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Germany´s Advantage - Integrated Logistics & Production


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Results of the current Miebach Study on the situation in Germany concerning logistics and production

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Germany´s Advantage - Integrated Logistics & Production

  1. 1. Germany’s Economic Advantages Integrated Production & Logistics as a Factor for Success A study by: Germany Trade & Invest GmbH Institut für Fabrikbetriebslehre und Unternehmensforschung (IFU) at TU Braunschweig Miebach Consulting GmbH Verein Deutscher Ingenieure e.V. Neu Isenburg, Berlin, Düsseldorf, Braunschweig April 2010
  2. 2. Preface The international economic crisis Production and logistics have already A handful of companies in Germany study was presented at the Deutscher Alexander Schenk clearly demonstrated the result of a developed into a solid economic focus have already recognized this – they Materialflusskongress (German Mate- Member of CoC Lean SCM strong dependency on exports: it put in Germany. According to a current have developed Best Practices and rial Flow Conference) in Munich in Miebach Consulting pressure on Germany, as a center of OECD study, the manufacturing trade are using the existing economic ad- April 2010, the picture had stabilized, economic activity, to take action as in Germany contributes a significant vantages in Germany more efficiently and constructive tendencies are now Dr. Johannes Mandelartz the global markets were collapsing. proportion – more than 26 % – of the than others. predominant. Managing Director High wages, growing transport costs gross domestic product. Well over 12 VDI Produktion & Logistik and an increase expected primarily in million jobs are directly related to pro- This joint study by the Verein The authors hope that this study can foreign sales are all forcing companies duction and logistics services, forming Deutscher Ingenieure (Association of have a positive impact on companies Prof. Uwe Dombrowski to consider whether it makes econom- a solid foundation for prosperity in the German Engineers, VDI), the Institut in Germany and on those considering IFU – TU Braunschweig ic sense to outsource their production Federal Republic of Germany. für Fabrikbetriebslehre und Unterneh- Germany as a potential investment operations. It is clear that some- mensforschung (Institute for Factory site, inspiring them to integrate their Sven Schürer thing needs to be done to guarantee Nonetheless, there is an urgent need Management Training and Operational own production and logistics pro- Member of CoC Lean SCM Germany’s attractiveness in the long to keep making improvements in the Research, IFU) at TU Braunschweig, cesses as much as possible in order Miebach Consulting term as a location for manufacturing areas of production & logistics so that Germany Trade & Invest GmbH, and to take full advantage of the potential companies. Germany can maintain and continue to Miebach Consulting used a question- that is clearly available. Isabel da Silva Matos expand its leading international role. If naire analysis and expert interviews to GTAI GmbH What are some starting points, and Germany is able to supply raw materi- assess these measures, potentials and Neu-Isenburg, April 2010 how can manufacturing companies als on short notice, process them very Best Practices. In particular, the study Tobias Rinza, Miebach Consulting Sven Schulze in Germany further optimize their flexibly into products with high quality attempted to answer the following IFU – TU Braunschweig processes? How can the tendency to- standards and low costs, and distrib- question: How can Germany link its ward outsourcing be slowed, or even ute them to customers worldwide, its own innovative strengths with the best reversed? How can Germany be made position in the competitive world mar- features of Japanese manufacturing more attractive to foreign companies? ket will be assured. The close dovetail- expertise and US supply chain man- ing between production and logistics agement theory to create integrated A critical success factor is the efficient processes seems to be key in this. production and logistics processes synchronization of production and and raise them to a new level? logistics. If highest-quality goods can One decisive factor in perfectly coordi- continue to be produced quickly and nating production and logistics will be The study began collecting data in cost-effectively in Germany, it will be the demonstrated flexibility, optimiza- October 2009 – this placed it, as worth building production and logis- tion and innovativeness of German indicated above, directly in the middle tics facilities on site. companies. Some areas show surpris- of the global financial crisis and its ingly large potentials, many of which effects. However, the economic news can be tapped through measures slowly but steadily improved over the that are relatively easy to implement. course of the study. By the time the 2 Study Germany’s Economic Advantages 3
  3. 3. Contents 8 Management Summary 12 Study Design 18 Germany as a Center for Production – How it is Perceived 32 Germany as an Environment with Potential – How it is Used 44 The Context for Current Locational Research 46 Appendix 4 Study Germany’s Economic Advantages 5
  4. 4. Management Summary 6 Study Germany’s Economic Advantages 7
