What are process-intensive products

"We support our partners by accompanying these teams, jointly defining catalogs of measures and providing technical input - from planning, implementation and consistent follow-up."

Thinking in scenarios: on the way to the 'New Normal'

The corona crisis has the process-oriented industry firmly under control. The far-reaching consequences require companies to act quickly with maximum uncertainty - because the effects are currently neither foreseeable in terms of their severity nor their duration. But which strategy can help against the omnipresent uncertainty? For Dieter Körner, COO of T.A. Cook, is a very promising instrument: use multiple tracks when planning your own future. In the interview, he describes his view of the corona pandemic and outlines possible solutions for the crisis and beyond.

 

 

Mr. Körner, the corona crisis is hitting the entire economy hard. Aside from the obvious economic consequences: What is driving the companies you work closely with right now?

It is simply nothing like it was before. Of course, our partners also deal with fundamental economic issues first. I have just read the latest forecast from the economies that expect a slump of three to five percent in 2020, depending on the scenario. No company knows how long emergency strategies and the measures taken make sense. And even less does it know when and at what speed the system output can be restarted in order to be ready for the 'restart' after Covid-19 and not to miss the connection.

What is the specific situation in the plants, what is the entire process-intensive industry currently doing there?

That depends on very different influencing factors, which vary greatly depending on the industry and company. Central aspects are the topics of supply chain, i.e. the supply chains that are interrupted in many places around the world and the demand. Many of our customers cannot plan with certainty when, how long or in what quantities the required resources will be available. Conversely, they do not know how the demand is developing, as it is currently fluctuating very much. This means that companies have to constantly redefine and plan their needs. So far, our partners have never seen challenges of this type and scope. In addition, there are parallel developments that have nothing to do with the Corona crisis - for example, the oil price, which is currently falling sharply. This is an advantage for some companies whose production is based on this raw material, for example. For the refining industry, on the other hand, two negative trends come together at the same time.

In the end, that means: companies cannot plan production reliably, which also makes planning all ancillary processes more difficult?

Exactly. In industries in which there is continuous production or manufacture, the raw material, delivery and demand problems mentioned may be a little less dramatic - there, capacity utilization and thus production is shut down in a controlled manner. In batch processes where batch sizes are produced - for example in parts of the chemical industry - our partners are forced to rely more and more on daily production planning. In other words: Task forces have been established that check demand every day and take countermeasures in the event of changes. These planning cycles are considerably shorter and more complex than the previous planning horizons. In addition, however, the direction in which the virus spreads represents a further challenge, especially for companies, especially for international partners.

Why this?

We can observe two global streams of spread of the virus: the east-west movement, i.e. from China via Europe to the USA, and a north-south movement. This further increases the uncertainty because the already complex planning becomes even more difficult. After all, our partners, who have locations around the world, cannot pursue a sensible strategy if the virus is decreasing in one region and increasing elsewhere at the same time.

 

So far we have only talked about procedural aspects. But also or especially the human factor should pose difficult tasks for your customers ...

It's really interesting how companies deal with it. Take shift work, for example. First of all, of course, staff will be reduced in order to minimize health risks and at the same time position itself as economically as possible. In order for the procedures or processes to work smoothly despite everything, among other things, purely virtual handovers take place so that the staff no longer has to meet in person. This means that companies are taking - often digital - measures that a few months ago would probably have been unthinkable or, at most, realistic in the long term. It is precisely with such complex implementation measures that we support our customers with our experience in order to protect the health of employees and at the same time to act as economically as possible. Such plans are therefore worked out at desks that are far away from the systems. This is new - but it works so far.

Examples like this bring us to the all-important question: What can and should companies do to manage the crisis as best as possible and to minimize losses?

Of course, the health of the employees is clearly the top priority in all companies. That is exactly why we implement remote & digital project work together with our partners. In addition, the most important measure is already in full swing at almost all companies with which we work closely: to put all costs to the test and to differentiate “good” costs from “bad” costs. In addition to current issues, this applies above all to future issues. So very different sub-areas are affected, which raise different questions. For example: What do I do with a plant shutdown that has already been planned? Does it have to be as big as estimated or can I reduce the size? Can I drag my downtime into times of low margins? How is customer demand developing? Do the service providers currently have the necessary capacities to postpone the standstill? What do security measures and restrictions look like? These are important questions right now, especially since not all manufacturing companies are experiencing declines in production. Some continue to drive almost at full load. Companies are therefore called upon to think much more multidimensionally.

So you mean: cost cuts must be - but ultimately only make sense if they also bring long-term benefits?

Exactly that - but not according to the watering can principle. Due to the current crisis, we simply look at certain decisions in a completely different way. A standstill that was previously firmly planned and classified as absolutely sensible can suddenly be potentially less important or even harmful from a margin point of view. Despite all the drama, the corona crisis offers an opportunity insofar as some 'black sheep' can be identified. By that I mean historically grown cost factors, maintenance services, PM measures or management processes, in which I notice in the course of the evaluation: The reduction or abolition not only saves costs now, but also offers a competitive advantage for the future. At the same time, there is the possibility of re-questioning planned future investments, which should, for example, contribute to expanding capacity or increasing OEE. It is very realistic to assume that the Corona crisis will have a decisive influence on future demand. In this respect, 'ramp-down' measures, i.e. the reduction of costs, capacities and services, currently make sense.

