Mobility

Project “P”:
A Blank Slate
at Audi

Audi has completely reorganized its production work. One of the largest restructuring projects in Germany’s automotive industry was completed within a single year – and is already paying off.

09/2020

“We pulverized our complete organization”: With the reorganization of production – project “P” – Production Board Member Peter Kössler and his team, together with Porsche Consulting, achieved the largest transformation in the history of Audi.
“We pulverized our complete organization”: With the reorganization of production – project “P” – Production Board Member Peter Kössler and his team, together with Porsche Consulting, achieved the largest transformation in the history of Audi.AUDI AG

Decem­ber 2, 2019, is a momen­tous day for the pro­duc­tion and logis­tics divi­sion at Audi. It marks the start of a new era for the pro­duc­tion. The heart of every car maker is its pro­duc­tion depart­ment, and Audi has just given it a new orga­ni­za­tion­al form. This might sound like a minor admin­is­tra­tive reform. But that would be like equat­ing the shift from com­bus­tion engines to elec­tric dri­ves with a sim­ple model facelift. This first Mon­day in Decem­ber 2019 marked “the largest trans­for­ma­tion project in Audi’s his­to­ry,” says Peter Kössler, the company’s board mem­ber in charge of pro­duc­tion. “We pul­ver­ized our com­plete orga­ni­za­tion,” he adds. One could also say the com­pa­ny con­duct­ed one of the largest inter­nal reor­ga­ni­za­tion­al projects ever seen in Ger­man auto­mo­tive indus­try.

New matrix for new challenges

“Exper­tise-ori­ent­ed matrix orga­ni­za­tion” is the key to the future of “P,” Audi’s pro­duc­tion divi­sion. This new orga­ni­za­tion­al form is designed to enable the car maker to meet upcom­ing chal­lenges con­sid­er­ably more effi­cient­ly and cost-effec­tive­ly, because the auto­mo­tive indus­try needs to mas­ter the great­est trans­for­ma­tion in its his­to­ry. The industry’s very foun­da­tions have been shak­en by inno­v­a­tive tech­no­log­i­cal trends and a fun­da­men­tal shift in how soci­ety views mobil­i­ty. Dig­i­tal­iza­tion, dri­ver­less cars, alter­na­tive pow­er­trains, intel­li­gent assis­tance sys­tems, big data – car design­ers today need more know-how than NASA engi­neers did to build their first lunar rock­et. The wheel of inno­va­tion is spin­ning ever faster, and any­one who can­not keep up will quick­ly fall off. This calls for inno­v­a­tive busi­ness mod­els and prod­ucts. And that in turn requires pro­duc­tion facil­i­ties to accom­mo­date ever short­er inter­vals in tech­no­log­i­cal devel­op­ments as well as chang­ing expec­ta­tions on the part of cus­tomers. With­in the space of just one year, Audi there­fore took its pro­duc­tion depart­ment from the ini­tial idea to the actu­al launch of what it calls an exper­tise-ori­ent­ed matrix orga­ni­za­tion.

In effect, that means a com­plete­ly new model for col­lab­o­ra­tion. New respon­si­bil­i­ties. New com­mu­ni­ca­tion chan­nels. New inter­faces to other parts of the com­pa­ny, and the elim­i­na­tion of one com­plete level in the hier­ar­chy. And – an essen­tial ingre­di­ent – com­pre­hen­sive con­cen­tra­tion on dif­fer­ent types of exper­tise. As a result, tasks can be con­sol­i­dat­ed and stan­dard­ized more effec­tive­ly. Time and cost-inten­sive redun­dan­cies are to be avoid­ed. And not least of all, the pro­duc­tion process should not be over­loaded. The great­est aim of the trans­for­ma­tion project is to relieve the plants of unnec­es­sary bur­dens so they can focus on their core task of mak­ing cars. A new strate­gic plan­ning orga­ni­za­tion­al unit now serves to coor­di­nate the company’s divi­sions. It sets the main guide­lines and tar­gets for all activ­i­ties relat­ed to Audi’s pro­duc­tion plants as well as to cen­tral divi­sions from logis­tics to the press­ing plant net­work.

Photos of fax machines

To grasp the sig­nif­i­cance of this restruc­tur­ing project, one needs to look back at the past. The fall of 2018 will suf­fice for a start. That was when the first major meet­ing for the upcom­ing trans­for­ma­tion took place with pro­duc­tion board mem­ber Peter Kössler, all the divi­sion man­agers, and experts from Porsche Con­sult­ing and Audi Con­sult­ing. At the meet­ing, Kössler showed some pho­tos from his early days at Audi. The native of Ingol­stadt,  joined the world of four rings in the mid-1980s as a trainee. The pho­tos includ­ed old rotary-dial phones, bulky com­put­ers with small stor­age capac­i­ties, and fax machines. “This is what Audi looked like when I start­ed work­ing here more than thir­ty years ago,” he said. The machines have since been replaced by ever more mod­ern sys­tems. But the orga­ni­za­tion­al struc­ture, which is the back­bone of suc­cess­ful car pro­duc­tion, had hard­ly been changed over the pre­ced­ing thir­ty years.

