There are murmurings that the manufacturing industry is beginning to see a slight upturn, but most feel that it is too premature to be jumping for joy. The last few years have seen millions of manufacturing jobs lost across Europe. The pressure on manufacturers is immense, with a weak economy battling against the trend to outsource to emerging foreign markets. There is no room for complacency. Paul Robinson from Cincom Manufacturing Business Solutions outlines some of the current trends in technology that can help manufacturers successfully weather the tough times.
European manufacturing companies invested almost $85 billion in information technology in 2002, according to analyst group Datamonitor. This is set to rise steadily reaching over $106 billion by 2006, of which Germany, France and UK will account for almost 60% of the spend. Despite this, a much more down-to-earth approach to IT investment has taken hold amongst manufacturers. Projects are likely to focus on tactical issues like solving pain points, improving business processes and increasing operational efficiency.
Although change can be difficult, it can also be a positive thing
Global competition weighs heavily on European manufacturing. Indeed many jobs have been outsourced to countries offering low-cost, but increasingly skilled/knowledge-based, labour. Although change can be difficult, it can also be a positive thing, forcing companies to reassess their business and processes.
Certain trends have emerged in response to global competition. Manufacturers are moving to offer solutions rather than products, which typically include lifecycle services, drawing revenue from other areas such as consultancy, maintenance and repair. Another trend has been to concentrate on the more complex endthe high value, low volume products. Typically these manufacturers produce products that have high variation, complex features and options, and may vary in end-user configuration. They are usually made-to-order, engineered-to-order or assembled-to-order.
Manufacturers are increasingly automating the sales process using interactive selling systems.
Complex manufacturing brings with it certain unique challenges. The sales process, for example, is often lengthy. It can take weeks to create a cost proposal for a complex product, such as a jet engine or a warship vessel, because much of the knowledge required resides in the minds of certain individuals within the company and subsequently a great deal of time is wasted chasing the expert. The importance of investing to improve the sales processcompared with supply chain, procurement, marketing and research and development processeswas highlighted in a recent Datamonitor survey among European manufacturers.
Manufacturers are increasingly automating the sales process using interactive selling systems that capture knowledge and business rules, guiding the user through the various configuration options, rather than having to manually prepare every order or proposal. Siemens, for example, cut the time to prepare proposals from four-to-six weeks to under one hour. It found that customer satisfaction was simultaneously improved as well as the ability to quickly generate CAD drawings and certified motor performance data.
BizTalk takes care of the complexities of communications protocols and XML message mappingwhich makes electronic trading available to all sizes of companies
Another impact of the global market on manufacturing is the greater need for collaborative processes and good information flow between worldwide suppliers, sub-contractors and customers. In the ideal world, there would be one big software solution that all parties used. In reality everyone is using different software, even within companies there can be communication issues between software packages. XML-based software, like Microsofts BizTalk, provides an easy-to-use, cost-effective and flexible solution to link processes electronically. As XML is increasingly becoming the industry standard for communications, it reduces the need for discrete point-to-point programming interfaces and the costly maintenance of these interfaces. BizTalk takes care of the complexities of communications protocols and XML message mapping, so all the companies have to do is agree on the contents of the messages that will travel to and fro, which makes electronic trading available to all sizes of companies, not just the big players.
This is a fast changing world and manufacturers have to cope with constantly changing requirements and new methodologies (lean, demand, TQM, etc.). They need to be able to ramp up activities in one part of the company while maintaining a steady ebb in another. The one-size-fits-all enterprise resource planning (ERP) software model is neither flexible nor agile enough for todays tough environmentanyway, who has time to reinvent internal processes to suit the software? Manufacturers are likely to turn instead to enterprise software that has been specifically tailored for their industry and can be adapted, at least to a certain extent, to meet their specific needs. For other manufacturers the answer may lie with a best-of-breed solution to address a particular issue, such as a quality management system in response to increasing regulation.
Manufacturers are also looking at outsourcing non-core competencies. In the IT department, outsourced application hosting is becoming increasingly common with backups, upgrades and maintenance being carried out by a third party, leaving IT to search out areas in which it can add value to the business.
too many manufacturers rush into projects without taking any metrics before the implementation and so have nothing to compare it to afterwards.
A shopping list for total cost of ownership
Whatever the solution, manufacturers should be demanding to see a return on investment (ROI). It may sound obvious, but too many manufacturers rush into projects without taking any metrics before the implementation and so have nothing to compare it to afterwards. Another common mistake is to focus on the cost of the software rather than total cost of ownership. Some things to check before committing to buy are:
The ratio of the cost of the software versus the cost of the implementation. Typically, a ratio of 1:1 is excellent; a ratio of 1:5 is not uncommon!
Hidden costs such as the cost of the project management and internal resourceshow many inhouse staff will be utilised and for how long?
The amount of training that will be required.
Time to complete the project. The longer the implementation takes, the longer it will be before a ROI can be achieved.
Ongoing costs such as onsite or remote support. What level of support will be needed and what are the associated costs?
Ongoing costs such as hosting and maintenance. Some software companies tie customers into regular upgrades that can be expensive and are not always necessary. Outsourcing these can be cost effective alternative.
The heydays of high-risk,big IT spend are over. The next few years will see manufacturers investing in business-led IT projects that address tactical issues. They will be expecting low total cost of ownership with good ROI. In line with this, vendors need to offer tangible benefits and deliver on their promises. Products and solutions should help improve efficiency, reduce cost and optimise assets. The theme will be focus not fashion.
Paul Robinson is the Northern European Marketing Manager for Cincom Systems, Manufacturing Business Solutions. Paul has over 20 years experience within the manufacturing industry. He has worked in engineering, sales and marketing roles, in various well-known companies including GEC Telecoms, Mars Group, JBA (now GEAC) and Samsung Semiconductor.