Why Bauer Is Reinventing Its Supply Chain

One of the world’s largest zinc mines lies around 170 kilo­me­ters north of the Arc­tic Cir­cle and about 1,000 kilo­me­ters north­west of Anchor­age, Alas­ka. In oper­a­tion since the 1980s, Red Dog mine accounts for approx­i­mate­ly 10 per­cent of the world’s zinc pro­duc­tion. The ground at the site is in a com­plete­ly frozen state of per­mafrost. But if the per­mafrost should thaw, the Ger­many-based BAUER Group was com­mis­sioned to do field tests to deter­mine the steps need­ed to shore it up. It con­duct­ed these tests on jet grout­ing and cut­ter soil mix­ing (CSM) process­es, and showed that the lat­ter would be suit­able. CSM process­es cut up soil, shift it, and mix it with an aggre­gate. The BAUER Group was also com­mis­sioned to con­struct a secant pile wall with 93 sec­ondary piles, using a mul­ti­pur­pose BG 30 drill rig with spe­cial Arc­tic equip­ment. The two pieces of machin­ery involved were devel­oped and pro­duced by BAUER Maschi­nen GmbH in the south­ern Ger­man town of Schrobenhausen.

The fam­i­ly busi­ness is list­ed on the stock exchange with 11,000 employ­ees at 110 sub­sidiaries and total Group rev­enues of a good 1.5 bil­lion euros. Its work is divid­ed into three seg­ments. The con­struc­tion seg­ment does large-scale spe­cial­ized foun­da­tion projects world­wide (sales share: 45 per­cent). The equip­ment seg­ment is a glob­al mar­ket leader in devel­op­ing and pro­duc­ing machin­ery for spe­cial­ized foun­da­tion engi­neer­ing (40 per­cent). And the resources seg­ment is a ser­vice provider in the fields of drilling, water wells, envi­ron­men­tal sys­tems, con­struct­ed wet­lands, min­ing, and reha­bil­i­ta­tion (15 per­cent). The BAUER Group is posi­tioned as an inno­v­a­tive and high­ly spe­cial­ized provider of prod­ucts and ser­vices for spe­cial­ized foun­da­tion work and asso­ci­at­ed mar­kets. Its machines can bore, ram, cut, shift, and com­press soil. They are not restrict­ed to the Arc­tic but can see action any­where: exam­ples include build­ing dikes at the Dead Sea in Jor­dan, extend­ing Bruce High­way in Queens­land in Aus­tralia, and expand­ing the port of Alexan­dria in Egypt. The heavy-duty rigs can weigh up to 300 tons (BG 72), and cost from 500,000 to a good five mil­lion euros.

Bauer is a very spe­cial type of hid­den cham­pi­on. Over its 230-year his­to­ry the com­pa­ny has con­stant­ly acquired new mar­kets and respond­ed suc­cess­ful­ly to change. “A readi­ness for change is part of our genet­ic make­up,” says Pro­fes­sor Sebas­t­ian Bauer, mem­ber of the own­ing fam­i­ly who directs research and devel­op­ment for BAUER Maschi­nen GmbH. The entire BAUER Group needs this abil­i­ty too, as its cus­tomer struc­ture is extreme­ly het­ero­ge­neous. As Bauer observes, “Each cus­tomer is dif­fer­ent, each con­struc­tion site poses spe­cial chal­lenges, and each coun­try has its own soil and trans­port con­di­tions. Max­i­mum depth will be impor­tant in one coun­try, drilling power in anoth­er, and trans­port weight will be the cru­cial sales cri­te­ri­on in yet anoth­er.” That is one rea­son why each of the approx­i­mate­ly 200 large-scale pieces of machin­ery the com­pa­ny pro­duces annu­al­ly is unique. Only very rarely is one of the machines just like its pre­de­ces­sor. Also of note is the fact that many buy­ers will wait to order their spe­cial­ized drilling rig or diaphragm wall cut­ter until the con­tract they seek is con­firmed. But then they need to act fast. For a long time the com­pa­ny focused on meet­ing cus­tomers’ needs with ready-made prod­ucts that were adapt­ed to indi­vid­ual spec­i­fi­ca­tions short­ly before deliv­ery. BAUER Maschi­nen GmbH pro­duced equip­ment to “keep in stock,” and there­fore had to store a large num­ber of machines on its premises.

