Siemens Resilient and adaptive: industrial production in the "new normal" User Manual

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Resilient and adaptive: industrial production in the “new normal”

What does production look like in the “new normal”? Different from today – because the crisis ensures that the previous maximization of efficiency must be supplemented with resilient and adaptive production systems. A significant contribution is made by the digital transformation.

Everywhere, opportunities are currently being sought to create the “new normal.” But what happens when a vaccine is found or a treatment becomes available? Will we then return to the previous business as usual? No – says German futurologist Matthias Horx vehemently. The “new normal,” according to Horx, does not consist of glass dividers and protective masks, but of a reconfiguration of social systems at all levels of human coexistence – including the economy.

As a result, some familiar knowledge needs to be adapted.

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The “new normal” does not only consist of protective masks, but also of a reconfiguration of the social systems.

Efficiency at all costs?

The classic competitive paradigm applied to companies during business as usual: in order to be successful in the market, a company must either realize a structural cost advantage (be able to offer its products less expensively than comparable competitive products) or it must deliver a better product for the same price. In both cases, it is paramount for companies to keep an eye on their efficiency because even the better performing product must always be in relation to the price. Every user would certainly want a day-long battery life for smart phones – but if this unique selling point costs USD 10,000, the group of buyers will be extremely small. Efficiency gains arise, among other things, from the so-called experience curve effect. This model states that unit cost decreases significantly with increasing production volume. According to the model, doubling the accumulated output leads to a cost reduction of 20 to 30% per unit.

The production systems, configured from technologies and organizational patterns, follow this strategic criterion of maximum efficiency. For this reason, the assembly line production was introduced over 100 years ago; from the 1990s, the production was increasingly outsourced to lowwage countries as an extended workbench; followed by the implementation of just-in-time as a logistics concept and the deployment of ever more efficient (i.e., ultimately more cost-effective) technologies. Growth is also a decisive

factor, as only in this way can cost reductions from the experience curve effect be realized faster than by compe­ titors – and only through the implementation speed can competitive advantages be developed.

Maximum efficiency makes companies vulnerable

However, the coronavirus crisis has shown how vulnerable and fragile systems maximized for efficiency can be, says Matthias Horx. Just-in-time only works as long as transport routes and national borders are open. The reduction in the in-house vertical range of manufacture and the elimination of a “second source” in favor of lower costs require a supplier not affected by virus-induced plant closures, etc. To be able to react better to crises, a healthier balance between efficiency (i.e., cost minimization) and effectiveness (what actually comes out in the end) is thus needed. For some goods, the classic competitive paradigm was completely irrelevant during the first phase of the pandemic – it was simply about being able to deliver at all. But the coronavirus is only a proxy for crises of all kinds – global challenges such as sea pollution, depletion of natural resources, and climate change also fundamentally question the previous notion of “more and more, always cheaper.”