Nevertheless, companies cannot crush all strategies and processes just to save costs - whether short or long term ...

This is exactly why many of our partners are trying to take the measures just described - and I personally find that very entrepreneurial! - also to maintain established structures. The supply chain also plays a major role here. The current situation is disruptive. In many places the established network is no longer working. In many companies this leads to questioning and optimizing their own sourcing strategies - up to and including a complete reorganization. In the case of partners I work with, I notice one thing above all: The frequency of communication with customers and service providers has increased both quantitatively and qualitatively, and the contact is much closer. They want to determine needs at an early stage and mutually respond to each other's needs. In the current "ramp-down" phase, the network is being significantly expanded, intensified and maintained.

So the management of many companies is already doing a lot. In which areas do you still see potential for expansion?

In my opinion, many companies could and should develop their integrated, strategic planning. If you look at the corona crisis from a business psychological point of view, one of the most common mistakes is not having a plan. Of course, given the fast pace of life, this is not an easy undertaking. Nevertheless: Without a real strategy, decision-makers have been shown to react hectically and thus in the end - at least partially - wrongly. The big challenge facing management is that the plan no longer exists. You have to think and plan in scenarios, i.e. develop several strategies in parallel and back them up with concrete options and alternative courses of action. What is then needed is navigating between possible scenarios - a strategy that does justice to the current dynamics.

That sounds extremely complex. In your opinion, why is it worth the effort?

Despite the many unknowns, one thing is already pretty certain: the world will not be the same after Covid-19. I like to speak of the 'New Normal'. No scientist, no expert knows what this new normal will look like - not even economically. This is exactly where scenario planning comes into play, in order to be ready for the time after the crisis and the "ramp-up" phase. Each scenario should define the duration and impact of the measures as precisely as possible. How long will it take the market to recover? How quickly will demand rise again? When can I run my systems at full load again? What is the competition doing? Where else do I have to expect restrictions due to Covid-19? All of these questions should be included in the individual scenarios. In the next step, these scenarios should be designed in as much detail as possible with recommendations for action. Here I see a need to catch up and support many companies.

In your opinion, what does it take to implement such scenario planning as efficiently as possible?

In asset management it is extremely important to know which capacities will be needed and to what extent in the future. In addition, investments must be made as precisely as possible. Broken down to a system, questions arise such as: Which systems do I run with which OEE figures? For which systems do I have to create which availabilities? Both aspects require a large number of investments - for capex, downtime or maintenance measures. This is exactly where we support our partners. In addition, suitable structures must be created for all of these measures. How many employees do i need? Are there new ways of working that I can use to optimize processes? Which shift models make sense? We are currently working closely with our partners on this type of structural planning. Because we are active internationally, we know good practices, requirements and developments that we can bring to the transformation. Especially in an uncertain time of crisis like now, there is important stability if you can use a tried and tested method.

In order to release such capacities in the long term, further processes of change will be necessary. How do I, as a company, ensure that it is consistently pursued?

The keyword here is 'Dedicated Resources'. Of course, there were also processes of change before Covid-19. Often, however, these were rather static, i.e. work was strictly carried out according to a plan. The current extremely dynamic situation, in which today's strategy may be out of date or obsolete tomorrow, requires a strong team that only takes care of the strategic planning described. The first companies have already established such 'Swat Teams' and 'Transformation Teams'. Here we support our partners by accompanying these teams, jointly defining catalogs of measures and providing technical input - from planning to implementation and consistent follow-up. In this way, we can optimize directly and deal with the operational problems that the industry is currently struggling with - for example the loss of employees and the far-reaching restrictions - on a daily basis. In asset performance management in particular, we not only take on the role of the driver in project management, but also that of the expert.

Is it realistic to simultaneously manage the current crisis as optimally as possible and at the same time prepare for a future that is difficult to predict?

Trends and demands have to be implemented with ever faster frequency. As a result, the need for information and communication is constantly increasing. Accordingly, what you have just learned can be integrated directly into your own planning. We are currently seeing that online work can work very well, solid networks can also survive critical phases. It is important to press ahead with these positive aspects. If technological development is consistently continued in parallel - for example, I'm talking about the networking of manufacturing machines in a plant - I as a company will be much better prepared for future times of crisis because I can react much more flexibly to sudden changes. In this respect, today's crisis management and the transformation of scenarios can be combined in a meaningful way.

Dieter Körner, COO

Dieter Körner coordinates as COO and partner at T.A. Cook the strategic direction of the international management consultancy. With more than 25 years of experience in asset management, he looks after international key accounts from the asset-intensive industry. The graduate in business administration has an MBA from the University of Passau. Before moving to T.A. Cook in 2007 he was Director at H. Neumann International Management Consultants GmbH in Munich, Partner at Czipin Management Consulting and Senior Account Executive at Proudfoot Consulting.
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