This type of pro­duc­tion car­ries high cap­i­tal com­mit­ment costs. But that’s not all. As Bauer explains, “For a long time we were incor­po­rat­ing a great many func­tions into our machines so they’d be suit­able for near­ly every cus­tomer and appli­ca­tion, in an attempt to avoid dis­tri­b­u­tion prob­lems and alter­ation costs.” This “ultra-stan­dard­iza­tion,” as Bauer calls it, meant that cus­tomers ended up with more com­plex machines than they actu­al­ly need­ed. As a result, they only used or appre­ci­at­ed a frac­tion of the appli­ca­tions their machines could per­form. “We’re now in the process of chang­ing that,” he notes. The over­all project is one of strate­gic trans­for­ma­tion. New com­peti­tors on the mar­ket, espe­cial­ly from Asia, are anoth­er rea­son this step is need­ed. As Bauer con­tin­ues, “If we want to safe­guard our lead­ing posi­tion in inter­na­tion­al com­pe­ti­tion, we have to become faster, more flex­i­ble, and more eco­nom­i­cal.” The goals are to short­en pro­duc­tion through­put times, reduce inven­to­ry, lower costs, and increase cus­tomer choice. The cho­sen instru­ment is a sup­ply-chain strat­e­gy. “It puts us in a posi­tion to sup­ple­ment our basic mod­els in such a way that we can pro­vide each client with a large­ly cus­tomized and unique product—in a rapid and stream­lined man­ner,” he says.

The aim is to pro­duce 80 per­cent of all machines on com­mis­sion and to deliv­er them with­in six weeks. In a word, the aim is ambi­tious. The idea is to achieve this by using pre­fab­ri­cat­ed mod­ules and com­po­nents that are pro­duced either in-house or by sup­pli­ers and are already “on the shelf”. When a machine is ordered, the pro­duc­tion team can imme­di­ate­ly retrieve the req­ui­site com­po­nents and mod­ules from the ware­house and adapt the over­all con­fig­u­ra­tion to the spe­cif­ic require­ments. As Bauer explains, “We’re no longer deter­min­ing the machines’ detailed spec­i­fi­ca­tions a year in advance and then essen­tial­ly adjust­ing the entire thing. Instead, we’re assem­bling each indi­vid­ual piece of equip­ment in a high-speed pre­ci­sion process.” What’s impor­tant here is to keep the level of pre­fab­ri­cat­ed parts as low as pos­si­ble. It’s also clear that this trans­for­ma­tion requires employ­ees to change how they think and act. “We need more flex­i­bil­i­ty here too,” notes Bauer.

The con­tract came in May 2020. Fol­low­ing pre­lim­i­nary talks with sev­er­al con­sul­tan­cies, BAUER Maschi­nen GmbH select­ed Porsche Con­sult­ing as its part­ner for turn­ing the vision of strate­gic trans­for­ma­tion into reality.

“Porsche Con­sult­ing under­stands pro­duc­tion,” says René Gud­jons, the man­ag­ing direc­tor of BAUER Maschi­nen GmbH in charge of pro­duc­tion, in explain­ing the choice.” And it has expe­ri­ence in man­ag­ing change.” Trans­for­ma­tion was on the agen­da, and ideas were already for­mu­lat­ed. “We want­ed a part­ner who would chal­lenge us, and who would tur­bocharge our progress,” he says. And that is what hap­pened. The project is now in the stage of inter­nal implementation.

Rain­er Ross­bach, the man­ag­ing direc­tor of BAUER Maschi­nen GmbH in charge of com­mer­cial admin­is­tra­tion, adds: “The con­sul­tants spurred us on, put our ideas into prac­tice, and served as cat­a­lysts in accel­er­at­ing the sup­ply-chain strat­e­gy.” The orga­ni­za­tion­al changes intro­duced have also played an impor­tant role. “At the begin­ning, the process felt like a minor rev­o­lu­tion, where­as the next two or three years will be more a mat­ter of evo­lu­tion­ary changes,” says Gud­jons. Ini­tial suc­cess­ful results of the trans­for­ma­tion are expect­ed to become evi­dent in mid-2022.

A suc­cess­ful sup­ply-chain strat­e­gy for a glob­al­ly active mechan­i­cal engi­neer­ing com­pa­ny absolute­ly has to build on cur­rent and con­sis­tent data. That is all the more true when it comes to plan­ning. After all, the Schroben­hausen-based com­pa­ny has to antic­i­pate as accu­rate­ly as pos­si­ble which machines will be need­ed on con­struc­tion sites world­wide in twelve or eigh­teen months. “For that we need to front-load the process with a lot of intel­li­gence,” says Gud­jons. This requires all the com­pa­ny divi­sions to change the way they think. All the depart­ments and all the sub­fields require plannable process­es. Data exchange process­es need to be improved as well, both with­in the group and with sup­pli­ers. As Ross­bach puts it, “We want our sup­ply-chain approach to relieve the dis­tri­b­u­tion and pro­duc­tion process­es that pre­vi­ous­ly had to con­tend with far too many ad hoc measures.”