Key Factors in
Optimizing Complex
Manufacturing Businesses
Survey of executives across functional areas provides insight
into boosting revenue and improving operations with
Enterprise Resource Planning systems
Sponsored by:
™
Executive summary
Growing revenues and cutting costs are an age-old
remedy for increasing profits, so it should come as
no surprise that manufacturers are focused on those
tried and true basics as they continue the climb out
of the economic downturn of the last few years. But
despite what many consider to be a weak recovery,
executives across functional areas of discrete and
process manufacturing companies are largely
committed to investing in product innovation and
expanding in emerging markets.
Those are among the key findings in a recent survey
on optimization trends in ERP usage by market
research firm GatePoint Research.
These executives shared their top priorities for
boosting revenue and improving operations. In
particular, they provide insight into how current
ERP systems are performing in helping businesses
meet their goals and what needs to improve, as
well as which processes they believe offer the best
potential for improvement. More than one-third
indicate that manufacturing operations are increas-
ingly complex and almost 90 percent rate the need
to address the challenges of complexity at three or
above on a five point scale.
4
Contents
1. Taking Advantage of Revenue Opportunities 2
2. Tuning Up Operations & Processes 3
3. Utilizing ERP Across the Enterprise 3
4. Finding Harmony Among Diverse Applications 5
5. Coming to Grips with Complexity 5
Conclusion
Manufacturing Solutions for Today 6
Survey methodology
Survey Background 7
Survey sponsors
About Infor and IBM 7
Five Key Factors in Optimizing Complex Manufacturing Businesses1
Taking Advantage of Revenue Opportunities
Following one of the worst economic downturns in
modern history, and one that hit manufacturers particu-
larly hard, the North American outlook for the industry
is moving in a positive direction, albeit at a tepid pace.
After relatively dynamic growth in the first half of 2012,
“Manufacturing output growth in the United States slowed
in the second half of 2012 and decreased to 2.8 percent
in the fourth quarter,” according to the United Nations
Industrial Development Organization (UNIDO)1.
Meanwhile, credit crises among Euro zone countries
continue to dampen the overall global recovery.
The global economy, increased competition from emerg-
ing markets, complex supply chains, increased compli-
ance requirements, and the volatile costs of raw materials
are forcing manufacturers to monitor and react to vast
external issues, as well as to manage their own internal
productivity.
So it should come as no surprise that executives in
manufacturing companies in North America are intently
focused on related business goals of growing revenues
and cutting costs. When GatePoint asked these leaders to
indicate their top priorities over the next 18 months, an
overwhelming 83 percent checked the revenue growth
category, while 73 percent checked containing/cutting
costs. The only other category selected by more than half
of respondents was that of increasing market share, at 52
percent.
The top tactic for growing revenue, cited by 71 percent
of those in the survey, is investing in product innova-
tion, perhaps reflecting the belief that after such a long
downturn now is the time to capitalize and take ad-
vantage of a new growth wave. That might explain why
57 percent indicate they are expanding in emerging
markets. Many apparently are focused on new domestic
opportunities, because just one third indicated that ex-
panding internationally is a priority, perhaps reflecting
the uncertainty over global recovery.
Meanwhile, about 4-out-of-10 (42 percent) said they are
prioritizing new product introductions and 35 percent
say that tightening the areas of operations, production
and manufacturing are a priority. Just 23 percent indi-
cate that managing a recent or upcoming merger or
acquisition is a priority. Other opportunities for expand-
ing revenue, according to 50 percent of the executives,
lies in selling added-value services and 39 percent are
expanding or improving alliances and partnerships.
“Manufacturers can extend revenue streams by adding
services such as installations, repairs and maintenance,”
says Jack Bullock, senior vice president and general
manager, Infor System i Solutions. “They can also lever-
age their information systems to identify new niche
markets and niche products while increasing collabo-
ration with customers with services such as design to
order and engineer to order. The ability to track the
complexity of unique SKUs is vital to ensuring supply
inventory needed to fulfill these services.”
Five Key Factors in Optimizing Complex Manufacturing Businesses 2
1Source: UNIDO, “World Manufacturing Production—Statistics for Quarter 4, 2012,” March 2013.
http://www.unido.org/fileadmin/user_media/Services/Research_and_Statistics/statistics/publication/QuartProd/STA_Report_on_Quarterly_production_2012Q4.pdf
ERP systems are almost ubiquitous in today’s manu-
facturing companies for monitoring and automating
business performance functions. Just 7 percent of
respondents indicated their organization isn’t using
this technology currently. ERP systems span functional
areas across the manufacturing enterprise, from man-
aging the customer lifecycle, to improving quality to
greater visibility into financials, let alone optimizing
supply chain and distribution channels.
Utilizing ERP Across the Enterprise
Without a doubt, ERP has a great impact on finance and
accounting. In fact, 59 percent of the executives in the
survey say that is where their organization gets the most
benefit from ERP. A third, however, say ERP is vital
across all aspects of their organization, while lesser
amounts give the nod, in descending order, to purchas-
ing, inventory control, manufacturing operations and
sales.