  5. 5. Management Summary Germany’s economic advantages – integrated production and logistics as a factor for success. Total savings potential from inte- Product launches in Germany – grated production and logistics: confidence in complexity approx. 20 – 30 %! The conveniently located and reli- According to the experts’ estima- able supplier base, together with the tions, this begins with each company’s availability of qualified research and own organizational structure. Experts development personnel, helps guar- believe that moving the production antee successful product launches – a and logistics departments closer national specialization that is extreme- together and eliminating the typical ly valuable in the international context. interfaces between the departments In this study, Germany was shown to can potentially save 5 – 10 % of the be a preferred “testing ground” for The decision-makers at the approxi- companies can access relatively easily annual cost for each area; in part, this new products; with its networked, mately 300 companies surveyed – within their own spheres of influence. can be achieved through very simple challenging market environment, it despite, or perhaps because of, the measures such as creating cross-de- also provides positive challenges for effects of the global economic crisis A critical success factor is the close partmental objectives, sharing project companies in terms of service and – all agreed: by and large, Germany’s dovetailing of production and SCM initiatives and combining the planning flexibility. location provides the ideal framework / logistics. About 85 % of those for both areas. conditions for successful, economi- surveyed already considered this Social trends challenge, cultivate cally sustainable production. However, symbiosis to be one of Germany’s Additional cost-reduction potential and drive production & logistics in this does not apply to every type of clear economic advantages – and they (an average of 20 %) can be gained in Germany product: it should be noted that the expect significant potentials to come production and logistics by optimizing goods produced in Germany are be- from further integration. processes, systems and technolo- In addition, the social trends in Ger- coming increasingly specialized. gies. The preferred method here is many are generally beneficial, exerting lean management, a philosophy that a positive effect on product develop- Germany – a land of customized experts say has found broad accep- ment and process design. Even de- products and flexible manufacturing tance in German companies and is mographic numbers appear to present Fig. 1 already being faithfully implemented challenges only to a certain extent; A particular strength of companies Do you see a close interaction by employees. Here, too, it is ex- they are expected to be partially bal- located in Germany is their ability to between production and SCM / pected that the optimization impulses anced out by immigration, which is provide made-to-order production logistics as an economic advantage will in fact come from the “shop floor.” seen as an advantage by all levels of and / or batch and series production for Germany? However, it is also clear that largely management. for innovative, tailored and increas- untapped opportunities can be found ingly complex products. In short, 7% in networking with suppliers and tak- Conclusion they manufacture premium products, 9% ing advantage of the wide range of a characteristic strength of German colleges and universities in Germany. All in all, the resulting picture is companies. positive: Germany offers outstand- ing framework conditions and many Germany’s traditional, well-known lucrative possibilities for economical economic advantages – political sta- 84 % domestic production. A key factor bility; a productive, multi-modal infra- is the integration of production and structure; high availability of qualified logistics processes. workers; and its convenient geograph- ic location within Europe – simply Yes provide a solid foundation for this. The Neutral real attraction, however, comes from No the as-yet-untapped potentials that 8 Study Germany’s Economic Advantages Management Summary 9
  6. 6. Study Design 10 Study Germany’s Economic Advantages 11
  7. 7. Study Design The survey’s target group, emphasis and methodology. Fig. 2 Fig. 4 Fig. 5 What position do you hold in your What was your company’s How many products do you company? revenue in 2008 (in euros)? manufacture per year?* 11 % 11 % 16 % 6% 27 % 16 % 34 % 11 % 43 % 24 % 12 % 46 % 26 % 17 % Chair / managing director / < 10 mill. 50 – 100 mill. 1 – 100 The study’s starting point was a ques- half of the people surveyed held man- plant manager in niche segments, but which should 10 – 20 mill. 100 – 500 mill. 100 – 3,000 tionnaire posted on an internet plat- agement positions and were respon- Division / department head still be considered significant: they are 20 – 50 mill. > 500 mill. 3,000 – 50,000 form from October 2009 to the end of sible for divisions, main departments Group leader / specialist high-tech companies, global players > 50,000 January 2010; it was made available to or sub-departments. The remaining Other and innovation leaders. This includes, * primary product group management and corporate decision- participants were largely produc- for instance, representatives of the makers at companies in Germany that tion or logistics experts, including optical industry, fittings manufactur- focus primarily on production. people from the fields of teaching and ers and solar or wind-power system research. manufacturers. Fig. 6 Fig. 7 The questionnaire was supplemented Fig. 3 Describe your manufacturing / Describe the complexity of the by “in-depth interviews,” held in Collecting basic information about What is your company’s industry? An evaluation in terms of each assembly strategy. product in a primary product group. person with selected members of top the companies at the beginning of company’s annual revenue in their management from well-established the questionnaire, together with the respective segments shows an overall 2% Engineering / plant 11 % corporate groups and medium-sized in-depth interviews, made it possible 26 % tendency toward larger medium-sized construction 20 % companies; the interviewers asked tar- to evaluate the survey according to in- companies and groups – this is espe- geted questions from a catalog, posed dustry segments within the manufac- Automotive industry 23 % cially typical for the pharmaceutical follow-up questions and discussed the turing industry. This provided a fairly and chemical industries, where a few 