Leading companies hide their workings from curious competitors close their gates from the views of curious competitors, so that their production methods will remain corporate secrets. Innovations will not be recorded as patents, because being one step ahead of the competitors is more important than an international patent, which can be copied worldwide fast and technically put into practice quickly.
Top Management, important leaders and union representatives of a company are heavily engaged in the day to day business and often blinded by their past successes, so that the up-coming technological tsunami is rarely observed.
“Only in the present do we generate the competitiveness and the success for the future.”
The yearly improvements of 5-8% in manufacturing were, over a long period of time, a sufficient standard in the automotive industry. This target productivity improvement compensated the normal cost increase in material and wages and therefore maintained corporate value. Furthermore, increase of productivity and savings have to fullfil e.g. the Global Terms and Conditions of an automotive manufacturer.
In order to participate in a quote for a new product, the required cost reduction of 4 times 5 % will be contractually fixed with the supplier. Some companies enable higher price reductions of an order to “buy” new contracts or to keep an existing contract in-house…
A plant closure could be the consequence because of not receiving a new or losing/cancelling an existing order. The cost of closing a plant in Germany will range from 50-100 Mio. Euro. The one-time cost will immediately lower profit. Therefore, management will often decide on a marginal cost approach. A difficult mixture of cost reduction in engineering, understaffed project control, cheap and old production equipment, deviation in schedule and a low delivery quality, etc. will arise without a professional project management office (PMO) and a consequent performance improvement programmes.
Unplanned ramp-up losses can quickly lead to a high unplanned financial burden. A fire sale triggered by financiers may dilute the value of the corporation. Loss in wealth, private bankruptcy, and high depreciation of loans of financing banks could be the consequences. This does not take into account the human side with employees and suppliers.