Case Study

Business Operations Strategy: Re-start for production networks

A market leader strengthens its Global Footprint structures

With a turnover of around EUR 10 billion, the company is one of the market leaders in the life science and chemicals sector. After a long period of successful global growth, developments such as tougher competition and shifts in demand between regions are jeopardizing the achievement of the ROCE (return on capital employed) targets. Together with ROI-EFESO, the company is therefore reviewing the industrial footprint of its global production network. To this end, it is developing its own "Business Operations Strategy", ensuring transparency and successfully operationalizing its change strategy.

Challenge

A market leader in the life science and chemical sectors has registered that current market developments are jeopardizing its ROCE targets. Together with ROI-EFESO, the company is reviewing the industrial footprint of its global production network and introducing its own Business Operations Strategy (BOS) methodology.

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The ROI-EFESO approach

Pilot project as test and basis for the development of the BOS process. Rolling out the BOS program to other business units with several locations. Further development of the BOS methodology with financial and risk assessment and strategic implementation projects. Qualification of an internal consulting team "on the job" to accompany and then autonomously implement BOS projects.

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Lessons learned

In Footprint analysis, a structured approach is essential that leads to an overall picture from the evaluation of internal and external factors. Design principles of BOS are also suitable for a focused scenario development.

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The ROI-EFESO success model

ROI-EFESO developed a standard program for the integration of BOS into the strategy process of the company - exactly adapted to its processes and methods. By means of trainings the internal competences were built up in order to repeat or update the process autonomously and regularly.

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Redesign of the Industrial Footprint

Especially in an environment where acquisitions play a major role, the structure of the network is often the result of "inherited" works - and less often the result of controlled development. In this case example, this led to the fact that the network structure (the "Industrial Footprint"), including product allocation etc., could be improved. A major project objective was therefore to reduce the complexity of the supply chains and to align them with the future. The BOS process (Business Operating Strategy) should lead to appropriate solutions and ensure a stringent translation of the business strategy into the network structure.

The Footprint approach of ROI≡EFESO played a central role here. In order to test and adapt this approach in the corporate context, the project started in a pilot business unit with several locations. Based on the positive results from this pilot, the decision was made to formalize the approach in the form of the BOS process, to make it a regular part of the strategy process in the company and thus roll it out across all BUs.

Effective solutions promised the development
of its own "Business Operations Strategy" (BOS).

Structured Footprint development

One advantage of this approach was that the Footprint approach of ROI-EFESO could already be tested and adapted in practice in the pilot project. In the BOS process, the project team focused on clearly answering four key questions:

  • Which product should be produced at which location?
  • Why is the chosen setup the preferred option?
  • How can a modified structure be implemented?
  • Which strategic implementation projects are necessary?

For this purpose, the project team consisting of decision-makers from the company and consultants from ROI-EFESO used a structured process that gradually led to the optimal design (see graphic).

A look inside

The examination of the
"internal" perspective completed the picture.

The subsequent examination of the "internal" perspective completed the picture. Here, the project team was particularly concerned with creating transparency regarding the relative cost structure at the various locations, identifying potential for capacity increases by means of benchmark comparisons and making strategic make-or-buy assessments. Further components of this phase were the evaluation of the organizational maturity level as well as the identification of potential gaps and risks to be addressed during the BOS implementation.

Based on the design principles previously established, the project team now developed various scenarios in line with market requirements - both in terms of financial effects and implementation risks. But which strategic initiatives would be necessary to actually implement a certain scenario? The team clarified precisely this question in the final design step of implementation planning.

Expertise remains within the company

The Business Operations Strategy was a relevant milestone in the further development of the entire production network. It was therefore also necessary to build up the necessary know-how with the project in the company in order to be able to use the BOS approach independently. The corresponding training of selected employees from the "Functional Excellence group Operations" was provided by ROI-EFESO consultants. With this FE Ops, the project team worked in a very coordinated and close cooperation, so that the BOS process could be rolled out to four additional business units - including the future location and supply node structure, CAPEX plans and other implementation projects.

LESSONS LEARNED

Today, BOS is an integral part of the strategy process in the company. Looking back, some basic, central principles for the successful design and implementation of a BOS program can be derived:

  • Structured step-by-step process for Footprint development: Use of a logically structured process for Footprint development. Especially use of design principles as pillars of scenario development.
  • Outside-in perspective as an important contribution to network design: Ensuring the understanding of future customer and market requirements by changing perspectives.
  • Principle of "as much aggregation as possible, as much detail as necessary": Avoiding "getting lost" in mathematical scenarios and cash flow simulations. Ensuring a common understanding of critical, decision-relevant parameters.
  • Qualitative maturity measurement: Ensuring that the maturity level of the different locations is transparent and is analysed with regard to leadership, willingness to change and robustness of core processes.
  • Development of internal know-how: Introducing training and education phases at an early stage in order to provide employees with the necessary knowledge and promote the development of in-house consulting teams.

THE ROI-EFESO SUCCESS MODEL

As part of the BOS project, the company developed the Industrial Footprint for four of its business units and determined the impact on ROCE and cash flow. One component of the Footprint projects was the development of relevant CAPEX projects (capital expenditures for long-term assets) and strategic implementation projects. In addition to the "hard" results on BOS as such, an integral component for the internal strategy process was developed and an internal team was enabled to continue this process independently.

The team achieved the BOS goals and developed a
integral part of the internal strategy process.