Extensive experience: Production board member Peter Kössler joined Audi in the mid-1980s as a trainee.
Extensive experience: Production board member Peter Kössler joined Audi in the mid-1980s as a trainee. AUDI AG

“For decades, pro­duc­tion at Audi focused on func­tions,” explains Boris Kainz, an asso­ciate part­ner at Porsche Con­sult­ing who par­tic­i­pat­ed in Audi’s reor­ga­ni­za­tion­al project. That was not a prob­lem when it was only a mat­ter of the two sites in Ingol­stadt and Neckar­sulm. Dis­tances were short and coor­di­na­tion was sim­ple. But the prin­ci­ple is no longer viable in today’s glob­al­ized world with the company’s five plants plus joint ven­tures in China, as well as short­er prod­uct cycles and greater prod­uct and model diver­si­ty. Audi’s pro­duc­tion resem­bled a fed­er­al sys­tem in which each plant and cen­tral office formed its own unit with its own tar­gets, stan­dards, prob­lems, and means of find­ing solu­tions. “It was tough, time-inten­sive, and occa­sion­al­ly impos­si­ble to achieve the cen­tral coor­di­na­tion and con­trol need­ed to focus on brand opti­miza­tion over­all,” says Kainz. The mes­sage behind Kössler’s ret­ro­spec­tive photo show was clear. Some­thing had to change. And that “some­thing” meant actu­al­ly every­thing.

“Think big – things will shrink on their own”

What the com­pa­ny then accom­plished in just a lit­tle more than a year is impres­sive. Audi formed a “change team” with man­agers from all the divi­sions along with “heavy-project” man­agers Dr. Siegfried Schmidt­ner and Michael Breme. Porsche Con­sult­ing did some­thing sim­i­lar. As the head of “P,” Kössler set the course with the maxim “Think big – will shrink on their own.” In other words, the team was unen­cum­bered by pro­hi­bi­tions and urged to think beyond depart­men­tal lines. Whether and how ideas would then be imple­ment­ed was to be decid­ed later on. In addi­tion, the team estab­lished its own trans­par­ent com­mu­ni­ca­tion strat­e­gy to ensure that every­one was always up to date. All those involved – employ­ees, the works coun­cil, man­age­ment, and board – were to be kept up to date at all times. More than one hun­dred Audi man­agers were direct­ly involved in the trans­for­ma­tion, and the restruc­tur­ing project affect­ed over 50,000 pro­duc­tion employ­ees.

Anoth­er of the project’s max­ims was that the struc­ture should reflect the process­es. More than one thou­sand indi­vid­ual process­es were iden­ti­fied and each one of them was assessed for pos­si­ble over­laps and whether decen­tral­ized process­es could be con­sol­i­dat­ed at a cen­tral source. One key scene in this major year-long trans­for­ma­tion­al project illus­trates the gen­er­al tenor. In mid-March of 2019, or around four months into the project, the experts from Porsche Con­sult­ing arranged a work­shop at a con­fer­ence cen­ter out­side Ingol­stadt. The sem­i­nar room’s views of the sur­round­ing mead­ows and wood­lands were soon obscured. The walls, win­dows, and even the floor were quick­ly cov­ered with 1,100 strips of white paper, each list­ing a spe­cif­ic pro­duc­tion process at Audi. And then the strug­gle began. Each work step and each sub­process described on each slip of paper was exam­ined. Twen­ty-five mem­bers of Audi’s change team walked around the room with “bunch­es of strips of paper,” recalls Kainz. “The strips were ripped up, crum­pled, com­bined, sort­ed, and repost­ed. Every­one rolled up their sleeves and joined in. There’s a rea­son why we worked with paper, pen­cils, and tape – it gives you a com­plete­ly dif­fer­ent and very phys­i­cal expe­ri­ence.” And the result was impres­sive. The num­ber of main process­es was cut in half, and the sub­process­es were reduced by a third.

Clear responsibilities – experts for every challenge

One exam­ple of the ben­e­fits of stream­lin­ing Audi’s pro­duc­tion can be seen today in the logis­tics activ­i­ties. Pre­vi­ous­ly each of the five plants had a logis­tics man­ag­er who con­cen­trat­ed pri­mar­i­ly on the well-being and prob­lems of that plant’s pro­duc­tion depart­ment and report­ed sole­ly to the plant’s man­ag­er. In the event of dis­rup­tions like short­ages in the sup­ply chain, that meant the strongest plant or the logis­tics man­ag­er with the best net­work had the edge. Other plants, which might also have been wait­ing for win­dow lifters, for exam­ple, were left in the cold. That has now changed. The logis­tics man­agers at the five plants now report to the cen­tral logis­tics depart­ment. It works togeth­er with the sites to dis­trib­ute com­po­nents such as win­dow lifters with the aim of find­ing the best solu­tion for the brand over­all.