52 % 37 % Metal industry / processing 7% 17 % 61 % answers. representative cross-section, analo- relatively large players tend to domi- gous to each sector’s contribution to Pharmaceutical industry 7% nate the market. A total of 281 people took part in the Germany’s gross domestic product. Chemical industry 6% survey, and in-depth interviews were The survey in terms of production conducted with another 20 people. Engineering, plant construction and Electronics & high-tech volume and the respective produc- More than a quarter of those surveyed the automotive industry each make 6% tion type showed that more than half Production after receipt of order Simple products industry held top management positions; as up approximately 25 % of the compa- of the companies produce individual Production for warehousing Medium-complexity products chairs, managing directors or plant nies surveyed, and thus formed the Fashion / clothing industry 1% pieces, small batches or medium- Production oriented toward the Complex products managers, they were responsible for focal point of the survey. The “Other” sized batches, and usually have a high medium term, customer-oriented section includes companies that work Other 24 % one or more production sites. Nearly level of contract manufacturing and / or assembly customization. No strategy 12 Study Germany’s Economic Advantages Study Design 13
  8. 8. In addition, nearly 90 % of those hours each and were conducted with nuance. In particular, this study more able framework conditions in Germany sumption that companies consider a surveyed said that they manufactured selected experts. After a detailed closely investigates the framework more effectively than others, access- location attractive if they can expect medium to very complex products, analysis of the available data and in- conditions that are seen around ing new potentials for themselves. The more service, flexibility and quality for and more than 80 % exclusively built formation, the results were formulated production and logistics processes in findings from this survey were divided the same amount of money. products to order and / or performed within the present document. Germany. The focused investigation into two categories: JIT / JIS assembly to order. format also means that “traditional” Finally, the chapter titled “The context The structure chosen for this takes locational advantages and disadvan- • responses from all of the people for current locational research” looks In addition to collecting basic informa- into account the fact that various past tages for production and logistics en- surveyed, at this study’s placement in relation tion about general company data as studies, expert interviews, official anal- vironments are carefully evaluated and • responses from companies that to current scholarship and to other described above, 51 detailed ques- yses and research assignments had updated using the responses given. can be categorized as operationally research being carried out in the field tions were also asked in order to already investigated various aspects successful, i.e. representing Best – for instance, many additional studies evaluate Germany’s economic advan- of Germany as a center for economic In part, the analysis of the question- Practices. were initiated by various parties during tages / disadvantages in each field. activity, both positive and negative, naire responses did confirm some the economic crisis, so the authors The questions fell into the following and often in a very general way. As common perceptions. These are Companies that fall into the Best believe it is worthwhile to give readers categories: a result, public perception included described in the following chapter, Practice category are leaders in ser- some orientation and an overview of some opinions about production, in “Germany as a center for production – vice, flexibility and quality in Germany. the surrounding academic landscape. • Organization & personnel particular, that can almost be consid- how it is perceived.” In terms of costs, a Best Practice • Systems, processes, technology ered clichés. Typical views, such as: company is at least cost-neutral in • Research & development, innovation The chapter after that, “Germany as international competition. • Market environment • “Made in Germany means good an environment with potential – how • Political framework quality.” it is used,” specifically looks at the A company only falls into the Best • Societal acceptance • “Products manufactured in Germany findings that do not necessarily corre- Practice category if all the criteria are too expensive.” spond to expectations and which are for locational advantages have been The results of the analysis were • “Germany is bureaucratic.” therefore newsworthy. fulfilled for its enterprise. validated, or in some cases care- fully questioned, with the help of the seem to have become established, One focus was on showing how some The category was expanded to include in-depth interviews, which lasted two and are often repeated without further individual companies use the avail- cost neutrality because of the as- Fig. 8 Characteristics of a Best Practice company. Advantage Neutral Disadvantage Lower unit prices • • Greater flexibility for changes in demand • Better adaptivity to changed market requirements • Faster product launches • Higher level of availability for technical systems • Highest quality for products and processes • 14 Study Germany’s Economic Advantages Study Design 15
  9. 9. Germany as a Center for Production – How it is Perceived 16 Study Germany’s Economic Advantages 17
