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Data-Driven Manufacturing Is Becoming a Two-Way Street

by Dave Hannon

July 8, 2014

There is certainly no shortage of research or opinions about what makes the best manufacturers the best – more than I could ever hope to include in a single blog post. But after reading a few items recently, I couldn’t help but notice an ongoing theme emerging in manufacturing that those of you the IT organization should be keeping a close eye on. It’s the use of data in the manufacturing realm to improve operations. While some might overlook its importance, others see it as a clear differentiator in the future.

Let’s start by looking at this January 2014 article from the Deloitte Review which identified 43 different capabilities that are required to be a competitive manufacturer. The authors asked 1,110 CEOs to rate their companies’ competitiveness in each capability. This figure from the article plots those responses nicely to show which capabilities CEOs see as most important to their future. As you can see, the CEOs ranked things like customer service responsiveness, brand image, innovation culture, and leadership strategy among the most important capabilities for the future.

Now take a look at that plot and find data analytics. Where does that sit on the plot? While it’s classified as a “game changing” capability, very few CEOs saw it as important for the future. As the article points out a bit later, analytics is part of “a special class of capabilities that we term stealth game changers, which are strong capabilities that high performers either may not recognize they possess or are becoming distracted and losing focus on their importance … Customers do not directly see these capabilities, but strength in these areas is a strong foundation for long-term financial success, flexibility, and agility.”

So at the highest level (CEOs) the value of data and analytics to drive overall manufacturing strategy in the future may not be getting through. But another piece of research indicates that only one tier down on the manufacturing org chart, the importance of data is hitting home. KPMG’s Global Manufacturing Outlook is based on a survey of 460 senior executives in six industries across Europe, Asia, and the Americas. In this survey, only half of the respondents held C-level positions and the theme of using data to gain more visibility to improve manufacturing and supply chain operations came through clearly.

The KPMG report points out that: “Forty percent of respondents admit they lack visibility across their extended supply chain, with 33 percent saying it was due to either inadequate IT systems or a lack of skills. Our research suggests that many of the gains in supply chain visibility have resulted from stronger relationships between manufacturers and their top-tier suppliers and the willingness to share more real-time data across the value chain … More than three-quarters say that their relationship with top tier suppliers is now strong enough for them to share real-time capacity and demand data.”

And when it comes to supply chain risk in particular – the value of analytics and data is coming through loud and clear. Another article in the Deloitte Review points out that, “For leading companies, [the increasing supply chain risk] has given way to an increase in the adoption of advanced tools grounded in analytics and visualization. Risk indices, risk-sensing services, supplier data, supply chain modeling and simulation, and supply chain mapping are all helping companies build resilience in the marketplace.”

And one of the greatest risks to any manufacturing is being caught off-guard by a dramatic change in market demand. And, according to some in the know, one of those changes is taking place right now. And guess what? It’s data-driven.

Both B2B and consumer buyers are tapping into the immense amounts of data available today in planning their purchases. As SAP’s Thomas Ohnemus describes in a recent interview with SAPinsider, buyers have access to so much data and information today, they are becoming more demanding and want a more customized product and buying experience. The “me” economy is how Ohnemus describes this trend.

“Buyers know what is out there and what features they want, and expect a product that fits those needs at the highest quality and lowest cost possible. Their decisions are made more quickly, on more available facts. Manufacturers must compete globally to fend off competitors and stay relevant with customers.”

And how do they do that? With data. As Ohnemus explains, more intelligent products create more data about their performance, which then has to be managed throughout the product life cycle. If a buying trend (driven by consumer data) necessitates a change in product design, that design change must be synched with the data that manufacturing uses, so when the design moves to manufacturing and later to supply chain, and even to the service teams later in the product’s life, the data is connected and updated.

In addition to the interview with Ohnemus, the new issue of SAPinsider includes a collection of stories focusing on how manufacturers are renewing their industry. Other articles in the in issue include:

It all adds up to one point: The manufacturers that are leading the way are those that have put the platform and infrastructure in place to adequately manage and share all of the data in their organization – from early designs all the way through to extended service.

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