Manufacturers must embrace complexity challenge

Manufacturing complexity has increased in the last five years, and is expected to continue to rise over the next three years, according to a global survey of 378 manufacturers in the automotive, aerospace, high-tech electronics, and industrial equipment industries, undertaken by IDC Manufacturing Insights and sponsored by Infor. The white paper, In Pursuit of Operational Excellence: Accelerating Business Change Through Next Generation ERP, highlights the need for manufacturers to not only confront the complexity challenge but to embrace the opportunity presented by rapid innovation to secure competitive advantage. However, manufacturers across all industries and all regions claim that they are not equipped with adequate tools to achieve this goal.

According to the white paper, manufacturers recognise and acknowledge the increase in complexity and strategies to manage it vary widely across industry sectors according to their unique industry challenges. Automotive and aerospace look toward improved demand planning (60 per cent and 57 per cent, respectively) to improve operational efficiencies; while high-tech electronics opts for increased sourcing from lower cost countries (49 per cent) and better alignment of IT with the business (49 per cent). Meanwhile, the industrial machinery sector is seeking to adopt strategies focused mostly on improved customer fulfilment (53 per cent). However, the common denominator, according to two-thirds of manufacturers, is that business processes and IT systems fall short of dealing with current levels of complexity.

The research was conducted in October 2011 among manufacturers in the United States, UK, France, Germany, Italy, Brazil, Australia, China, India, Japan, Qatar, Saudi Arabia, UAE, and Russia. Drawing upon a similar white paper sponsored by Infor, the current findings unveil that complexity has risen in the last five years, according to 53 per cent of manufacturers, with the majority of manufacturers (57 per cent) claiming that it will continue to rise over the next three years. The remainder expect complexity levels to remain the same, with none anticipating it to reduce.

All industry sectors anticipate complexity to grow fastest in their respective markets, closely followed by their internal processes. Aerospace, industrial machinery and high-tech electronics rank technology as the third area likely to become more complex, while automotive companies put increased supply chain complexity third.

Looking to business strategies to embrace complexity over the next three years, automotive and aerospace companies point to improved demand planning and forecasting (60 per cent and 57 per cent respectively), and customer fulfilment (49 per cent and 50 per cent), followed by lean/six sigma programs (45 per cent) as their top initiatives. Industrial machinery companies mirror this trend, but rank customer fulfilment (53 per cent) higher than improved demand planning (51 per cent), while high-tech electronics companies favour increased sourcing from lower cost countries (49 per cent) as their primary initiative in harnessing complexity, along with better alignment of IT with the business (49 per cent) and improved customer fulfilment (44 per cent) third.

When asked about barriers to harnessing complexity and improving operational excellence, findings point to a lack of agility in adapting business processes to change (66 per cent), and ineffective or inadequate IT systems (61 per cent). Additional weaknesses of IT systems include poor integration with existing applications (44 per cent), limited operational capabilities (28 per cent) and complexity and expense in upgrading (24 per cent).

"Manufacturers all around the world must maintain strict discipline over their operations management in order to improve profitability," said Pierfrancesco Manenti, Head of IDC Manufacturing Insights, Europe, Middle East & Africa. "Companies must directly address key challenges such as harnessing and embracing the complexity that surrounds their operations while reducing internal complications by having consistent processes, better informed people, and open lines of communication. There is a huge requirement for modern applications that can support new, customer driven operating models to help manufacturers exploit innovation and profitable growth."

"Similar to the 2010 survey, complexity remains high on the list of priorities for manufacturers, who recognize that their need to offer choice and differentiated service also creates increased operational complexity and a hidden cost to manage it," said Andrew Kinder, director, product marketing, Infor. "The right enterprise applications and technology strategy has a big part to play in confronting the complexity challenge with solutions that facilitate better, faster decision making, support an increasingly mobile workforce and equip manufacturers with business agility rather than rigidity."