  10. 10. Germany as a Center for Production – How it is Perceived This locational study was also used as an opportunity to look at common perceptions about Germany’s typical economic advantages and to update them. The following – probably familiar workers’ positive attitude toward their We have a significant advantage – aspects described below were own work – particularly in compari- in Germany when it comes to re-confirmed by the results of the son with other industrialized nations, employee training, qualification and questionnaire. employee motivation in Germany is self-sufficiency. This can be seen largely described as “neutral.” Still, in terms of performance and in the Specialists and management there are certainly companies whose quality of the products, among other Fig. 9 employees: highly qualified and survey responses indicated that they things! Do you see Germany’s position in the following areas available! consistently track employee motiva- as better or worse than other industrialized nations? tion in order to derive greater poten- Dr. Vera Schöne There was a high level of agreement tials. Managing Partner In terms of employee qualification among nearly all of the study partici- heroal Johann Henkenjohann GmbH pants when it came to the questions Another necessary feature is interdis- & Co. KG 0% 50 % 100 % about personnel qualifications and ciplinary qualification: where produc- availability. 83 percent of the respon- tion and logistics intersect, it makes All respondents dents believed that the German mar- sense for each area to have a com- ket had very qualified personnel in the prehensive understanding of the other Best Practice areas of production and logistics – and process partner’s tasks, competencies Our advantage comes from our even with the current increase in need, and responsibilities. However, joint high basic level of education. How- In terms of employee motivation this personnel is still available. training sessions are more the excep- ever, we need to contribute more than tion than the rule here. Of the average just an excellent education in order to 0% 50 % 100 % According to the in-depth interviews, 14 days of training held per year for retain our own younger experts. Those the unanimous expert opinion is that production and logistics, only about 3 are exactly the people we need. All respondents this educated, company-specific involve joint training sessions. pool of employees provides a basis Dr. Thomas Berden Best Practice for further increases in productivity Vice President of Manufacturing and / or unit cost reductions. However, Hilti GmbH (industrial fastening Advantage Neutral Disadvantage an important prerequisite for this is the technology company) 18 Study Germany’s Economic Advantages Germany as a Center for Production – How it is Perceived 19
  11. 11. Fig. 10 Organizational structures: In general, it is clear that the organi- How and on what levels does coordination take place between more separate than integrated zational integration of production and the production and logistics areas? logistics still offers unused potentials – Still, only a few exemplary companies in some cases, process inefficiencies 0% 50 % 100 % have the organizational framework appear in terms of additional handling, conditions needed to access these inventory and space requirements only Main department head employee-driven potentials: while the because the process flow has been areas of production and logistics are segmented by organizational inter- Department head (planning) generally combined on an executive faces. and / or management level, on an op- Department head (operations) erational level they tend to be divided into two separate departments. On the Employees positive side, one can say that a vari- ety of activities are carried out jointly throughout the year as needed several times a week at the interface between production several times a month daily and logistics – the negative effect is the enormous coordination effort required; in terms of planning, the amount of time spent in weekly and monthly meetings seems especially Fig. 11 high. Which department (production and / or logistics) is responsible for the following areas? The respondents’ answers do not clearly indicate who holds the leader- 0% 50 % 100 % ship role in these meetings. They do Fig. 12 identify areas in which either the pro- At what point are the departments integrated Program planning & coordination duction or logistics department tends into the product emergence process (PEP)? to take responsibility, but for the most Replacement parts management part a variety of organizational solu- Production tions are used. In fact, the topics cov- Loading equipment planning ered in the survey are typical interface SCM / Logistics areas for many of the respondents, Standards & methods and should be handled jointly. IT Hall & layout planning For product launches, on the other Purchasing hand, the production department nor- Plant structure & factory planning mally seems to be involved throughout R&D the development phase, from the Supplier development concept approval up through the start Personnel of production, while SCM / logistics Material disposition tends to become more influential in Decision – project Concept Functionality Product Start of the following phase. implementation approval approval pre-production production only logistics both production & generally production generally logistics logistics only production all respondents Best Practice 20 Study Germany’s Economic Advantages Germany as a Center for Production – How it is Perceived 21
