Targeted IT investment continues to deliver benefits

Posted on 5 Dec 2008 by The Manufacturer

Business investment has been a key driver of the improved competitiveness of manufacturing in recent years. Investment in intangibles and capital equipment has supported companies’ efforts to raise innovation performance and develop new offerings for customers.

However, as the economic downturn deepens, manufacturers are grappling with weaker demand for goods and services and growing pressure on cashflow. Against this economic backdrop many are reappraising their future investment plans. But even during these more difficult times improving and productivity and efficiency will remain paramount for manufacturers.

The latest research from EEF, the manufacturers’ organisation and Infor shows how companies have been investing in IT equipment and services to support productivity growth and improve customer service. In the past two years a majority of manufacturers have raised their expenditure on IT – from hardware and software to ICT embedded capital equipment. While this investment is targeted across the business, manufacturers’ primary focus remains on raising innovation outcomes, improving customer service and increasing production efficiency – the key components of a competitive, modern manufacturing sector.

Investment in IT solutions has helped companies to better manage the flow of raw materials, improve demand forecasting, guide decisions on where to locate production and coordinate supply chains. But implementing new IT projects is not without hurdles – with a lack of appropriate skills the most common. As technology progresses and the functionality of hardware, software and other ICT-intensive goods increases, ongoing training and development is needed to ensure that companies get the most out of their investment.

And while all the data points to improved manufacturing performance, many companies have not made the link between efficiency gains and their investment in IT. In many cases IT solutions are intertwined with business processes and the skills of the workforce so it is much harder to isolate a specific IT-related benefit. And many firms are still in the relatively early stages of putting in place the processes to procure and assess the effectiveness of this expenditure. For most companies, therefore, the direct benefits of IT spending are not clearly visible.

However, our latest research shows that IT investments are delivering benefits, with targeted investment leading to direct improvements in on-time delivery, stocks of finished goods and raw materials and levels of wastage. With a more systematic approach to performance measurement, companies could maximise the gains from IT investment. This will be particularly critical as companies face more difficult decisions on investment priorities over the coming year and companies seek to ensure that future investment opportunities are identified and implemented effectively.