman n oca mar e s g enoug , own sa esorganization id founded

Organization of whole distribution from the productionplant over the warehouse to the final customer by the

Additionalown salesorganization

Build-up of additional production plants in the fast

growing markets Preferred option if business opportunity appears stable

and needed ualit standard can be achieved inAdditional

roductionTime

33 Airbusinterview

countries

Often acquisitions are used for a fast increase of localproduction capacity

plantsScenarios



34/37

4

A large pharmaceutical producer uses external intermediatesbusiness as a buffer to cope with fluctuation of internal demand

Interview example: Pharmaceutical company


Company sells intermediates to external customers

If internal demand is increasing/decreasing, business

with external customers is slashed/increasedExternalInternal demand

Volatile internal capacitydemand

ex y s secure y re a ve y s or - erm con rac s

with external customers Due to combination of internal and external demandeconomies of scale can be realized within the plants

as capacity

reserve

Extensive use of multi-purpose-plants

Avoidance of continuous production processes

Standard shift models to vary personnel capacity

Time

combined with extremelyflexible plants

Manufacturing technology , ,

job rotation)

Manufacturing KPI system to measure performanceand flexibility

Flexiblemanufac-turingsystem

34 Airbusinterview

companiesProductsPotential of plant equipment



35/37

5

A large consumer goods company facilitates its manufacturingnetwork and service providers to cover demand fluctuations

Interview example: Consumer goods company


Mostly local manufacturing for local demand, at leastfor commodity products

Worldwide sister plants use same raw materials (e.g.Manufac-Demand

Different demand patterns

Product 2

, Shift of production capacity is institutionalized within IT

systems for the case of demand peaks, local rawmaterial shortages etc.

network

Time

Product 1

ro uc

combined with increasingcomplexity in packaging

Number of

packaging variants

Contract manufacturing is used to cope with demandpeaks

Service providers have expert knowledge when it

comes to fast product/plant changes, often

Use of

service manu ac ur ng o pro uc s w sma o s zes soutsourced

Benchmarking with the external service providershelps to increase speed of product/plant changes

providers

35 Airbusinterview

TimeTechnology

Throughput optimization with machines focussed onone product type (e.g. shampoos), flexible automation

of machine periphery to cope with packaging variants



36/37

6

A specialty chemicals manufacturer combines network andgeographic flexibility to satisfy its global customer base

Interview example: Specialty chemicals


Products are produced in technologically identical("twin") plants (e.g. 2-3 twin plants per region)

Local production for local demandsNetwork

Global customer base

ree capac es are s are w n every reg on

Payoff time for local infrastructure shortens astransportation costs are on the rise

flexibility

ncrease o oca coverage w par ners ps og s cssuppliers) and joint ventures (e.g. [not yet] favorableM&A targets)

Leveraging advanced planning systems (e.g. SAP

requires presence in localmarkets

Geographicflexibility

Utilizing standardized IT systems for effectively routing

flow of goods & products together with logisticspartners

36

Own site Joint venture



37/37

7

The specialty chemicals company uses hedging and selective M&Astrategies to react on changing business environments

Interview example: Specialty chemicals


Flexibility for product technologies is achieved byselectively acquiring specialized competitors

Post-merger integration of acquisitions is done

Winning with acquisitions

changing technological requirements

Immediate integration of acquisitions into global leadbuyer structure

Centralized roduction onl for business units offerin

SelectiveM&Astrategy

significant economies of scale

Risks of volatility reduced by broad business portfolio

Hedging with+105%

USD/t Prices for important raw materials are secured by

using futures e.g. on commodities such as palm oil

High planning security as prices are locked in

High flexibility to get the optimum independently of

37

time

price developments

Possibility to smooth out peaks and downs


roland berger operations flexibility in process industries 20110222

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