The approach to launch­ing new mod­els has also been changed, with indi­vid­ual sites no longer expect­ed to han­dle every­thing alone. For exam­ple, in 2017 the site in Brus­sels, which had thus far pro­duced only one model – the A1 – was charged with launch­ing Audi’s first elec­tric car – the e‑tron – with its espe­cial­ly sophis­ti­cat­ed tech­nol­o­gy. “That was an enor­mous chal­lenge for a site that had pre­vi­ous­ly only launched a new model every seven years,” observes Kössler. It became clear that the com­pa­ny should not require sites of that type to run such projects alone. “The plant had to break new ground and do a lot of impro­vis­ing,” he adds. With the new exper­tise-ori­ent­ed matrix orga­ni­za­tion, sites are no longer left to their own devices. A launch team with rep­re­sen­ta­tives of the rel­e­vant cen­tral depart­ments and experts spe­cial­iz­ing in pre­cise­ly these jobs was formed to coor­di­nate pro­duc­tion launch­es and guide the projects suc­cess­ful­ly for both Audi and the indi­vid­ual plants.

First big stress test: Covid-19

The first stress test for the new orga­ni­za­tion came quick­ly and with a vengeance. How­ev­er, it was a stroke of luck for the project team that the new pro­duc­tion orga­ni­za­tion was up and run­ning when the effects of the Covid-19 pan­dem­ic set in. As Kössler observes, “From the per­spec­tive of the cur­rent sit­u­a­tion and look­ing back at the past months of sup­ply-chain short­ages, fur­loughed employ­ees, and sus­pen­sions in pro­duc­tion, it’s absolute­ly clear to me that with­out the new orga­ni­za­tion, we could never have han­dled it in this form, par­tic­u­lar­ly those dif­fi­cult weeks in spring. We man­aged all the plants, espe­cial­ly in terms of logis­tics, from a sin­gle source and applied a coher­ent strat­e­gy to the new chal­lenges that kept aris­ing every day.”

And that is how the new aspects of “P” estab­lished them­selves very quick­ly. But the most unusu­al part of the enor­mous trans­for­ma­tion is that some­one who had vis­it­ed an Audi plant in the fall of 2018 and did so again today would not notice any dif­fer­ence. The largest trans­for­ma­tion in the his­to­ry of Audi has left hard­ly any vis­i­ble traces on the shop floor—although it has changed almost every­thing.

Interview

“The organization has been rejuvenated in many areas”

Peter Kössler, Board Member in charge of production, Audi AG
Peter Kössler, Board Member in charge of production, Audi AGAUDI AG
Mr. Kössler, the new organizational structure for production at Audi has now been running for a good half a year. Are you satisfied with it? Very much so! That was an enormous project for us. It was the largest transformational process in Audi’s history as well as the largest reorganizational project in DAX-related German industry in recent years! After all, we pulverized “P’s” entire organization, namely, the production work of a major international automotive group. It was quite an exciting time for the people in our production and logistics division. A time that was also full of emotions like anxieties, expectations, and fears. But it was worth it. The organization has been rejuvenated in many areas and you can see substantial improvements in – for instance, between the product engineering and the manufacturing engineering departments. I’m therefore completely satisfied. Why did you decide to reform Audi’s production? I deal with issues in a very analytical and structured way. After more than thirty years at Audi I am obviously very familiar with the structures here. The company has undergone enormous growth in recent years. I can still remember the time when we were selling a total of 360,000 cars. In 2019, we were up to around two million. But the organizational structure had hardly changed. We generally simply docked something on, or enlarged an existing department. But the processes, or in other words, the key part of our company, were not examined. That was what we set out to do: to shine light on all the processes in order to find the best possible structures that would enable us to better master the challenges of the future. For such a fundamental change in culture to work, it’s essential to have everyone pull together. How did you make sure this would happen? The production and logistics division has around 50,000 employees. It would be presumptuous to think that everyone was on board to the same extent when we set the new course. Transparent communications were therefore of the utmost importance in order to get everyone to support the project. It was very important for me to have people view themselves as actively participating instead of being passively affected. My promise was that we would take care of each individual and find a suitable high-quality job for them. My office door and my text messaging account were open to everyone. What was it like to work with Porsche Consulting on this transformation? I have high praise for our colleagues at Porsche Consulting. Also for the team we formed at Audi. It was an outstanding example of collaboration. Sometimes you could hardly tell who was from Audi and who was a consultant. It was one team, and one project group. The only thing that counted was the big picture. The people from Porsche Consulting showed a truly deep understanding of what we are about. They didn’t show up with PowerPoint presentations and the notion that they always know where the benchmarks lie. On the contrary, we worked together to draw up a very practical solution.
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