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Finding sanity in the midst of increasing complexity

The number, variety, and accelerating rate of new technologies available to industrial manufacturers have created a lot of confusion in deciding which are best to help meet their business goals. The buzzwords used to describe some of these innovations are almost as innovative as the capabilities they actually provide. Examples include Big Data, Cloud Computing, Predictive Analytics, Machine-to-Machine Connectivity, Digital Manufacturing, and the Industrial Internet of Things.          

The amount of marketing on these topics would suggest that these are breakthrough, transformational capabilities that are better now than anything that existed in the past. It can be easy to get caught up in all of the hype; however, the reality is that the desired business outcomes from adopting new technology remain the same:

  • Increase revenue growth
  • Reduce operating costs
  • Optimize asset utilization

There is little argument that enterprise business objectives can be better realized through real-time information processing that creates closed-loop planning, execution, and decision making cycles. Classic approaches to improving business process performance – such as Process Reengineering, Value Stream Mapping, and Lean Six Sigma – often fall short of integrating work flows across different functions, business units, and geographies. When applied correctly, these methods can still be effective; however their value potential can be multiplied when combined with enabling IT capabilities.

The big question becomes which of these technologies can deliver the biggest impact on your specific business goals?

Focus on critical capabilities that will drive real business value

Most manufacturing-centric companies compete on their ability to design, manufacture, sell, distribute, and service their products. The fundamental capabilities needed to perform these functions are well known, even though the variety of IT enabling options are compounding at an accelerating rate.

Based on findings from the America’s SAP Users Group (ASUG) benchmarking program, top-quartile performers are both more effective and more efficient than their peers in executing business processes across the enterprise. For example, improving visibility throughout the product lifecycle has a direct impact on structural cost, inventory, and customer-satisfaction levels. Many top manufacturers are working to extend their internal processes across the value chain to include customers, suppliers, and other trading partners. Some have been able to create a competitive advantage in developing new market offerings, reaching different customer segments, and entering new channels.

Below are a few other examples from in-depth research conducted by the ASUG / SAP Performance Benchmarking team:

  • A leading manufacturer of industrial components cut its order-to-cash lead time by 36%, and improved order fill rates by 27%, by deploying tools for collaborative engineering, digital manufacturing, and configure-to-order solution selling
  • A manufacturer of automation and control systems increased asset utilization by 18% by integrating real-time product diagnostic data with predictive service and maintenance processes
  • A global provider of industrial tooling solutions standardized 92% of its business processes four times faster than planned by adopting a new in-memory computing platform

Where does your company rank on leveraging IT enabling capabilities to drive real business value and competitive advantage?

Put technology to work to meet your business goals

To increase revenue, a growing number of manufacturers are embedding technology to make their products more connected. A good example is a leading provider of industrial cleaning systems that is developing software to measure the area its equipment covers, detect operator safety issues, schedule equipment maintenance, and provide diagnostic data from equipment operating in the field. Companies that produce everything from forklifts to appliances to agricultural products are pursuing similar strategies to evolve from a product-centric business model to one that provides better customer experiences and new sources of revenue as well.

To reduce operating costs, there is widespread interest in exploring how to improve visibility, integration, and compliance on the shop floor.  This information can be used to streamline interactions between product development, supplier sourcing, and manufacturing engineering teams before the start of full production. ASUG Benchmarking findings indicate that industrial companies can reduce manufacturing costs as much as 15% by establishing real-time visibility and control across their entire production network.

Other manufacturers are standardizing common business processes like supply chain planning, purchasing, finance, and IT operations by adopting shared services that can be easily scaled to standalone locations and emerging markets.  Some have accelerated these benefits by leveraging the flexibility of cloud based computing architectures to modernize their current IT landscape without an expensive, multi-year initiative to “rip-and-replace” existing legacy systems.

To maximize asset utilization, many manufacturers are developing real-time connections to sensors, embedded electronics, and on-board applications to monitor real time operating parameters. It is now possible to provide broader visibility and deeper resolution into actual equipment performance through mobile networks and Big Data analytics. When machines in manufacturing, distribution, and field operation are accurately tracked in real time, key performance indicators that fall outside acceptable limits can be identified and addressed more quickly.

Predictive analytics can be used to take traditional “break fix” approaches a step further by facilitating a more proactive strategy to equipment maintenance. By capturing and assessing markers of degraded performance, they can service equipment before it begins to break down and avoid the disruption created by unplanned downtime. This technology also makes it possible for separate pieces of equipment to interact with each other without human intervention, in what is now being called Machine-to-Machine connectivity.  Taken more broadly, some are calling this the Industrial Internet of Things.

Discover the best path to your business goals

The world of industrial manufacturing will be significantly transformed in the coming years, so it is essential that companies in this market explore the wide array of new technologies available to them. Beginning with a clear understanding of your specific business objectives that define success is the first step. This focus on desired outcomes becomes your “compass” to help navigate the myriad of technologies available and guide more intelligent investment decisions.

Operational excellence will always be one of the core drivers of competitiveness in industrial manufacturing; however, the potential to create a competitive advantage is possible when combined with enhanced asset utilization, revenue growth, and innovative service offerings.  I believe the companies that figure out how to best align these new technologies with their business objectives will ultimately separate themselves from the rest of the pack.

About the Author

David Breaugh is a Vice President in SAP’s Industry Value Engineering organization and is responsible for manufacturing industries across North America.  Based in Detroit, Dave has been with SAP for 9 years.  Prior to joining SAP, Dave spent over 15 years working for other technology, management consulting, and industrial manufacturing companies.  Dave has an Electrical Engineering degree from Kettering University and an MBA from the University of Chicago.

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