Business Issues Facing Discrete Manufacturers
The general perception is that the worst of the recent economic difficulties are behind us but concerns still remain about the recovery of some economies. This ongoing uncertainty in the macro environment means it has never been more important to understand the specific business issues and concerns in your industry. This article provides an overview of the issues and concerns in relation to discrete manufacturers and discusses some potential strategies and specifically reviews the role of IT and particularly, how well equipped with IT are manufacturers today to deliver improvements in operational excellence. The catalyst for this article is a recent report by IDC Manufacturing Insights sponsored by Infor and IBM.
IDC has recently undertaken the largest worldwide study of the SMB discrete manufacturing sector to discover the immediate concerns, the strategies used to address those concerns and the role of IT in those strategies. The scope of the research encompassed multiple discrete manufacturing industries including: Automotive, Metal Fabrication, Industrial Machinery as well as High-tech in eight countries. The research was responded to by over seven hundred CEOs, COOs and CFOs from regions including: Western Europe, U.S., Japan, Brazil and China.
Business concerns
The current situation is one of business transformation with more than 50% of the respondents indicating that operations are more complex because of consumer demands and the change from local to global economies. Not to mention supply chain complexity, compliance demands and quality demands. Interestingly, complexity appeared to have no boundaries in that it was on the increase irrespective of the size of company. Unsurprisingly, competition was in there, too.
At the business level, among the top four concerns over the next couple of years were: revenues, profitability, raw material costs and manufacturing costs. Driving the concern about revenue targets were whether the markets would return to pre-recession sales levels or if the current levels are the new baseline – sometimes known as the "new norm".
The depth and breadth of this Infor sponsored research shows some real insights into the differences in approach on a regional basis. For example, China is more concerned about demand volatility, demand management and raw materials costs than revenue targets.
Strategies
The top three strategies for discrete manufacturers were: customer retention, productivity improvements and reducing operational costs. However, differences occur here too. Europe and the U.S. are intending to adopt the three aforementioned "holding ground" strategies where as China, perhaps because of its expected GDP to be around 10% is free to target higher innovation.
Strategies need initiatives and just some highlighted in the report are: optimisation of internal assets, reducing supply chain costs and improved customer fulfillment.
One revealing set of data in the Infor sponsored report are the comparisons of where companies believe they demonstrate excellence today and where they believe they need to pursue excellence over the coming two years. Customer fulfillment stands out as first today and the next two years for excellence and demand planning being last today and third over the coming two years. Demand forecasting is predicted to be an area of excellence.
Some companies by region are more focused on customers, such as UK and Benelux with Japan being more willing to be a technology leader. Germany and France will be focusing on operational excellence. Project bidding and project profitability are also specific areas where excellence is required.