Project “P”:
A Blank Slate
at Audi

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.

“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.

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.

“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.

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.

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.

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.