  12. 12. At Kendrion, we see ourselves as Sales fluctuations: flexibility During the crisis in particular, it was Fig. 14 Information technology: SAP is a very flexible company with a great is the norm shown that the existing job-market In the following areas, do you see Germany as being at an advantage standard – and offers potentials capacity for responsiveness. During tools such as reduced hours, inter- or a disadvantage in comparison with other industrialized nations? for expanded usage the crisis, we learned that we can According to the survey, German com- pretation of the protection against respond to large fluctuations in unit panies largely see themselves as very dismissal, etc. were accepted and 0% 50 % 100 % While the organizational structure for volumes, and that we can be even flexible. Failing to fulfill customer re- seen positively by all business sector production and logistics in German faster in the future through our quests – along with the corresponding throughout Germany. Today, the job Lower unit prices companies is not yet standardized, location in Germany! sales losses – is generally not consid- market in Germany is considered to be the picture of the corresponding IT ered acceptable. This is clear from the adaptable and therefore competitive. Greater flexibility system environment is different, and / Peter Strötgen responses regarding how companies or clearer. Director of Production plan to balance out demand fluctua- In the experts’ opinion, however, Greater adaptivity Kendrion Binder Magnete GmbH tions of +/-20 % within 6 months. flexibility can mainly be achieved by Fundamentally, the study respondents extensively synchronizing production Product launch speed said that standardized ERP systems In this situation, companies use some and logistics: in comparison to other provided significant support for traditional, but clearly very effective, industrialized nations, this approach Availability of facilities integrating production and logistics management techniques that have presents different advantages for Ger- processes. SAP is the undisputed become established in Germany many as an economic center. Quality standards market leader here; nearly 80 % of in order to balance out any volatil- the respondents named the Walldorf ity in customer orders. This includes Fundamentally, experts rate the avail- Existing infrastructure software company’s system environ- work-time accounts based on works ability of technical facilities very highly, ment as the ERP system used in their agreements, personnel adjustments and the existing infrastructure makes it Disadvantage Neutral Advantage company – though in various release using temporary workers, creative possible to quickly change production versions. shift models, temporary insourcing or and logistics processes, production outsourcing, etc. sites and transport providers. In addi- The companies named Germany’s tion, the existing quality standards are geographic coverage by numerous Furthermore, fluctuations are often considered to “enable” flexibility and Fig. 15 specialized service providers as a counteracted through “business intel- adaptivity. Which of the following functions are integrated into your ERP system? clear economic advantage. The wide ligence,” for instance through analyses variety of (independent) implementa- of historical data and previous experi- Order management 91 % tion providers is considered outstand- ence with seasonal variations. ing. Procurement planning 85 % Still, it is also clear that integrated ERP Production planning 84 % software is not yet commonly used for production and logistics, and / or Fig. 13 Warehouse management 81 % that the use of ERP software has not How would you balance out demand fluctuations of +/-20 % yet fully permeated most companies over a period of 6 months? Distribution planning 59 % where it is used. Personnel adjustments 76 % Transport management 38 % While warehousing and production functions (including order manage- External process partners 40 % SRM 33 % ment, etc.) are mainly integrated with IT, various company-wide processes Inventory 36 % CRM 33 % are not yet completely integrated. This includes CRM and SRM modules, but Delaying orders 29 % Personnel planning – need & usage 33 % also loading equipment management, etc. Production network 28 % Loading equipment management 26 % Accepted sales loss 9% Product life cycle management 16 % 22 Study Germany’s Economic Advantages Germany as a Center for Production – How it is Perceived 23
  13. 13. All in all, the picture is positive: Germany offers excellent framework conditions, together with numerous lucrative possibilities for cost-effective domestic production. The key is to integrate production and logistics processes. Tobias Rinza, Miebach Consulting 24 Study Germany’s Economic Advantages 25
  14. 14. Fig. 16 Germany is not just attractive as a Fig. 17 The experts who responded therefore How would you rate your suppliers in terms of the following characteristics? buying market. Because of its high How do you expect the sales market to develop through 2013? expect to see growth in terms of ex- population density and high purchas- ports to the traditional EU countries as sharp increase stagnant decline sharp well as sales to growth regions such 70 % 80 % 90 % 100 % ing power, the country also offers increase decline as Eastern Europe, Asia and South interesting potential as a sales market Reliable delivery volume – as long it is used properly and Service demands America. In general, the more interna- production and logistics processes are tional the sales market, the greater the National 25 % 61 % 11 % 0% 3% designed accordingly. expectations for sales growth seem Europe 19 % 72 % 8% 2% 0% to be. Reaching these markets will Reliable delivery quality German customers’ cost awareness, require participation from the supply International 18 % 63 % 18 % 2% 0% quality expectations and service chain managers at the companies needs are extremely high. How- Cost awareness located in Germany. ever, that should not necessarily be Satisfactory product quality National 38 % 54 % 8% 0% 0% The infrastructure, which is known seen as discouragement or a seri- ous disadvantage. According to the Europe 29 % 61 % 9% 2% 0% to be solid, forms the backbone of respondents, the international markets this strategy. In addition to the dense International 29 % 54 % 16 % 2% 0% network of basic services such as quickly follow Germany in terms of Timeliness customer expectations, so it is used Quality demands power, water, etc., transportation as a testing ground for new products. networks – across all forms of trans- National 15 % 51 % 34 % 0% 0% port – should also be mentioned. A Anyone who succeeds here has a good chance of succeeding interna- Europe 12 % 58 % 29 % 0% 0% question about the development of within Germany within Europe outside Europe tionally. key