John Hammann, industry principal for manufacturing, SAP UK, discusses how analytics and business intelligence are critical for manufacturers to cut costs and plan effectively.
First the good news: the UK manufacturing industry is cautiously confident about business prospects for the coming year. According to SAP’s latest Manufacturing Success research – a poll of 200 senior decision makers within the manufacturing sector – more than a third (35%) said that they very optimistic, while a further 47% professed themselves fairly confident of success over the next twelve months.
While these findings are encouraging, they should not serve to distract us from the very real difficulties that all manufacturers, large and small, face from the current state of the world economy. The great recession of the last five years has left its impact across every industry, and economic growth is fitful in frequency and, when it does come, pitifully small in size. Furthermore, the liquidity crisis in the banking sector means that loans to businesses have all but dried up. Thus, though the economic free fall might be over, manufacturers are having to cut their cloth to adapt to “the new normal” of economic fragility and uncertainty.
Manufacturing is key to the UK economy, supporting 2.6 million jobs, and accounting for around 12% of the country’s wealth, so the industry’s confidence for the future should be welcomed by everyone. But for these businesses to succeed, they need the insight and analysis that will enable them to cut their costs across the entire supply chain and to plan effectively for the future. Whether or not a manufacturer achieves a high level of visibility is likely to determine whether the business merely entrenches for survival, or is able to adapt and innovate for growth.
Are you an Accelerator or a Stabiliser?
Our research identifies two types of businesses in the manufacturing sector: those that seek to grow faster than their competitors, and those that are less concerned with outstripping the industry’s average rate of growth. The former, dubbed the “Accelerators” account for a third of all manufacturing businesses; the remainder are the “Stabilisers”.
We don’t intend the term “Stabiliser” to be a pejorative label: every manufacturer faces its own unique set of circumstances and priorities for the future. What is noteworthy, however, is the differing levels of visibility that these two groups have over growth opportunities, and their subsequent ability to plan for the future.
Accelerators are much more likely to have a high degree of insight into opportunities for growth, with just under half (45%) claiming to have “excellent” levels of visibility, compared to the industry average of under a third (32%). Similarly, Accelerators are significantly more likely to be able to plan more than a year in advance (68%) compared to Stabilisers (54%).
These findings are directly related. The more visibility that a manufacturer has into its business – including detailed information on costs, processes, the supply chain and so forth – the better it is able to start managing its operations more effectively, to find new opportunities for growth, and to plan for the future.
Data is the lifeblood of any organisation in the Information Age. The greater a company’s ability to access timely, accurate, detailed and actionable information – about both its own business and the wider market – the bigger its advantage over competitors and the greater control it can exert over its operations.
The tools that deliver this data, such as analytics, business intelligence and rules engines, are particularly relevant to manufacturing firms, which traditionally rely on build-to-order, configure-to-order and engineer-to-order strategies as a core part of their business models. Analytics applications enable their users to capture company-wide information on every aspect of the business, from supply chain to distribution to services. It should be no surprise that a poll of CIOs by technology consultants Mint Jutras identified data analytics as the largest single driver of organisational change.
The information gleaned from analytics and intelligence tools provides a “health check” of every element of the business, enabling decision-makers to make specific, informed plans for the future. The data also enables manufacturers to gain detailed information on their expenditure and therefore to control costs – which is identified as a key challenge by more than half (55%) of the respondents in SAP’s Manufacturing Success poll.
But for manufacturers seeking to cut costs, improve operations and make long-term plans, information is only one side of the coin. To make a real difference, businesses need the tools to enact the necessary improvements identified from the insight they have gained.
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Managing the processes
Manufacturing is one of the most process-driven sectors of industry. These businesses often have long and complex supply chains, while the manufacturing process itself consists of multiple stages, each dependent on the other.
Problems with any of the processes, such as bottlenecks or inefficient working practices, will have repercussions along the length of the supply chain, affecting relationships with suppliers, distributors, partners and customers. That is why increasing numbers of manufacturing organisations are turning to the latest Business Process Management (BPM) tools, which provide a holistic approach to the entire business, enabling them to efficiently model, implement, integrate and monitor business processes.
These tools, used in conjunction with the latest business and market intelligence, will enable manufacturers to address global competitive challenges and economic pressures, to cut costs and improve the value that they create, while further speeding up time-to-market – a key consideration for businesses in the sector.
Whether individual manufacturers identify themselves as Accelerators or Stabilisers, there is a clear need for every business to be capable of effective planning, based on relevant and detailed data, along with the ability to implement changes to processes or operations as required. If these tools become even more widespread across the industry, enhancing firms’ ability to control costs, maximise efficiency and identify new opportunities, there is every reason to share manufacturers’ growing confidence in the future