Those perspectives may also reflect how modern an ERP
implementation is in each respondent’s organization
and how often it has been updated. Over a span of more
than 20 years, ERP software has undergone a significant
transformation. While early systems were purchased
and used primarily for financial applications, order
management, purchasing, and manufacturing, today’s
systems are designed for broad use across the enterprise.
Tuning Up Operations & Processes
Optimizing production processes heads the list of what
executives are exploring to improve operations, selected
by 74 percent of those in the survey. Just slightly less
than half—42 percent—say they are exploring ways of
shortening the supply chain, although only 28 percent
indicate they are seeking to reduce the number of sup-
pliers they’re dealing with.
“As manufacturers deal with the growing complexity of
supply chains and distribution channels, the ability to
tailor reporting systems and metrics is increasingly
important so that they are able to spot potential issues
as soon as possible and adjust processes before they
turn into real problems,” says Infor’s Bullock.
Just a third of those surveyed say they are looking into
sourcing components from lower cost regions and
even fewer—13 percent—are looking into outsourcing
manufacturing operations. That may be an indication
that the outsourcing shift has indeed peaked—at least
for now—due to a combination of instability in foreign
regions, rising wages in countries such as China and
India, as well as lowered costs for keeping business in
North America. However, there have been frequent
predictions over the past decade that the outsourcing
trend has crested.
Five Key Factors in Optimizing Complex Manufacturing Businesses3
“Newer ERP systems can include specialized applica-
tions for supply chain management, customer relation-
ship management, human capital management, product
lifecycle management, enterprise asset management,
and expense management,” says Andrew Kinder, senior
director of Industry & Solution Marketing for Infor.
“Many manufacturing concerns need both a general ERP
and specialized business applications, which requires
middleware able to handle the integration of informa-
tion across the enterprise.”
According to Kinder, manufacturers are selecting Infor
ERP solutions to take advantage of a flexible, loosely
coupled architecture built on the language of the
Internet—html—so that they can leverage Infor ION
middleware and easily add specialized business
applications for areas in their operation requiring more
in-depth functionality.
Those applications, Kinder says, include traditional
supply chain management (SCM), product lifecycle
management (PLM), and enterprise asset management
(EAM) as well as solutions to meet the emerging needs
for mobile access and social collaboration. “The manu-
facturing environment is rapidly changing. We believe
flexibility is going to be essential for the manufacturer
who wants to adapt and respond quickly to changing
market demands,” Kinder adds.
The evolution of ERP plays well into the needs of today’s
manufacturing enterprise. The executives polled in this
survey were asked which of their processes show the
most potential for improvement and almost half (49
percent) see a need for improvement in demand fore-
casting, while slightly fewer (44 percent) see the need
for improvement in inventory management. Manu-
facturing applications should incorporate business
intelligence and performance management software to
track performance across critical business metrics.
Demand forecasting capabilities of today’s modern ERP
systems can provide advanced statistical analysis com-
bined with market knowledge gained through internal
and external collaboration to bring pinpoint accuracy to
demand plans, drawing on business intelligence analytics
and insight into inventory and supply chain metrics.
Five Key Factors in Optimizing Complex Manufacturing Businesses 4
Finding Harmony Among Diverse Applications
A substantial number of the polled executives (15
percent) indicate that there are multiple ERP systems
in use at their organizations. That often results from
acquiring a business that had an existing ERP system in
place different than that in use at the company making
the acquisition. It may also be a result of distributed
decision-making and the ability of new business units
to select a more up-to-date system than is being used at
older business units.
“The ability to connect these systems is crucial to provid-
ing the information flow to feed the advanced analytics
capabilities that manufacturers are relying on to provide
management with insight into the business that is need-
ed to make critical decisions,” said Mark Humphlett,
director of marketing with Infor.
Among survey respondents utilizing a single brand of
ERP, the selections are significantly diverse. Older and
more established solutions such as SAP (39 percent of
respondents) and Oracle (23 percent) are closely follow-
ed by “other” (18 percent) and homegrown (17 percent),
while lesser amounts rely on older acquired brands such
as JD Lawson and PeopleSoft.
Undeniably, the survey indicates a wide variety in ERP
usage throughout the market. The reasons for using a
particular branded solution undoubtedly vary broadly,
and may be the result of long-term loyalty, unwilling-
ness to migrate to a new solution, the particular fit of
a more specialized ERP provider, or simply a matter of
budget priorities.
Coming to Grips with Complexity
Complexity in manufacturing operations is a significant
factor faced by executives polled by GatePoint Research.
On a scale of 1-to-5, 87 percent of the respondents rated
addressing increased complexity as a 3 or above.
“An ERP system that meets manufacturers’ needs today
has to be able to help the business deal with change,
which can come in the form of a shift in market prefer-
ences, interruptions to the supply chain, new regulations,
or new competition able to undercut pricing,” says Ross
Freeman, senior product manager and strategy lead,
Infor System i Solutions. “An ERP solution that will grow
with you as you’re expanding and enables you to manage
complex supply chains is a critical asset in dealing with
global market issues.”