transportation carriers produced International 16 % 51 % 32 % 2% 0% the expected response: in the future, Germany in Europe: central loca- Purchase volume trucks will remain the most common tion, multimodal infrastructure, carrier. The respondents all had similar National 0% 9% 55 % 34 % 2% closely networked expectations about its rapidly growing Market environment: solid supplier uct quality as well as for consistent Europe 2% 40 % 38 % 18 % 2% importance. In contrast, the relevance base, sophisticated sales market delivery volumes and timeliness. In In fact, most of the respondents of inland navigation was expected to expected to see the greatest sales International 21 % 48 % 25 % 5% 2% stagnate at the current level, while air contrast, the process weaknesses In particular, production in Germany found in continental and global sourc- growth opportunities not in the local traffic was expected to show moder- is made possible by a strong national ing increased in direct proportion to market, but in other countries. Accord- Majority of responses ate growth. Only rail service produced supplier base: more than 50 % of the the distance of the supplier. It should ing to the experts surveyed, Germany mixed responses – the future signifi- procurement volume for the respond- be noted that import processing, cus- will continue to be a leading export cance of rail transport is very unclear. ing companies came from Germany, toms clearance, port processing and country, and will benefit strongly from of which 15 % even came from the transport organization within Germany its exposed geographical position immediate regional surroundings. – in short, national logistics – are all within Europe. This position allows for National suppliers were distinguished fairly smooth. For the most part, any timely networking and a high level of not only by their high-quality products, recorded damages, delays, incor- reliability in deliveries, which are im- but also by the corresponding process rect and missing deliveries primarily portant requirements for an attractive quality. The study participants gave resulted from problems within the production and export location. consistently high marks for prod- shipping countries. 26 Study Germany’s Economic Advantages Germany as a Center for Production – How it is Perceived 27
  15. 15. Interim Conclusion Fig. 18 I see German bureaucracy as The survey of relevant economic fac- But what does this mean, specifi- What do you expect as a result of political decisions in Germany? being very professionally oriented. tors reveals framework conditions in cally? What must companies do and That is actually an advantage com- Germany that are not unexpected, what should they avoid in order to be pared with other countries where but advantageous in comparison successful? What defines a high- Stability 76 % the structures do not yet function with other countries when it comes to performing company? What Best the same way they do here. purchasing raw materials, manufactur- Practices can leverage Germany’s Modified taxes 40 % ing goods and carrying out worldwide existing conditions in order to access Hermann Pooth distribution. significant ratio potentials of 15 % and Financial support 36 % Managing Director higher? HDM GmbH These conditions create a healthy Other 29 % foundation for successful production The following chapter – and the opin- and logistics processes – in other ions of the corporate decision-makers words, processes that are profitable found therein – will provide a few in the long term. Companies that are answers. able to use this foundation in an intel- Political framework conditions: Particularly when it comes to new ligent manner can position themselves stable and supportive investments in production facilities to succeed in the extremely fast-grow- and logistics centers, there are always ing, competitive global market. The study participants’ main expecta- plenty of examples of relatively short tion from German politics was a guar- approval times, flexible adjustments to antee of stability. Primarily, that meant construction plans, exceptions made preserving the status quo, something for plant usage hours, etc. that was also expressed under “other goals”: reliability, planning security and One interesting aspect here: while the setting a long-term course, among fundamental legislation was seen as other things. neutral – neither particularly support- ive or obstructive when it came to In some cases, there was also a call building and operating production and to reduce bureaucracy – but not to the logistics facilities – the general trend in extent that might have been expected. environmental legislation was seen as a positive influence. This means that the companies have actively accepted the consistent increase in regulations governing CO2 emissions, particulate matter, noise, reusability, resource pro- tection, etc., and that they take these into consideration both in their own product portfolios and in value-added and non-value-added processes. 28 Study Germany’s Economic Advantages Germany as a Center for Production – How it is Perceived 29
  16. 16. Germany as an Environment with Potential – How it is Used 30 Study Germany’s Economic Advantages 31
