Why ERP is the catalyst for a new age of manufacturing

Sustainable growth in an increasingly competitive marketplace is the order of the day for today’s manufacturers as the UK exits the economic downturn and looks to develop an edge over low-cost economies like China.

The focus is on developing high-value innovative products that are intelligent, intuitive and responsive to their environments, and targeting them at premium markets.

In line with this, we are seeing the growth of servitisation, with manufacturers reviewing their entire business approach, and increasingly offering services and solutions that complement and add further value to their core and increasingly innovative product offerings.

The benefits of servitisation are many and varied. By using the approach to get closer to customers, businesses drive up loyalty levels; develop more valuable supplier-customer relationships and ultimately generate recurring and incremental revenue streams.

It’s a multi-faceted approach with two distinct elements. The first relates to how the products are consumed and used, the second to how they are serviced and maintained.

To take the former point first, we are increasingly seeing car rental companies offering deals based around the customer picking up a vehicle at a certain point and then dropping it off at another when their trip is complete.

From a commercial perspective, they are effectively consuming or ‘using’ a journey rather than a car.

In contrast, examples of the latter can range from white goods manufacturers effectively ‘wrapping in’ service and maintenance as part of a rental-based contract, to engine producers selling thrust power by the hour and including items like in-use monitoring, repair and replacement as part of the agreement.

No matter what the specific approach taken, the main drawbacks of the move to servitisation is that in a service economy, margins tend to diminish over time.

When businesses add a strong service element to their product offering, they also have to develop service centres and man them with multiple, high-cost resources.

They inevitably need expert senior operations managers at the helm to develop customer service teams and ensure calls are dealt with promptly, expert level diagnosis is provided and customer issues are rapidly resolved to meet service level agreement terms.

All of this can be expensive and put heightened pressure on business margins.

ERP to the Rescue

So what’s the solution? Technology and specifically the latest ERP software can play a key role in addressing some of these issues.

The key is being able to capture the knowledge and understanding of the relevant senior manager, or operational head and then integrate this knowledge as part of an algorithm that allows the call centre operator to take the customer through a logical workflow.

It’s effectively a case of the ERP solution, guiding the agent through the process, telling them that for this type of call you ask the following set of questions, for example, and then providing a future course of action depending on the customer’s response.

Leveraging the knowledge of experts and adding it into the ERP software in this way allows businesses to focus senior staff on developing algorithms and workflows and deploy lower cost resources to man the call centre.

For many organisations, this reduces pressure on margins and makes flexibility, scalability and business agility easier to achieve while improving responsiveness and sustaining or even improving first time fix KPIs.

The proliferation of connected devices extends the potential for organisations to gather information and use it to deliver business benefits.

An engineering company producing wind turbines, for example, might well deploy a series of sensors on those turbines that detect temperatures and make qualitative measurements of component wear and tear.

That information can then be fed back into ERP systems.

Specific parameters related to product lifecycle management, or service and maintenance, can then be set up, alerting businesses to problems, sometimes before they’ve happened, and proactively triggering maintenance even before an incident occurs.

Organisations can take this a step further by coupling this kind of information with information from social media or other data sitting in the cloud to achieve both a relationship and technically-focused real-time view of customers, suppliers and stakeholders.

This enables the business to make more informed decisions about enhancing innovation and efficiencies, to optimise products for consumption, usage, service and maintenance and to improve the overall customer experience.

Growing acceptance of the servitisation model

Today, we are seeing a growing understanding and acceptance of the benefits of servitisation among manufacturers.

Somewhat counter-intuitively, it’s often the smaller businesses that have been fastest to adopt the model as they are often more agile and nimble and have less reason to worry about the impact of technological change, or about modifying the approach in multiple geographies worldwide.

The benefits of servitisation are proving increasingly difficult for manufacturers to ignore, not least in terms of the better harnessing and management of data to support the efficient delivery of service across new business models.

The new approach offers them the opportunity to achieve the combination of enhanced customer service and customer loyalty together with incremental revenue growth that will enable businesses to compete with competitors from low-cost economies like China.

It’s a message manufacturers understand and the vision is clear. Now, with the latest ERP software in place and offering a potent combination of rich functionality, versatility and flexibility, organisations have the tools they need to deliver on the vision and move the industry forward into the new servitisation age.