When significant changes like these occur, manufacturers
can lose valuable productivity as they adapt and refocus,
which can be disruptive to complex processes, and may
involve new procedures and retraining personnel, or
more significant retooling and re-engineering actions.
The Gatepoint survey asked executives to rate the current
complexity of their manufacturing operations and the
largest group of 38 percent rated it 4 or 5 (extremely
complex) on a 5-point scale, while 22 percent rated it 1
(minimal) or 2, with the remaining 29 percent selecting
the midway rating of 3.
Five Key Factors in Optimizing Complex Manufacturing Businesses5
8
Conclusion
Manufacturing Solutions for Today
Improving finances is the top issue keeping executives
of manufacturing companies up at night. While the
basics for manufacturing industry success are a con-
stant—minimize costs, maximize flexibility, and keep
your systems current—it’s increasingly important to be
able to adapt to rapid shifts in business and technology.
The GatePoint Research survey underscores that
executives at manufacturing companies are focused on
increasing revenue by focusing on product innovation
and expanding into emerging markets. They under-
stand that optimizing production processes is a key
strategy to help support those goals.
Each step in the manufacturing process can dramatical-
ly affect profitability. Gaining visibility and efficiency is
crucial for any company wanting to compete globally,
open up new markets and leverage its investments to
meet evolving business needs. ERP is a necessary
component of manufacturing today, yet many firms
fail to realize its full business benefits. The key drivers
of cost containment, superior service and manageable
growth stall without interoperability between business
applications.
“Businesses should also expect their information systems
to foster collaboration and communication,” says Kinder.
“That’s not just with regard to customers and suppliers,
but also in providing information to skilled workers.
The more easily they can consume relevant informa-
tion, the easier it is for the business to speed up decision
making.”
IBM and ERP provider Infor have teamed up to offer
an integrated and optimized combination of software,
hardware and services for modern manufacturers. The
Infor Manufacturing Solution built on IBM Power
Systems helps make best-in-class manufacturing
possible. Infor Manufacturing Solution built with IBM
Power Systems combines IBM POWER7 and IBM
i with affordable enterprise software tailored to help
transform business processes, backed by Infor services
and support to make deployment and management
simple. For more information on the Infor and IBM
alliance, visit ibm.com/infor.
That’s not to say manufacturing company executives are
overwhelmed by complexity, but neither are they under-
whelmed. In fact, complexity seems to be a given for a
majority of the executives, with 53 percent saying their
expectation is that the current level of complexity will
remain about the same. Just over a quarter (26 percent)
expect a slight increase in complexity and a very small
percentage (3 percent) expect a major increase. Rela-
tively few (13 percent) expect to see some decrease in
complexity and just 5 percent expect a major decrease.
Where they expect the greatest growth in complexity is
in the area of business process, according to 39 percent.
That was followed at 32 percent by organizational
complexity, just ahead of supply chain complexity at 30
percent and IT and market complexity at 28 percent.
Operational complexity was at the bottom of the list
with a significant 24 percent and just behind product
complexity at 26 percent.
Five Key Factors in Optimizing Complex Manufacturing Businesses 6
Survey sponsors
About Infor and IBM
Infor offers an ERP system designed specifically to
optimize manufacturing operations in order to make
the organizations they support more flexible and
competitive. By offering an integrated hardware and
software solution, the Infor Manufacturing Solution
built on IBM Power Systems helps make best-in-class
manufacturing possible. Infor Manufacturing Solution
built with IBM Power Systems combines IBM POWER7+
and IBM i with affordable enterprise software tailored
to help transform business processes, backed by Infor
services and support to make deployment and manage-
ment simple.
For more information please visit:
ibm.com/infor
www.infor.com/solutions/ERP
Five Key Factors in Optimizing Complex Manufacturing Businesses7
Survey methodology
Survey Background
GatePoint Research polled 120 executives at manufac-
turing firms, from a qualified list of more than 1,200 in
functional areas including operations, manufacturing,
finance, supply chain, and IT.
Almost all respondents (99 percent) in the survey are
directors and above and 71 percent are vice presidents or
C-level executives, providing a senior decision-making
view into priorities and pressures facing manufacturing
companies.
Just under half of the executives are employed at Fortune
1000 firms with revenue of more than $1.5 billion. An
additional 26 percent work at companies with revenue
of between $500 million and $1.5 billion.
Participants were asked a range of questions in an effort
to gauge current trends in business optimization issues—
from the problems executives are grappling with to how
they’re focused on resolving them. The executives shared
insight into business priorities and where they believe
their organizations are experiencing the most benefit
from ERP.
Copyright ©2013, Gatepoint Research. All rights reserved.
The information contained in this report is the sole property
of Gatepoint Research and may not be used, reproduced or
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and digital form without the express written consent of
Gatepoint Research. www.gatepointresearch.com
5 Key Factors in Optimizing Complex Manufacturing Business
As products, customer demands and global market pressures increase, manufacturing processes are also becoming more complex.
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