MCA Awards 2003
Winner: Production & Services Management Category
PA Consulting Group; client - Siemens VDO Automotive
Transferring production to a lower-cost economy only saves money if the relocation process happens smoothly enough to keep customers on board. When Siemens VDO Automotive wanted to reduce costs by shifting a number of car part production lines, beginning in mid-2000 with a move from Hungary to China, the PA Consulting Group team that was called in to run the project had three major problems to solve.
First, they needed to work out the most efficient way of transferring production without interrupting supply.
"The number one priority is continuity of supply to the customer," explains Martin Strutt, one of the two assignment leaders on the project. In the highly competitive car industry, customers forced to shut down their production lines because a part had failed to turn up on time would impose heavy financial penalties, of up to Dollars 30,000 an hour. "It's very high risk," says Mr Strutt.
Second, the new site cannot get up and running without enough skilled workers to operate the production lines. That means persuading the very workers who are about to lose their jobs in the move to pass on their expertise to the staff who will take over from them after the relocation.
"It's not just a physical move, it's a skills transfer, and that's a lot more difficult to work out," says Mr Strutt. The third problem was how to satisfy Siemens VDO's customers that the move was in their interests. They needed to believe there would be no breaks in supply and that the quality of products would be just as high at the new site. "It's about keeping them confident that things are working," says David Bailey, his fellow assignment leader.
PA describes its approach to solving these three formidable problems simultaneously as "collaborative, inclusive and sensitive". In practice, that meant having a consulting team with the right expertise, building up a close relationship with Siemens VDO staff and keeping in constant communication with all the players involved in the project.
"We do all we can to make sure we've got the right mixture of all the right skills," says Mr Bailey. "The vast majority of PA consultants have done 10 years or more in industry," he says. "People soon realise we have been in their position."
Mr Strutt believes it is also important not to underestimate the significance of cultural factors in determining the success of a cross-border project like this.
The team on the Hungary-China move combined technical expertise with fluent Hungarian and one of the consultants on the Germany-Czech Republic transfer is from a Czech background.
With each relocation project spanning different sites, communication was crucial. One of the more complex moves involved telephone meetings between staff in eight locations, across five timezones.
Suppliers also needed to be kept abreast of developments and readied to produce buffer stock, so that the changeover could take place as neatly as possible. New suppliers also had to be found and brought in.
Keeping lines of communication open throughout also meant problems could be dealt with as they arose. "We have our hitches, but we work them out together," says Mr Strutt. Notwithstanding the odd hitch, PA has certainly succeeded in impressing its client. Siemens VDO was so pleased with the initial results that PA is now completing its sixth and seventh relocation projects for the group.
"PA did such an excellent job that we had complete confidence in them to deliver each of our subsequent moves," says Johann Luttner, Siemens VDO's chief financial officer.
Siemens VDO has pencilled in Dollars 20m a year as the likely cost-savings from the package of relocations.
