Challenging Times Require a New Approach
These days, it’s so hard to be successful in manufacturing. We’re living in a time of accelerated disruption, characterized by continuous volatility and heightened uncertainty. Changing customer needs and preferences are forcing companies to adapt quickly as technology advances. This requires a deep understanding of the competitive landscape and a willingness to invest in new technologies and processes. This is made even more difficult by the fact that consumer tastes are constantly changing, and the market is always in flux.
Companies have long aimed for operational and product excellence to make their customer experience as positive as possible. Most manufacturers deliver top-of-the-line products with fine-tuned processes (otherwise they wouldn’t be there). But adding value into the traditional source-make-deliver model is next to impossible in some sectors, given the challenges in the market — suppliers not delivering on time, a shortage of containers for shipments, the cost of manufacturing, and disrupted factory networks. On top of all that, inflation is biting, distribution channels are failing, and customers may not have the money to pay for it.
Manufacturers need to deal with the immediate challenges but also not lose sight of the long term. Companies need to have their hands in the now, but keep their eyes on the future. So, the next few years will be transformational for manufacturers as they find new and more effective ways to manage their businesses.
Manufacturers Need to Move Digital to the Next Stage
IDC’s Global Future of Manufacturing Survey highlights that digital maturity does have a positive impact on profits and growth in uncertain times (see IDC’s Shaping the Future of Manufacturing InfoBrief, IDC #EUR150205923, March 2023). Survey results show that those manufacturers that consider themselves to be “digitally advanced” have been able to stabilize — and increase — their profits in the past fiscal year. Manufacturers have learned a lesson, and even latecomers to the “digital party” are now building a new technology foundation to deploy modern business applications. Many are investing a high percentage of their IT investments on IT innovation, with 47% of manufacturers worldwide now developing and implementing innovative IT systems based on cloud and advanced analytics.
Cloud, Open Integration, and Modular Functionalities Enable IT Progress
The same research also sheds light on what manufacturers are looking for when selecting their main enterprise solutions IT provider in their transformation journey. The top 3 criteria are:
- Cloud-first strategy and road map. This is hardly a surprise. Survey results show that the more digitally advanced manufacturers are, the more they have already moved most of their enterprise software to the cloud. Because of the easier deployment journey of cloud technologies, leading manufacturers have managed to build a scalable IT foundation for long-term revenue and profit growth. Even when it comes to operational processes such as those happening within the factory walls, after having been a “taboo” inside the plant for many years, cloud is now key. Edge-to-cloud architectures are enabling zero-latency performance, while cloud-based solutions enable easier application integration, thereby supporting data sharing and better data utilization, which potentially impacts revenue and profit growth.
- Integration of state-of-the-art technologies. This is closely related to the cloud. Innovation now happens outside corporate firewalls. Cloud-based solutions help organizations to scale as they enable easier access to additional capabilities (compute power, data storage and analysis, advanced cybersecurity tools) and IT innovation, mostly around machine learning and AI. This way companies can achieve a seamless continuum of computing capabilities from the machine to the edge, to the data lake, and to the cloud without the need to manage and integrate multiple disjoined APIs.
- Modular functionality, within a single enterprise solution. In the past, IT growth has often been accompanied by unnecessary complications. Over time, companies have built internally complex landscapes of business applications, often heavily customized (built around COTS best-of-breed software or sometimes even spreadsheet based), in addition to their traditional enterprise systems. But this overuse of Excel spreadsheets as a repository for data and overcomplication in IT architectures eventually creates greater challenges in delivering information effectively and at the right level across the organization. These poorly integrated business applications (such as traceability, transportation management and logistics, warehouse management, and CRM systems) tend to manage silos of information, focused as they are on their dedicated processes. In other words, they are very effective at doing what they were originally conceived and implemented to do. However, they can’t seamlessly transfer data and information to other business processes and applications. To effectively cover intra-enterprise processes, companies often need to rely on expensive and cumbersome custom applications or error-prone manual processes. This requires them to go through a simplification journey.
A last piece of advice for manufacturers: they should make sure digital is at the center of their business thinking now, but initiatives that focus on using technology only are not likely to be completely successful or scalable. It’s all about solving business challenges and developing use cases that have a business need. It’s essential therefore to think of digital as a means to solve the challenge, not an end in itself. Technology is not the end — it is the future.
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