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Sustainable increase in efficiency during transformation: rethinking functional analysis

Munich, July 2024

Sustainable increase in efficiency during transformation: rethinking functional analysis

Munich, July 2024
T

he automotive supply industry is undergoing the greatest transformation in its history.

More than ever, suppliers are compelled to significantly boost their efficiency to remain competitive in the long term.

The industry is responding with proven methods: large-scale cost-cutting programs combined with job cuts and site closures. However, these measures do not always have the desired effect. Companies that cut costs, restructure, change their business model, or alter their strategy can cause themselves long-term damage through poor implementation.

Symptoms and diagnosis of the current crisis

The rise of e-mobility together with the advance of digitalization is changing the face of the automotive industry forever. There are also various market-specific challenges, such as the reorganization of the automotive value chain by OEMs or the emergence of new vehicle manufacturers in China.

By 2030, around a quarter of the approximately 270,000 jobs in the automotive supply industry in Germany could therefore be lost. Over the past ten years, the number of people employed in the sector in Germany alone has decreased by 7.5%. A few years ago, the average return on investment stood at 7 or 8%. Today, however, the figure has fallen to 5 or 6%. Necessary investments are being postponed or delayed and innovation programs largely cut back. R&D, operational excellence, and precision – once supreme disciplines and a competitive advantage – have become a sea anchor that is slowing down urgently needed adjustments.

Therefore, only cost cuts promise to provide sufficient breathing space in the short and medium term. The programsintroduced by well-known suppliers such as Continental, ZF, or BOSCH have long been pointing to tougher times ahead. The common reaction to date: job cuts and the associated efficiency gains. However, the question remains as to whether and to what extent this approach sustainably improves the allocation of resources and whether lower costs and leaner structures can be achieved. In the past, simply cutting costs has generally turned out to have a boomerang effect. Failure often correlated with inadequate integration with the corporate strategy, a lack of involvement of employees and managers, unrealistic goals, or poor implementation.

Functional analysis as an instrument for shaping the future

When used correctly, functional analysis can be an excellent tool for effective, efficient cost structuring. Typically, this method analyzes processes, resources, and interfaces within the organization in a step-by-step sequence with the aim of identifying potential for improvement and boosting efficiency.

Functional analysis is currently experiencing a revival in various industries and fields, such as product development in automotive engineering as well as in the area of digitalization and technology. The results serve to optimize processes and implement positive changes. Which value streams and functions will be important going forward and which effects will their interaction have on the organization as a whole? Functional analysis can provide the answers to these crucial questions. It shows which processes are becoming obsolete and where efficiency can be improved through technologies such as artificial intelligence. A clear vision of the future organization is essential. The aim is to identify both current and future potential for success in order to increase speed and improve adaptability. The centralization and decentralization of processes needs to be carefully considered so that autonomy is guaranteed where it offers the greatest added value. On the one hand, the focus should be on rigorously applying an end-to-end view of value streams. On the other hand, implementation, i.e., the more consistent realization of the identified improvements and the more sustainable monitoring of their effects, is also crucial to achieving the goals that have been set.

Approach – Our blueprint for future-oriented performance improvement considers classical elements such as functional analysis and combines them with organizational transformation elements and a strong execution.

Source: Berylls by AlixPartners

Unused change potential accompanies implementation

Any increase in efficiency is only successful if its goals are sustainably achieved. The fact that the top-down definition of measures and potential does not work should be common knowledge nowadays, but is nonetheless often ignored. Experience shows that the effects achieved in this way regularly fizzle out over time. An efficiency-boosting project is not usually met with applause. Accordingly, it is important for its success and sustainable integration that those involved understand the necessity and the measures and, ideally, have helped to develop them, support them, and thus actively embrace them. A functional analysis offers plenty of opportunities to generate the transparency required to do so and create interactive spaces for dealing with any fears and misunderstandings that may arise within the organization.

Expertise and skills management are the basis for future sustainability

Already today, at many OEMs and suppliers the knowledge and skills of employees are barely keeping pace with the ongoing transformation. The majority of CEOs see this as a threat to their future business and are justifiably concerned about the resulting skills gaps within their company. Moreover, many job profiles on which the competitive advantages of the past were based will have disappeared by 2030. At the same time, completely new job profiles are emerging in areas such as customer experience design, human-machine interaction, and cybersecurity. Many automotive suppliers have just begun to embrace this race against time and established corresponding programs to counteract the decline in the half-life of knowledge. The current situation is hitting them at a bad time. If action is not taken now with a clear idea of future requirements, there is a risk of downsizing in the wrong places or of talented people leaving the company – with fatal consequences. Strategically integrated expertise and skills management is therefore the basis for maintaining future viability and thus another success factor that should be part of a modern efficiency program based on a functional analysis. 

Conclusion: shaping a resilient future

Automotive suppliers are at a critical turning point. The short-term answer lies not only in cutting costs, but also in the strategically induced transformation of the company. A holistic functional analysis that combines the approaches of proactive change management and strategically integrated expertise and skills management is an effective tool here.

Authors
Dr. Alexander Timmer

Partner

Dr. Frank Heines

Associate Partner

Philipp Stütz

Associate Partner

Frank Strebe

Project Manager

Philipp M. Stütz

Philipp M. Stuetz (1981) joined Berylls at the beginning of 2021. He has over fifteen years of experience in the automotive industry. Thereof he spent seven years at an international automotive supplier with assignments in Spain, the USA and Mexico and over eight years in consulting. His focus is in operations excellence, especially in large transformation programs, process optimizations and efficiency improvements in administrative functions and indirect operations areas. He counts suppliers and OEMs to his clients alike.

Philipp M. Stuetz graduated in business administration from the universities of Stuttgart and Strasbourg.

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Dr. Alexander Timmer

Dr. Alexander Timmer (1981) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors), an international strategy consultancy specializing in the automotive industry, as a partner in May 2021. He is an expert in market entry and growth strategies, M&A and can look back on many years of experience in the operations environment. Dr. Alexander Timmer has been advising automotive manufacturers and suppliers in a global context since 2012. He has in-depth expert knowledge in the areas of portfolio planning, development and production. His other areas of expertise include digitalization and the complex of topics surrounding electromobility.
Prior to joining Berylls Strategy Advisors, he worked for Booz & Company and PwC Strategy&, among others, as a member of the management team in North America, Asia and Europe.
After studying mechanical engineering at RWTH Aachen University and Chalmers University in Gothenburg, he earned his doctorate in manufacturing technologies at the Machine Tool Laboratory of RWTH Aachen University.

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Dr. Frank Heines
Dr. Frank Heines (1967) joined Berylls Strategy Advisors as Principal in September 2016, and is based at Berylls’ Swiss office. He started his career at the postal automation division of Siemens AG before changing to a medium-sized electrical and electronics company where, in his position as responsible for the technical department, he soon became member of the board. In 2003, he began his consulting career at the Malik Management Zentrum St. Gallen, becoming Partner and member of the group management board in 2007. The focus of his consulting work lies in strategy development, organizational design, productivity increase as well as in integrated organizational development and transformational management.
Economics at the University of Constance, Germany; business administration at the University of Zurich; Ph.D. at the University of St. Gallen, Switzerland.
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