01/05/2015

By Paul Carreiro, Executive VP For Infor in Europe


Manufacturing is once again reinventing itself. From ground-level basics to the overarching strategies for growth and product innovation, manufacturing leaders are rewriting their game books. In plants, mills and fabricating shops worldwide, production workflows as well as management concepts are being revised, again. Few departments or job descriptions are exempt from review as companies shift priorities trying to adapt to the drastic changes in competitive pressures, market demands and disruptive technologies. Modern IT solutions are helping shape the new mindset and support the new organisational structure needed to compete today.

Forces behind the shift

Necessity is at the fulcrum point of change. Manufacturers are making drastic changes because they heard the wake-up call, loud and clear. Stakeholders know the heavy toll the recent recession had on manufacturing. Plant closings, jobs lost, wages cut and work sent off shore dominated headlines for a decade, casting a cloud of doom on the industry that once employed the best and brightest entrepreneurs, engineers, research scientists and product visionaries. According to the US Bureau of Labor Statistics, nearly 4 million U.S. jobs were lost in manufacturing since 1998. In the 1970s, nearly 20 percent of all jobs were in manufacturing; today, only 9 percent.

Technology undoubtedly takes some of the blame for lost jobs. Automation, robotics and advanced computerization drastically reduced manual tasks once done by laborers. At the same time, technology also deserves some of the credit for rekindling enthusiasm in the American factory’s ability to out-innovate global threats. Nanotechnology, 3D printing, smart sensors, drones, machine-to-machine communication, wearable devices and machine learning all have brought imagination back to manufacturing.

A spark of innovative imagination is hardly enough to turn around an entire industry, though. To succeed, manufacturers must restore a sense of relevancy to their products, including a level of quality, value and service that the customer expects. Manufacturers must, once again, be closely aligned with the buyers’ motivations and triggers, whether the target market is a local geographic region or an emerging population cluster in Eastern Europe.

A recent report, “[nnurl=http://go.infor.com/registration/?requestedContent=%2Fcontent%2Fanalyst%2Fimproving-business-growth-achieving-resiliency.pdf%2F&ok=yes]Improving Business Growth by Achieving Resiliency[/nurl]” published by IDC Manufacturing Insights says that the current challenge goes beyond product design. Manufacturers must begin to see the issue as one stretching their thinking to include such intangibles as reliability and loyalty. “Companies must provide superior responsiveness and outstanding reliability in meeting fulfillment needs to ensure customer loyalty and to stay ahead of competitors. Manufacturers realize that line-of-business resources must be aligned to customer requirements and processes calibrated to the customer,” the report says.

Becoming relevant

Knowing today’s consumer is no simple task. With the influence of social media, online shopping and hundreds of omnipresent media sources, trends can change in an instant. To keep up with this pace, manufacturers have learned they must embrace these social tools, rather than resist them. Modern IT solutions help track and manage the vast amounts of online communications, from social media posts from disgruntled customers to websites where prospects can select and customise their own, personalised products.

The customer experience can cover a wide range of activities, from online shopping portals to configuration tools that allow the customer to personalise a product and see a 3D rendering before the custom design goes into production. Product customisation is rapidly becoming part of the new normal in consumer goods, being applied to products from clothing, shoes and jewelry to furniture, electronics and décor.

The customer experience still also includes the basics, such as on-time delivery of as-promised goods. Accurate invoices, prompt answers to questions, reliable advice and friendly agents are all part of the fundamental deliverables that customers expect from retailers, distributors and manufacturers. As products become more complex and costly, the expectations for service also seem to rise. Today, the purchase of a product will often include the delivery, set up, on-site calibrations, performance testing and training of users.

The demand-oriented value chain

Manufacturers today must strive to create a value chain which has one goal: meeting the consumer demand. This value chain can be long or short, regional or global, involve many suppliers and partners or be simplistic and direct. The successful demand oriented value chain tends to be:

Dynamic and cost-effective at all times. Manufacturers must be agile and quick to adapt to the changing profiles of their customers. This means assets and structures need to be adaptable and able to flexibly scale up or down as needed.
Service-centric and embedded with customer understanding. To reach the highest level of customer engagement, manufacturers must learn to use data from downstream partners, such as suppliers and resellers.

Maintaining a core focus

When manufacturers stretch out of their comfort zone to add more items in the product line, more customisations and service packages, they often struggle to maintain their core focus. It’s easy for the organisation to become muddled.

As manufacturers re-engineer their processes in order to ramp production back up to pre-recession levels, they are faced with the challenge of creating a new organizational structure that is lean and efficient, yet meets modern customer expectations. The old organizational hierarchy simply no longer fits their needs. More personnel must have access to critical data in order to make well informed decisions. Organisations can no longer expect to route all decisions from the ground level to top tier personnel for resolution, it’s too slow and limits the ability of front line personnel to engage with customers on a meaningful level.

Authority must also be delegated to more downstream personnel so they can comply with the vast and complex needs of the entire customer base. When account managers, service representatives and line of business managers are given decision-making authority, they can become fully attentive and responsive to individual customers, such as offering purchase incentives, providing advice on upgrades, rewarding large purchases, expediting special orders or collaborating on custom designs.

This decentralised approach does have its drawbacks if not managed carefully and supported by the necessary IT solutions.

Borrowing the ‘flock approach’ from nature

IDC provides an interesting illustration of an organisational structure that is resilient to change: a flock of birds in nature. Nature watchers have likely noticed how a flock of birds, herd of antelope, swarm of bees, or school of fish travels in groups and instinctively turns in unison, seemingly without communication. These organizational structures provide an excellent model which manufacturers can emulate as they reinvent their systems today.

In nature, a system is considered resilient if it can adapt to changing circumstances while maintaining its central purpose. When it comes to manufacturing, resilience can be defined as the ability to adapt to fast changing market pressures without losing focus on core business targets. To achieve this state, manufacturers can borrow the flocking principle and become "simple at the core and diverse at the edges." This means balancing the obvious need for process standardization at the core with flexibility at the edges so front-line personnel can react to situations and engage with customers in a meaningful way.

IT solutions support new infrastructure

It’s is clear that the old straight line hierarchy is an outdated concept, but the more modern structure which delegates authority must be carefully managed in order to maintain visibility. If not fully integrated into the company-wide value chain, it is easy for departments to become siloed, operating within a narrow sphere of influence and self-serving priorities. Modern ERP solutions play a critical role in managing a more dispersed, complex organisational structure, preventing gaps in communication and ensuring full visibility across the elongated value chain.

Although manufacturers have been making great strides in improving communication channels, the explosive amount of information to be shared is challenging. Key software providers are responding and improving the ability to drill into details behind incidents and push contextual relevant data to the user, even before they make a query. Intuitive, predictive abilities of modern IT solutions help users—at all levels in the organisation—understand the situational relevance of data and cut through the layers to hone in on the facts significant to a particular question.

By turning to modern ERP solutions, manufacturers can create the organisational structure that is flexible and responds to customer needs with relevant products and services. Manufacturers can continue to reinvent the meaning of success, being resilient to outward forces, while still being focused on the core goal, pleasing customers. By establishing this new structure now, manufacturers can be well prepared for the next generation of consumer demand.