  17. 17. Germany as an Environment with Fig. 19 What starting points do you see for optimizing the collaboration between production and logistics? Potential – How it is Used Joint product development 32 % Process design 66 % The following results derived from the questionnaire Strategic planning 67 % demonstrate some of Germany’s less commonly known and occasionally surprising aspects. Ideally, these will Joint lean-management initiatives 67 % help provide companies with concrete advice. Cross-departmental objectives 75 % Fig. 20 How are production and logistics represented in the company’s management? 0 % 20 % 40 % 60 % 80 % 100 % One chair each One chair for production & logistics One chair for production (includes SCM / logistics) One chair for SCM / logistics (includes production) The idea of the “supply chain” Organizational optimization: improves processes, still has further has been accepted all the way up integrating departments provides efficiency gains to offer. Thus it makes Best Practice all respondents through the management level. The opportunities for rationalization sense that 75 % of the study partici- position of the COO – responsible for pants believed simple organizational production, logistics, purchasing and In Germany, as described above, the measures, such as introducing cross- quality – helps anchor the supply chain assigning of company functions to departmental objectives, provided an Fig. 21 in the company, along with a unified either production or logistics depart- important starting point for improving How are the production and logistics areas organized at your site? way of seeing things; the goal is to ments very much depends on the the collaboration between production ensure a continuous flow. individual companies. While there are and logistics departments. 0 % 20 % 40 % 60 % 80 % 100 % certain shared focal points within vari- Alexander Thoma ous sectors, keeping the departments Another measure involves shared 2 areas managed in parallel Takata Petri separate tends to create dislocations project initiatives such as re-engineer- Logistics Europe rather than correspondences, which ing approaches, integrated process requires increased coordination effort. optimization and joint planning for 1 SCM area interfaces between production & logis- (includes production) Even simple organizational measures tics. The desired result on both sides can produce improvements. In gen- is a clear definition of tasks, compe- 1 production area eral, it can be said that the organi- tencies and responsibilities – various (includes SCM / logistics) zational integration of production companies still have numerous gaps and logistics, which coordinates and and weaknesses here. Best Practice all respondents 32 Study Germany’s Economic Advantages Germany as an Environment with Potential – How it is Used 33
  18. 18. Fig. 22 Fig. 23 Increasing efficiency: automation Fig. 24 What cost-reduction potentials In which segments of the process chain do you use outsourcing? is out, intelligent lean management How do you see the tendency toward automation at your site? do you see for the logistics and is in production areas in terms of Outsourcing Purchasing Ware- Production Production Distribution 0% 50 % 100 % organization and personnel? level housing supply According to the survey, Germany <5% 13 % 38 % 45 % 55 % 16 % clearly offers a preferred environment Production: all respondents 4% for manufacturing complex prod- Best Practice 8% 6% 5 % – 20 % 7% 15 % 16 % 25 % 4% ucts; the general goal is to tailor the 22 % 20 % – 40 % 5% 14 % 10 % 8% 2% production to the customer’s wishes. Assembly supply: all respondents As described above, all of the compa- Best Practice 23 % 40 % – 60 % 7% 11 % 8% 3% 0% nies work hard to achieve significant 60 % – 80 % 6% 5% 5% 0% 5% increases in efficiency. Assembly: all respondents 37 % Best Practice 80 % – 100 % 62 % 17 % 17 % 9% 73 % When respondents were asked about their preferred approaches and meth- Logistics: all respondents ods for improving process sequences, Best Practice 0% 10 – 20 % the impact of the worldwide economic 0–5% 20 – 30 % crisis was apparent. Because of the strong decrease stagnant strong increase 5 – 10 % > 30 % Thus nearly 60 %, or a clear majority, In Germany, all of the companies now significant sales declines that affected decrease increase of the respondents expected cost-re- see outsourcing as a valid option, nearly every company, there was duction potentials of 1 % to 10 % from but one that must always be care- increased pressure to lower costs; at relatively simple integration measures, fully analyzed; it usually requires very the same time, the consistently low and 37 % even expected rationaliza- clearly defined interfaces with the sales figures meant there were not tion potentials from 10 % to more than company’s own departments in ad- enough liquid assets to invest in new Fig. 25 30 %! dition to a careful cost-effectiveness technologies. How well established is the lean management philosophy (including CIP, study. The tendency is to outsource 5S, value-stream analysis and other lean methods) among the employees This is an impressive figure, especially typical logistics areas more often than The responses to the automation trend in production / logistics? since it can normally be achieved production areas. However, the basic were similar: respondents expect without making significant invest- rule is that the processes must be the level of automation to rise only 0% 50 % 100 % ments. made more efficient before outsourc- moderately in the areas of production ing is considered. and assembly, and it is expected to Production: all respondents This seems to largely nullify the earlier stagnate in the area of logistics, even Logistics: all respondents perception that organizational problem though various handling-intensive ac- areas should ideally be outsourced: tivities are being moved from produc- Production: Best Practice tion to logistics. Logistics: Best Practice Instead of installing complicated not established halfway completely automation technology, the responses pilot phase largely clearly showed that companies were emphasizing increased efficiency; they did so by focusing on activities that add value, concentrating on process- ing times, decreasing inventory and making ongoing improvements. 34 Study Germany’s Economic Advantages Germany as an Environment with Potential – How it is Used 35
