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In our digital, data-driven world, software is one of the principal tools organisations leverage to keep the enterprise ship sailing boldly forwards

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Manufacturing IT Software selection for manufacturing organisations: Targeting RoI optimisation

Aug 19, 2016

The nature of technological innovation and prevalence of economic uncertainty have transformed the environment for manufacturers from one that was rather slow-moving and monolithic to today’s fast-paced, hypercompetitive, time-sensitive, customer-demanding, increasingly nuanced global commercial ecosystem. The cover story explores some common business challenges faced by today’s manufacturing and high-tech organisations, how the right software addresses these challenges, and posits a number of key selection factors that will optimise ROI on software investment for those in the sector.

Keeping risk at bay, and identifying and seizing opportunity are traits of companies that thrive in this difficult environment and steer a steady course in seas where potential crisis lurks. In our digital, data-driven world, software—particularly enterprise resource planning (ERP) software—is one of the principal tools organisations leverage to keep the enterprise ship sailing boldly forward.

Because these systems are central to today’s enterprise operations, their selection must confirm that the features and functionality they provide take into account the rapidly changing nature of global manufacturing and help address the challenges that poses.

Common business challenges

Compliance issues: Regulations and regulatory compliance are particularly important in the manufacturing sector. For example, according to the National Association of Manufacturers, the average manufacturing firm in the United States pays nearly twice the compliance costs of the average US firm; small manufacturers pay nearly three times as much as the average. Additionally, as global trade increases, international standards take on greater importance.

These can range from multiple ISO standards to directives that have been introduced by the European Union (EU) that are moving toward global recognition as de facto or de jure international standards. In certain vertical sectors, such as medical device manufacturing, validation processes are critical. Keeping compliance with such regulations is an ongoing concern for manufacturers, not only from an adherence perspective, but also from a cost of documentation perspective.

Rising margin pressures: Regardless of the specific sector, margins for manufacturers are being squeezed from multiple directions. In developed markets, top-line growth has slowed or declined, whereas in emerging markets, margins are threatened by rising labour costs, more expensive commodities, and cost of distribution. As such, manufacturers need more granular information on what margins are being made when they’re taking or closing orders. If margins change based on a supplier’s increasing costs, the manufacturer needs to be made aware of that proactively, as it happens, so that action can be taken in response.

Greater visibility & more granular information: Today’s manufacturers want to know how much time and effort—specifically and from where—have gone into designing a new product. How much time (and money) was spent with a customer working on a product design? How much did we budget? What resources have been used so far? How many can we expect to use? This process can entail anything from finance doing credit checks to engineers doing drawings to prototype production to manufacturing set-up. Visibility of the time/expense plan is increasingly crucial for many manufacturers and granular detail is key.

Consumer demand: Many manufacturers now must account for individual consumers as well as traditional industrial customers. This trend is particularly growing in the environmental arena, where consumers are demanding verification that what they are purchasing has been manufactured in a sustainable way. Increasingly, it’s important for manufacturers to have eco-footprint information within their systems to report their carbon footprint, recyclable packaging used, etc. This information needs to be reportable internally, to shareholders, and more and more to the public at large.

Standardisation: Particularly as operations extend across disparate locations or geographical borders, manufacturers and high-tech organisations are looking for ways to standardise their business processes across multiple sites for consistency and cost reduction factors. This need extends from design to production to service, and applies to smaller manufacturers (e.g. a company building a product at two different local sites) as well as to global enterprises that may manufacture in one country and assemble in another.

Disruptive innovations: Disruptive innovations are those that help create new markets and value networks, eventually disrupting an existing market and value network (over a few years or decades), and displacing earlier technologies. When new technologies emerge, the decline of industries is neither rapid nor immediate; but successful manufacturers understand that growth demands innovation, and innovation in the sector cannot occur without embracing technologically-advanced manufacturing capabilities. Perhaps the most visible of today’s disruptive technologies is additive manufacturing, also known as 3D printing. In the future, smaller, highly specialised 3D printing companies will emerge to serve a local area on demand. So instead of manufacturers buying components such as spare parts and having them shipped from afar, or buying a machine and putting it into the warehouse and taking up stock and cost from a financial point of view, they could wait until a part failed, send a command, and have it printed on demand within hours.

The Internet of Things (IoT) is another development moving rapidly from the consumer venue to manufacturing. Sensors are being embedded to provide machine-to-machine communications for applications, such as remote monitoring and control, enabling manufacturers to get information and act upon it remotely. This is speeding maintenance, while driving down costs.

How the right software addresses business challenges?

The right business software supports manufacturing’s ability to meet emerging challenges and respond to constant change by providing the foundation for enterprise agility. The concept of manufacturing agility involves the development of manufacturing capabilities to achieve sustained competitive advantage in an unpredictable environment. Agility is the product of three foundational blocks—vision, knowledge, and flexibility—that effectively designed and developed software facilitates across the business.

Vision is the ability to link business strategy and growth aspirations to technology investment, and to make informed decisions that prove effective over time; knowledge is the ability to identify, understand, and predict new sources of threat or opportunity across quotidian business operations and projects and flexibility is the ability to take action rapidly when things happen, expectedly or unexpectedly, founded on technology that makes rapid and responsive change possible.

