What is the true value of ERP for Manufacturers? If you’re familiar with IFS, you’ll hopefully know that we are deeply driven by the goal of bringing our customers significant and measurable business value with our enterprise solutions.
To validate and express this value, we recently engaged with IDC and asked them to carry out a study involving several IFS users from different industry verticals, including probably our most diverse customer industry, Manufacturing.
ERP for Manufacturers: Making Sense of the Study
The study revealed several immensely pleasing statistics and proof-points which served as evidence that IFS software does, indeed, make a marked difference. The value of the solutions manifests itself in such ways as a proven 18 percent productivity improvement, a 14 percent faster delivery of products/services and an impressive $25.8 million increase in revenue.
Words of Wisdom from our Resident Industry Expert
Despite these findings being cause for celebration, it is also important to understand their relevance specific to the highly complex industry that is Manufacturing. It’s an industry fraught with diversity and challenges, and to truly make sense of the study, I quizzed IFS’s Global Industry Director for Process Manufacturing, Colin Elkins.
In order to truly appreciate the findings, it’s important to understand exactly why the study was carried out in the first place.
Why was it necessary to have this study? And why so particularly in manufacturing?
“We all want to know whether what we’re doing as a company is actually giving value to our customers. It’s as simple as that”, Colin retorts to this question. He cites IFS’s ERP as a solution that is designed to make manufacturing companies more efficient and productive.
Colin was interested to survey what the ‘true value’ was to an organization in terms of implementing ERP. “Unless you actually test whether you’re achieving that, what’s the point?”
After mulling it over a moment, Colin eventually claimed that the study was indeed a particular necessity in the manufacturing industry. This was because he believes the industry is one of the most complex, given the nature of “taking raw material(s), that could be different every time you get them, and turning them into a product, and actually being able to sell and service it.”
The introduction of the study mentions that customer expectations and competition within the industry are two significant challenges for manufacturers. I was interested to know Colin’s thoughts on the matter, having over two decades of experience in ERP solutions within process industries.
What is the most immediate/greatest challenge faced by manufacturing organizations?
When asked which of the two challenges mentioned above were more important for manufacturers, Colin suggested that they were equally pressing matters for industry players. However, he went on to elaborate upon the matter of competition in greater detail, eventually declaring that in some process industries competition was a greater challenge than consumer demands.
Colin backed up this claim by referencing international affairs in manufacturing. “The competition from places like China, where they have massive resources of minerals and materials (the largest in the world)—when they start turning those materials into product, that is a massive competition for the West.”
Colin went on to explain that whilst international competition is a great challenge for many, in other industries like food and beverages, new and often local entrants are able to challenge the existing manufacturers. These smaller more agile entrants are able to innovate new products, building on initiatives like sustainability and clean labeling to take market share from the established brands.
How can these challenges be tackled?
Colin references the study here, which declares that manufacturers must gain maximum value from all their assets—from the workforce to the tech found in manufacturing plants—by properly utilizing data.
“Almost all the respondents to this survey talked about data. They all talked about more information, better information, faster information […] If you look at IDC’s report, that’s exactly what we (IFS) delivered.” Colin refers to a significant finding of the IDC study, which shows that the interviewed customers attribute IFS to an increase in the total value of staff time per organization from $8.38 million to $9.82 million. That works out as a 17 percent increase in staff efficiency from prior to IFS implementation!
These efficiency increases, Colin suggests, naturally translate into higher revenue due to cost savings and/or better productivity and, ultimately, a better fighting chance against the pressing challenges of the industry.
Which is the single most impactful statistic or finding of the IDC study that shows IFS bringing business value to its users?
There are some remarkable value points revealed by the IDC study, from millions of dollars in increased revenue to over a week faster delivery times after implementation of IFS solutions.
Despite this, the most impressive value point (and importantly, the one which should bring the greatest value to manufacturing organizations) is decidedly attached to the aforementioned 17 percent benefit to the total value of staff time per organization per year.
Colin quotes his favorite impactful statement from the report: “On a samplewide basis, IDC calculated average productivity gains for supply chain and manufacturing teams at 17 percent, along with faster product delivery times (14 percent) and delivery of more orders in a timely manner (10 percent).”
He describes this statement as the truest demonstration of value that the study derived. The caveat that Colin brings up, in reference to the finding of improved product delivery times is that it may not be relevant industry-wide. “In some industries, it doesn’t really matter if it’s two days late, or three days late.” He raises the question of whether or not the customer is even unhappy with late delivery, or if in certain sub-sectors of the manufacturing industry, slightly late delivery is the norm.
Final Thoughts: ERP for Manufacturers
From what I have taken from my interaction with Colin, and others involved in the orchestration of the project, I think the study was highly necessary if IFS is going to ‘practice what we preach’. It’s all very well to boast the business value that our solutions bring to their users, and why challengers of industries can’t do without them; now, we have research evidence to make good on our claims.
You have been presented with some of the key statistics and quotes in this blog, but for a deeper dive into the report, check out the IDC Business Value study for Manufacturing, an IDC white paper, sponsored by IFS.
If you enjoyed this blog please look out for others on IFSBlogs.
Colin welcomes comments on this or any other topic concerning process manufacturing.
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Photo: GettyImages-1054184002- PJ66431470
 per organization, per year. Source: IDC Industry Brief, sponsored by IFS, Manufacturing Summary Brief, September 2019, https://www.ifsworld.com/corp/sitecore/media-library/assets/2019/09/19/idc-ifs-man-business-case-brief/