  19. 19. Fig. 26 An interesting observation: the CIP: Operational areas drive im- Fig. 27 What proportion of sales revenue is used for transport costs at your site? companies that consistently follow provements – external partners What cost-reduction potentials lean principles also work to reduce offer potentials do you see between the areas of All respondents 3,27 % 4,08 % inventory, minimize processing times logistics and production in terms and shift materials into a “flow” – this In particular, there is a well-known of systems, processes and Lean (professionals) 4,68 % 6,00 % actually leads to transport costs that need for action when it comes to technology? are approx. 3 % higher than average higher unit costs in Germany, and it Lean (beginners) 2,94 % 4,74 % relative to sales revenue, because is constantly being addressed by the 5% 3% deliveries are more frequent! However, companies surveyed. More than 60 % 10 % Best Practice – clusters 3,49 % 5,30 % optimizing all of the networks pays of the respondents see surprisingly 22 % for itself through the overall costs for high cost-reduction potentials even Transport costs for purchasing Transport costs for distribution production and logistics. In general, within their own systems, processes 25 % these costs are about 15 % lower than and technologies – they expect to the average for other companies. see rationalization potentials between 35 % 10 % and more than 30 %! In keeping with the lean manage- Because of the need for flexibility, ment philosophy, Ritter Sport relies In short, lean management has ar- series and small-series producers in If this can be implemented in a timely on having well-trained employees. We rived in Germany, and according to particular must take supplemental manner, all of the existing cost disad- 0% 10 – 20 % have drastically reduced the number the respondents it is part of standard measures for agility and adaptiv- vantages can definitively be balanced 0–5% 20 – 30 % of temporary workers, since our own management practice. More than ity in addition to lean methods – this out, compensated and / or transformed 5 – 10 % > 30 % employees with Ritter Sport contracts 90 % of the respondents are working adaptability can well be considered into significant advantages in compari- identify more strongly with the com- to introduce lean management meth- a national core competency. Some son with other industrialized nations. pany and can successfully implement ods, while more than 50 % describe methods include intelligent safety many CIP measures. their own lean methods and elements stocks, highly flexible manufacturing as being largely or even completely cells, and above all adaptable work- Andreas Ronken implemented. time models; the versatility required in Ritter Sport this field usually puts lean approaches Managing Director to the test, and often causes them to fail. 36 Study Germany’s Economic Advantages Germany as an Environment with Potential – How it is Used 37
  20. 20. Fig. 28 In keeping with the lean philosophy Fig. 29 At your site, which elements provide the incentives / triggers for R & D described above, process improve- Do you see Germany as being at an advantage or a disadvantage in comparison with other industrialized nations efforts to improve processes? ments seem to be initiated primarily in the following areas? through experience gained in opera- 0% 50 % 100 % tions or through corresponding CIP 0% 50 % 100 % initiatives. The internal R & D areas, Visions & strategies which are always focused on product Availability of motivated and qualified R & D personnel development and manufacturing pro- Project experiences cesses, decline correspondingly. Thus Availability of external partners and innovation networks even – or particularly – the shop floor Operational experiences level offers companies in Germany Availability of norms and standards significant potential for the improve- Own R & D employees ments described above. Availability of public support funding Other employees Furthermore, additional improve- Disadvantage Neutral Advantage ment incentives come from outside Customers the organization. A significant push seems to come from customers, who Suppliers are constantly asking for product and process optimizations and subsequent Product launches: Germany is a In addition to its suitability as a site for partnerships and strategic alliances Competitors price adjustments. testing ground innovation, Germany is also a pre- creates a beneficial foundation here. ferred “testing ground”; it provides the Research institutions Meanwhile, optimization potentials This survey confirms something we al- right environment for complex product After a successful market introduction on the supplier side seem to be ready knew: Germany is (and remains) launches and fast marketing. Particu- and experience in the “German pilot often sometimes rarely never largely untapped. Even the existing the place where companies carry larly when it comes to the adaptability market,” established products are Germany-wide research landscape, out research and development. The and flexibility needed for launching a often shifted to low-wage countries which could potentially drive process decision-makers surveyed here see new product, experts consider Germa- – but only if the production technol- improvements, is underutilized by a clear, continued focus on design- ny to be at the top of the international ogy in Germany has reached a stage most companies. As an initial conclu- ing complex technology components. market. This guarantees the optimiza- that allows a shift and subsequent sion, optimization seems to be driven This concentration is supported by tion of important commercial success safe production in another country. In primarily by internal areas, while Germany’s highly qualified employ- factors such as “time to market” and addition, Germany also offers a critical external networks still offer untapped ees, including in the area of R & D; by “time to cash.” In addition to the avail- testing ground for market introduc- opportunities. the existing innovation networks; and ability of experts, as mentioned above, tions. by the current norms and standards, this is due to the qualified supplier which provide a stable platform for base – the companies’ participation in further development. cooperative networks, development 38 Study Germany’s Economic Advantages Germany as an Environment with Potential – How it is Used 39