European manufacturing companies will lose their competitive advantage without the correct use of data. Historically, they were known for their unparalleled quality – labels bearing the words ‘made in’, whether that be Germany, Italy or Britain, spoke for themselves, while ‘Swiss made’ watches are coveted to this day.
In contrast, goods manufactured in China and some emerging markets have been perceived as lower quality. However, they are increasingly reliable and available at an extremely competitive price. While COVID-19 restrictions have slowed Chinese manufacturers’ production and operations, the fact remains that low labour costs and technologically advanced factories in key hubs like Shenzhen can produce high-quality goods at low cost.
Meanwhile, many European manufacturers are reliant on energy sources and semiconductor imports. Both are undergoing disruption of flows, a search for alternative sources and rapid price inflation. Already pushed to breaking point by the pandemic, the conflict in Ukraine has thrown supply chains into disarray. Results from the Oxford Economics Global Economic Model, which made forecasts based on scenarios designed by Accenture Research, suggest that supply chain disruption in the Eurozone could cost as much as €242bn across 2022-2023. Volatility and competition are putting immense pressure on companies accustomed to market leading status.
Global competition capable of delivering equal quality at a lower price has forced differentiation on price, shrinking the margins of European manufacturers. The options available are to decrease costs or to offer other meaningful differentiation such as additional services, ‘as a service’ business models and customer experience. The secret to delivering that differentiation is data. Using a suite of connected cloud applications and infrastructure, manufacturers can leverage data more effectively to unlock the potential of new models and services.
Connected problems, disconnected systems
Manufacturers are reliant on access to raw materials, a range of suppliers and affordable energy costs. In times of economic uncertainty, this makes them especially vulnerable to disruption; one delay in their supply chain can lead to issues across their entire value chain. For example, automotive OEMs are reliant on partnerships and dealers. Parts are often made to order, so their customers often have no alternative but to wait out delays.
The majority of manufacturers’ systems are not connected. Their supply chain management is disconnected from their enterprise resource planning software and the back-office operations it supports, and the solutions they use to communicate with customers. Crucially, they can’t make effective use of their data as it is stored in silos across the whole enterprise. Because of these data siloes, they are unable to make decisions quickly enough to mitigate the adverse effects of disruption.
This can lead to a range of problems. Without a data pipeline and visibility across a manufacturer’s operations, a supply chain problem or delay might not be communicated clearly to a customer, leaving them unable to make effective contingency plans of their own. Manufacturers need the right infrastructure and software in place to be adaptable, deliver better services and avoid these kinds of scenarios.
Bosch Thermotechnology, a leading manufacturer of domestic and commercial heating and cooling systems, leveraged technology to improve the service it provides customers. Using Oracle Field Service, a service management application, the company was able to conduct installation and repair work more efficiently, resulting in a higher ‘call rate’ with more jobs completed each day. Implementing the solution also saw customer service metrics improve by roughly 25%.
While the presence of siloes within manufacturing systems and operations are a challenge, implementing solutions that make better use of data, as Bosch has, represents a huge opportunity. Indeed, a 2021 study from Accenture found that European C-level executives are most likely to view smart manufacturing as the best opportunity to improve the competitiveness of European industry.
Effective use of data enables manufacturers to add value for their customers. This includes offering machines as a service and other forms of service, which wrap core products with layers of maintenance, support and customer service. There’s the potential to offer products at a lower price point with a service pack that adds value and introduces an additional revenue stream.
Best of suite
To fully embrace smart manufacturing and make the most of their data, companies are looking to best-of-suite services. While best-of-breed solutions can deliver efficiencies in targeted areas, investment in a connected suite of tools will enable the scale of transformation necessary for manufacturers to thrive in today’s environment.
Rather than selecting applications on a case-by-case basis, European manufacturers stand to benefit considerably from leveraging a complete suite of solutions. This can deliver a data pipeline from supply chain to ERP, to communication with customers. An uninterrupted flow of data across their operations, with the ability to cleanse data and use it in a range of systems, is the foundation of better manufacturing services.
This connected approach to solutions can drive intelligent analytics and improve a range of outcomes. Companies can make decisions with confidence and take necessary action in a timely manner. By 2025, the IDC predicts that 40% of the top 2,000 manufacturers will use traceability technology to mitigate risk and boost transparency. An entire suite of solutions, connected by a data pipeline, is the gold standard for risk management and transparency.
An internet of clouds
Of course, not every organisation is able to adopt an entire suite of solutions from a single provider. Existing systems cannot always be replaced seamlessly, nor should they need to be. What a data-first approach to manufacturing does entail, however, is thinking bigger.
Instead of viewing every single solution as a freestanding tool, manufacturers can gather related cloud solutions into groups. One could draw together logistics and supply chain management, one back-end functions such as finance and HR and another covering customer engagement. They can choose a single provider for each group to ensure the seamless benefits of best-of-breed solutions, be that sales and CX tools or HCM and ERP.
CNH Industrial, which manufactures agricultural machinery under the IVECO brand, integrated a suite of solutions to reduce transportation and logistics costs and improve its processes. Using Oracle SCM, ERP and Transportation Management Cloud, the firm improved the efficiency of its inbound and outbound transportation, as well as its visibility across these operations through a unified platform.
These best-of-breed groups can still be closely interconnected. Manufacturers can mix and match services from multiple cloud providers, safe in the knowledge that they can seamlessly move data from one to another without ingress or egress fees. This gives firms more choice and prevents them from being locked into a single cloud provider.
A connected future for manufacturing
Ultimately, every manufacturer is different, with their own needs, strengths and partnerships. However, they do share many of the same connected challenges, be that high energy costs or disrupted supply chains. Fortunately, with a best-of-suite or internet of clouds approach, their systems can be as connected as those problems. They can leverage data across their operations, unlocking its true value and delivering superior services to their customers.
As Go-to-Market Manager for Manufacturing and Automotive at Oracle, Martin Cereceda leads strategy and marketing at a high level across HCM, SCM, CX, and ERP applications.
With a background in sales and marketing, he previously held senior customer experience roles in the manufacturing business units of companies like Microsoft and Adobe.
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