10 key questions to ask when selecting enterprise software

1. Does the software support rapid business change?

An organisation’s software should help it plan for change. Change is constant and the most dominant characteristic of today’s business environment, so the ability to plan for the unknown makes it possible for agile companies to thrive. Long-term planning is not about being able to predict every future, but being able to respond fast and smartly enough to capitalise on change. Effective software facilitates the ability to change.

2. Does the software provide essential access to data?

Data-driven decision-making is central to enterprise operations, but the proliferation of data can be overwhelming for users. Well-designed software delivers data to users in ways they can use it, wherever they are, whenever they need it, without delay or variation. Having data in a single place, accessible from any device, is key.

3. Does the software allow for future growth?

The boundaries between manufacturing and distributing organisations have been slowly disappearing; more manufacturing companies have been distributing and servicing their products, which has led to tighter integration of ERP, CRM, and supply chain management (SCM) solutions. Many companies that today are manufacturing only may be looking to add service as part of their portfolios. These companies are served by software that meets their current need, but also has the capability to handle future development in the system.

4. Is the software appealing to today’s generation of workers?

As the manufacturing workforce ages, a younger generation is coming into the sector. The longstanding perception of manufacturing as a smokestack environment (i.e. dirty, greasy, unhealthy) is giving way to the reality of high-tech manufacturing, much more appealing to those that grew up in the digital age. When younger people come into manufacturing, they don’t want to work with a green-screen application; they want something that they are familiar with (i.e. graphic sophistication, touchscreens, apps to download onto a phone).

5. Is the software usable in today’s changing work environment?

Related to the question above, usability speaks to the way work is done differently today, which is something influenced by the younger generation, but certainly not limited to them. Increasingly, the workplace is where we happen to be, which may not be within the “four walls” of the organisation. This has certain implications for software. Is it mobile? Can it be accessed and comprehended by sophisticated and casual users on multiple devices: laptops, tablets, smartphones and, in the coming years, wearable technology like watches? Does it provide role-based portals and interfaces? Is it intuitive to anyone who sits in front of it?

6. Is the software’s CRM discrete or embedded?

Customer relationship management is increasingly important in today’s manufacturing market, and nearly all software providers will have CRM as a separate but integrated package. But it’s still in a separate world. This becomes an issue when manufacturers set up more complex relationships (e.g. from opportunity to sales to contract delivery), which typically requires integration work. Further, there are user experience issues, including not being able to drill through CRM all the way to the back office, and not from the back office into CRM. When CRM is embedded in the enterprise software, those issues are taken off the table. There is no need for integration work. Users can now drill through in both directions, which can be an important advantage.

7. Does the software provide deployment options?

Single instance, on-premise enterprise systems are rapidly being relegated to the past as hybrid models continue to grow toward the norm. Whereas the majority of those hybrids are a combination of core and point solutions (on-premise) from multiple vendors, increasingly manufacturers will use cloud-based point solutions as an essential part of the hybrid approach. This is inevitable, particularly as manufacturing operations take on global scope. Does your software provide real deployment flexibility?

8. Does the software speed execution of tasks?

While provision of real-time data is increasingly a given for enterprise software, is this translating into faster execution of essential work? Software should enable companies to have information they can believe and trust, in one system, so when they print out a trial balance, they believe the numbers generated. There shouldn’t be a need to wait for information (e.g. for production to indicate how much WIP they have, or accounting to report accruals). Real real-time data is often overlooked these days, because companies are not used to it; but it’s still a shock when a company tells you it takes a week to do a month’s end report.

9. How broad and deep is the software solution?

Can the software system phase out the use of multiple systems, eliminating undue complexity and cost? Today, many manufacturers are multi-modal: some products are made to order, some made to stock, some engineered to order, some assembled to order, and some configured to order. Can your software handle all these approaches? If you set an approach today, do you have the ability to easily change over in a week’s, month’s, or years’ time? A broad and deep solution will provide this capability.

10. Customisation or configuration? Is the software easy to modify?

Because change will make it likely for a company to want to modify its software over time, how easy and how costly will it be to make that change? Best systems enable users to add their own fields, events, and so on without having to go back to the software provider for customisation. Configuration is part of the functionality out of the box and easy-to-do, not part of an upgrade or requiring additional costs.

Consider independent assessment

Finally, companies are well served by looking to respected analysts who assess the status of software providers. Of those who study enterprise software and systems, the best known and perhaps most highly respected is Stamford, Connecticut-based Gartner.

Gartner’s “Magic Quadrant for Single-Instance ERP for Product-Centric Midmarket Companies” focuses on ERP systems that support a single-instance strategy for multi-entity midmarket and upper-midmarket companies.

Companies are evaluated on multiple aspects of two parameters (ability to execute and completeness of vision), then mapped in an X-Y grid to create a quadrant: niche players (low on both parameters), challengers (high on ability to execute, low on completeness of vision), visionaries (low on ability to execute, high on completeness of vision), and leaders (high on both parameters). Of the 10 companies evaluated, two were leaders. IFS Applications is one of the leaders.

Courtesy: IFS

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