As companies race to seize competitive advantage in a tentative economic upturn the need for ever finer degrees of efficiency is pushing the use of IT and automated analytics up the strategic priority list. But what does this mean for manufacturers? Jane Gray chewed the fat with industry representatives.
The latest of The Manufacturer’s Director’s Forum (MDF) dinners, held on April 7 in Nottingham and sponsored by Columbus IT, provided a timely opportunity to ask attendees how the recently reported slump in economic optimism was affecting their operations and the motivations behind their use of technologies like enterprise resource planning (ERP) systems, business analytics and business intelligence. After all, our gathering was taking place just days after the British Chambers of Commerce’s Quarterly Economic Survey had announced dolefully that Q1 2011 was “mediocre and disappointing, especially for manufacturing” and the UK PMI figures for manufacturing declined again from the January high of 61.2 to a less buoyant 57.1.
Yet the overwhelming response from diners was that full order books and escalating customer expectations on lead times are what’s driving efficiency hunts, as they look to glean even the most minute competitive advantage in order to fulfil exacting demand. Even representatives involved in luxury consumer markets, said to be suffering most in the current economic climate, reported feverish activity.
A means to an end
As conversation over dinner unfolded it became obvious that this is translating into pressure for IT systems to be more intelligent in identifying trends and for users to be savvier in their manipulation of data. Describing how he hoped added intelligence would change the game for his organisation, George Ewen, global production director at CPL Aromas, said: “We call ourselves a global company, but the fact is that, although all sites manufacture the same product, they do it in different ways. We are not truly linked up – just standalone sites. We are trying to change that, through introducing standardised bar coding, for instance, but we need a system that can support us.” Ewen said a desire for better global warehousing strategies and management of the 15,000 raw materials used in its product range had driven CPL Aromas’ decision to buy a new ERP system.
Microsoft Dynamics AX was chosen because of its demonstrated success in leveraging value. One such example of this is Balfour Beatty Rail, represented at this MDF Dinner by project manager Emma Holland.
Holland spoke of the benefits of viewing inventory information from different perspectives at both global and local levels.
In addition to analysis of materials movements both Ewen and Holland advocated analysis of labour costs in terms of direct and indirect hours, and the effect of downtime.
However, not all organisations will gain benefits through searching for efficiencies in stock purchasing and warehousing practises.
A few words from Simon Charlton, sales director at Columbus IT, raised the imperative of understanding what makes a difference to your organisation’s competitive position.
Charlton recalled his work with catering butchers Fairfax Meadow’s ERP implementation and observed: “If we talk about [Fairfax Meadow’s] business in this respect it needs to be considered that the product, prime beef, is far more expensive than the labour on the shop floor. This means that, the priority is capturing costs related to meat processing compared to the overall cost of delivering the product. You can’t just pull in a system which is meant to be fantastic and assume that it is going to bring benefits. You need to understand how to capture information that is relevant to you.” Tony Carlisle, IT manager at Fairfax Meadow, agreed with this assessment and explained why having assurance about his ERP system’s ability to quickly and consistently process high volumes of transactions as well as analysing product yield were the main considerations in his ERP adoption plans.
This leads naturally to a consideration of how individual business processes differentiate one ERP provider from another and to the question of whether custom built systems are better than ‘out of the box’ offerings. For Carlisle, a member of the Microsoft Technology Adoption Programme (TAP), the advantages of standardisation offered by the latter approach are too attractive to be missed. He reflects: “As we upgrade to new versions we expect to see any modifications we have done in the past fall away until we have as standard a package as possible. The challenge then is to persuade system users to work in a particular way.”
The human side
Attendees were confident that this “particular way” laid out in future releases from Microsoft will be effective, mostly as they have been engaged in technology adoption and testing. It seems we are no longer in the dark days of IT systems and upgrades arriving on the doorstep of masses of users for them to take through a painful period of integration during which ill-fitting solutions could damage competitive advantage.
Initiatives like TAP mean that each new version of a technology is carefully developed in partnership with industry representatives who can bring upto- date information around market conditions and capability requirements to software vendors.
According to Carlisle there is a “tremendous difference” between the current version of Microsoft AX and the 2012 version due to be released later this year.
Of course every new ERP implementation and, to a lesser extent, every upgrade means a financial commitment and consequent expectation for ROI.
With understanding of business priorities having been identified as a crucial element in successful technology exploitation table talk soon fell to the varying roles and responsibilities of IT and business professionals within any implementation.
The challenge of engaging the right people and communicating the right message about the motivations behind technology implementations provoked some of the evening’s most animated debate. While there are many dynamics to be considered here, for example the technical knowledge of IT departments, as well as the engagement and training of key groups in data preparation and system use, all attendees agreed that the role of the CEO in implementation was still often badly managed or understood. Charlton commented: “The CEO must champion the project. Not just sign the cheque.”
Bite sized review
Key topics discussed at this event were:
The importance of visibility across manufacturing sites in order to form a customer centric, economically sound, business strategy
The importance of understanding how product and market will effect analytics
The advantages of optimising ‘out of the box’ capability versus customisation
The importance of thoroughly preparing data in order keep to budget and time plans
The importance of understanding user engagement issues and securing implementation champions in the business
The need for business ownership of IT projects
Thanks to Columbus IT for their sponsorship of this Nottingham-based dinner, and to all attendees for their contributions to the evening’s discussion.