16 February 2016

Building the productive enterprise

As never before, productivity matters. But the search for productivity improvement must be enterprise-wide, and extend right across the supply chain, warns Phil Lewis of Infor.

To a degree unimaginable a few short years back, the world’s economies are inextricably linked. Our homes, workplaces, and supermarkets are full of products manufactured abroad—in many cases, in Asian economies on the other side of the world.

Which is why, says Infor’s Phil Lewis, that it is very appropriate for this year’s EEF National Manufacturing Conference to have focused so strongly on the topic of productivity—and specifically, the link between national productivity and international competitiveness.

Because with low oil prices driving down freight costs, a resilient currency, and the rapid growth in e-commerce trading hubs, many British manufacturers are uncomfortably aware that their customers are increasingly sanguine about lengthy supply chains stretching around the world.

“Productivity has never been so important—and for many manufacturers it’s the key determinant of success,” stresses Lewis, vice-president for solutions consulting at the enterprise applications giant. “The trick is to not only boost productivity so as to be able to compete with foreign imports, but to also take the fight to overseas manufacturers, and compete with them for their customers.”

Such exhortations aren’t new, of course: politicians routinely urge higher productivity. And, points out Lewis, a step change in productivity is genuinely achievable—look at the transformation of British industry in the 1980s, as the restrictive practices and outdated attitudes of the 1960s and 1970s were swept away.

The result: a manufacturing sector that today contains genuine world leaders, with manufacturers such as Rolls-Royce, Renishaw, JCB, Cobham, and Jaguar Land Rover renowned for their innovative high-quality products and exporting prowess. Britain’s vehicle manufacturing sector—virtually written-off in the 1970s—is now an international success, with exports at record levels and production hitting a 10-year high of 1.6 million vehicles, according to official figures released in January.

And yet, says Lewis, manufacturers wanting to raise productivity today face a challenge that is subtly different from that faced by manufacturers in former times.

“Back then, the key issue was labour productivity,” he observes. “The logic? Labour costs were a significant proportion of total costs. These days, that’s not necessarily the case—and so, manufacturers must increase their overall productivity, and not just their labour productivity.”

Think of the well-known four P’s, he urges: Products, People, Partnerships, and Processes. Today, manufacturers wanting to improve productivity must raise the productivity of each of these—and not solely the People dimensions, and certainly not that proportion of the workforce directly manufacturing products on the factory floor.

“It’s not just about physical output, it’s about being more effective as a business, right across the board. It’s about doing more with the same level of resources, or better still doing more with fewer resources. Business must become more effective organisations as a whole, taking better decisions, employing better processes, producing better products, and with better-equipped people,” sums up Lewis. “What’s more, doing so not just within the four walls of the enterprise, but right across the supply chain. Supply chain performance—and supply chain visibility—have never been more important.”

And to their credit, many manufacturers acknowledge this, he adds. Despite the uncertain economic outlook, the latest surveys continue to show manufacturers investing in growth, and investing in working with customers and suppliers to create flexible and agile supply chains.

Just look at the current level of interest—and investment—in Industry 4.0 initiatives, and initiatives leveraging the Internet of Things, stresses Lewis. Look too, he adds, at the way that manufacturers are making solid practical use of Big Data and advanced analytics.

And just as significantly, he emphasises, look at the way that combinations of these technologies—the Internet of Things and, say, Big Data—are being used to build whole new business models and ways of working. Ways of working, moreover, that significantly contribute to overall organisational effectiveness, and therefore productivity.

Take ‘virtual manufacturing’, for instance—where businesses replace directly-owned manufacturing facilities with a network of relationships with suppliers, contract manufacturing and logistics partners, with the ‘virtual manufacturer’ and brand owner at the centre, orchestrating flows of both information and physical products.

Or consider business models such as servitization, where customers pay for equipment on a per-usage basis, rather than through outright capital purchase, with the Internet of Things reporting that usage. Or leveraging the Internet of Things to aid automated replenishment, or remote diagnostics and maintenance.

In each case, enthuses Lewis, traditional supply chain inefficiencies are being eliminated, with machine-to-machine communications and electronic transactions replacing slow and opaque people-based processes.

“Businesses are looking at their supply chains, and seeing opportunities to eliminate costs such as waste, downtime and multiple setups,” he says. “And in the process, they’re getting a more visible and transparent supply chain, and making decisions based on fact, rather than forecasts.”

Similarly, he adds, businesses are getting better at connecting external supply chains with events and processes inside the four walls of the enterprise. The result: finally, truly seamless end-to-end manufacturing and supply chain processes that are linked together, providing unparalleled visibility and control.

But how best to bring all this into being? Because with the goal now defined, many manufacturers are uncomfortably aware that there’s a growing gulf between the systems and technologies that they possess, and the system and technologies that are called for in an environment of increased end-to-end enterprise effectiveness.

What is clear, says Lewis, is that traditional enterprise ERP and supply chain systems fall short on several counts. Ticking them off on his fingers, he fluently enumerates their failings.

“End-to-end connectivity? Mostly lacking. Proven, effective, industry-specific best practice? Ditto. Built-in Big Data-capable analytics, to inform better supply chain, marketing and manufacturing decisions? Ditto. True integration, across systems, processes, equipment and services? The same.”

And if businesses truly want to be competing on the global stage, with industry-leading productivity and processes, then these aren’t capabilities that are optional.

That said, he points out, they are capabilities that Infor is well-placed to provide. Founded in 2002, and privately-held, Infor has repeatedly maintained a position of technology leadership through well-funded innovation programmes and deftly-timed acquisitions. Most recently, the company acquired real-time supply chain collaboration platform GT Nexus in the summer of 2015.

“GT Nexus connects 25,000 active trading organisations—buyers, suppliers, and logistics and financial partners,” observes Lewis. “That includes 30 of the world’s top financial organisations and banks, 50 of the world’s top 3PLs, and a roster of blue-chip manufacturers such as Nestle, Electrolux, Philips, Lenovo, Hewlett-Packard, Procter & Gamble, and Caterpillar.”

At Caterpillar, for instance, GT Nexus handles both the inbound and outbound supply chains, and is credited with removing three days inventory from the supply chain—equivalent to a saving of $150 million—as well as reducing transportation costs by a further $150 million.

Combine that with Infor’s formidable roster of ERP capabilities, and the proposition becomes compelling, he believes.

“Basically,” he sums up, “Infor has brought together a whole series of advanced capabilities in areas such as social collaboration, mobile computing, Business Intelligence, and expense management; applied a ‘consumer grade’ easy-to-use interface; and then tightly integrated them with its Infor Xi flagship technology platform via its advanced ION middleware capability—and done so within the Cloud, in the form of industry-specific cloud-based ERP suites, pre-configured and pre-enabled with connectors to leading third-party ‘edge’ applications. And now, we’ve added the market-leading multi-enterprise collaboration platform, built into every product.”

“You want end-to-end enterprise effectiveness?” he concludes. “We believe we’re as state of the art as it’s possible to be.”

Author
Infor

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