Towards a rebalancing of industrial production
In the face of the consequences of the crisis brought on by the coronavirus pandemic, Zarko Stevic of Proactis and Antoine Lorotte, CEO of FiveCo, call for a rethink of production models and in particular of leadership.
The unprecedented period we are living through raises fundamental questions about the industrial "new normal" of tomorrow.
The weaknesses the crisis has revealed
The breakdown of supply chains and the dependence on Asia as the "world's factory" clearly demonstrate the vulnerability of the Western world following the deindustrialisation of recent decades.
The traditional criterion of cost is being supplanted by the criteria of product and service availability and quality. Indeed, many companies are realising that the total cost of a product includes not only the purchase price, but also shipping, insurance, and quality control costs — which significantly reduce the difference between local production costs and those of distant countries. Another cost element, rarely measured, has now been brought to light: the opportunity cost of lost sales resulting from products not being available on time. In other words, what is the cost of losing a client dissatisfied with the proposed delivery timelines?
Acting in a timely manner
The adage "Don't waste a crisis — learn from it!" compels us to turn this storm into an opportunity for self-examination. This is the time for taking stock — to understand what has worked well and what clearly needs to change. What future do we want? Anticipation and holistic risk management will become increasingly important.
The questions that industrialists must ask themselves today are: how to make their business model more resilient, how to better demonstrate their value relative to price, and how to better balance the risks of dependency on certain clients and suppliers alike. The answers to these questions will necessarily differ for each company and will depend on several criteria, including: market needs, the typology of products and services, internal competencies, available industrial infrastructure, and the competitive context (differentiating factors).
In search of a new balance
Reflections on a new balance between local, regional, and global operations are gaining ground within companies. Scenarios for new configurations require examining new modes of multifunctional, multi-industry, and multi-geography collaboration. Communication and transparency throughout the value chain — from client to supplier — will gain in importance in order to avoid the effects of exaggerated demand amplification and to ensure continuous supply. At the same time, one must be ready to absorb these waves. In this context, collaborative planning and the use of digital tools must be further promoted.
Proximity and collaboration between Research & Development centres and Production centres will become increasingly important in order to enhance the agility of the value chain. One of the axes of future innovation lies in improving the speed of the process from idea to production. How to better study the market, respond to an identified demand, develop a solution, produce it, and finally commercialise it — all within an accelerated dynamic.
Visionary leadership
The task will be to build specific strengths for each company, simplify processes, invest in developing employees' skills, and above all make them more autonomous with real decision-making power. This will stimulate collective intelligence and thus make companies more flexible, more high-performing, and — to use a fashionable word — more agile.
The transformation of companies will also require an examination of the product and client portfolio, financial flexibility, the ecosystem, and the capacity to anticipate change. This period is conducive to investment to improve operational performance, gain an advantage over competitors, and thus win market share. Let us not forget that this period of uncertainty offers acquisition opportunities for companies with solid financial means and support.
More than ever, visionary leadership is called for. It enables one to look beyond short-term obstacles and thereby ensure long-term success.
