This study attempts to illuminate how enterprise software is supporting manufacturers by measuring the environmental impact of their supply chain as well as conforming to the green supply chain requirements of their customers.
This is part two of a two-part series. Part one can be found here.
In December 2010, a study of middle market to large manufacturers was conducted by IFS North America and Affinity Research Solutions, a Boston-based research firm, among manufacturing executives and professionals to better understand how business software applications like ERP and EAM and other enterprise-wide software programs play a role in their companyâs green supply chain initiatives. While much is written about environÂmental regulation and its effect on manufacturing, not as much is written about how large manufacturers are requiring environmental data from their vendors and using it to drive purchasing decisions. This study attempts to illuminate how prevalent this trend is and how enterprise software is supporting manufacturers by measuring the environmental impact of their supply chain as well as conforming to the green supply chain requirements of their customers.
Data was collected from manufacturing professionals on their involvement in the green supply chain, the types of environmental information they are tracking and sharing with their supply chain partners and/or customers, and the value they place on information about the environmental impact of their operations and those of their supply chain partners. In addition, the study took a close look at how data is being exchanged with suppliers on the environmental impact and chemical content of materials and products, regulationâs role in driving change and how enterprise software could be integrated to better meet green supply chain requirements today and in the future.
Beyond evaluating green supply initiatives, this study also examines a number of business models manufacturers are engaged in. Specifically, the study examined the use of manufacturing modes such as âmake to stock,â âmake to order,â and âassemble to orderâ and how enterprise software is being used to fit these various modes. The study further looks at how well enterprise software performs in each of the manufacturing modes and the frequency and precipitating events that lead to changes in current business models.
Section III: Importance of Green Supply Initiatives
Over the next three years, implementing a green supply chain will be even more important than it is today. ReaÂsons for this, according to manufacturing professionals, center around more government regulations, increased awareness for environmental concerns, and a push from customers to be more sustainable. As one professional stated, greening the supply chain is ânot optional, its becoming the standard.â
Drivers to Adoption of Green Initiatives
When asked whatâs driving companies to adopt and implement green initiatives, manufacturing professionals cite being socially responsible, mandates by their company and customer pressures as the top reasons.
Regulations Impacting Business Today and in the Future
The regulations most impacting manufacturing organizations today and in the next two years are the Hazard Communication Standard (Material Safety Data Sheet), Clean Air Act, the Clear Water Act, and RoHS.
Section IV: The Role of ERP and the Green Supply Chain
Data Exchange:
Among those manufacturing professionals that exchange data with their suppliers and customers regarding the environmental impact and chemical content of materials, products or components, a majority are using manual methods where they enter the information from hard copy into spreadsheets (28%) or into supply chain manÂagement solutions (16%) or into an ERP solution (20%). Roughly a fourth, 23% are using paper-based systems to manage this information.
Only 12% allow their trading partners to access a portal to automate environmental and materials reporting.
Improving Enterprise Software:
There seems to be some uncertainty as to how enterprise software could be enhanced to help manufacturing professionals better manage their green supply chain requirements. Some comments centered on better inteÂgration of data.âImproved integration and the ability for EDI back and forth between us and our supply chain.â
Others mentioned improving their visibility into the supply chain.
âBetter capture and reporting of green supply chain issues.âA few comments focused on going paperless and greater automation and efficiencies.
âGo from paper to electronic by reading / scanning documentsâ
âReduce paper wasteâ
Current Enterprise Software Solution Ability to Track/Share Environmental Data as Part of a Green Supply Chain
When asked, unprompted, what types of functions their enterprise software performs pertaining to its ability to track and share environmental information regarding their green supply chain initiatives, better than four out of ten (43%), couldnât identify any. At the same time, 57% did identify a function, but overall there was no general consensus on the types of function.
Room for Improvement
Manufacturing professionals were asked how helpful their enterprise software solution is in terms of its ability to help manage green supply chain initiatives. Slight over half rated their current enterprise solutions unfavorÂably in its ability to assist with their green supply chain requirements. Only 5% rated their enterprise software as excellent in this area.
Types of Manufacturing Modes
Manufacturing professionals were asked which manufacturing or business mode(s) their companies operate. Only 17% indicate working in just one mode while the vast majority, 83%, say they work in multiple modes with âmake to orderâ dominating all other modes followed by âmake to stockâ.
Rating of Enterprise Software Capabilities on Modes
Current enterprise software solutions are rated more favorably on straightforward manufacturing functions such as âmake to stockâ and âmake to orderâ and less favorably for engineeringâintensive modes. Over half rated their enterprise software capabilities the highest in âmake to orderâ and âmake to stock.â The areas that their software solutions deliver the poorest is in installation, service management/aftermarket service, performance based logistics and engineer, procure, construct and install.
How Enterprise Software is Made to Fit Different Modes
When asked how their enterprise software accommodates different modes, over a third, 35%, say they modify their software to fit the various manufacturing modes that it could not accommodate out of the box. Roughly a fourth, 27%, say their software suite can handle most of the manufacturing modes, while 20% are running separate software products for various aspects of their business. Only 15% say their enterprise software suite adequately handles all of the different modes.
When asked, unprompted, how their enterprise software could be improved to accommodate multiple modes of manufacturing, a third, 33%, could not offer any suggestions. Some specific suggestions addressed issues of flexÂibility, better integration, improved interfaces and easier to use features.
Change in Modes
Over the past five years, more than half, 54%, say they have added modes at least twice.Types of Events that Impact Manufacturing Modes
More than half say the reason they change modes in their organization is due to customer demand. Just under half say acquisitions prompt a change in modes.Methodology
This research was conducted collaboratively with Affinity Research Solutions and IFSNorth America, the AmeriÂcas subsidiary of a provider of enterprise resource planning (ERP), enterprise asset management (EAM) and other enterprise solutions. In February of 2009, IFS became the first major enterprise software vendor to offer an embedded environmental footprint management tool, and wanted to learn more about the appeal that this functionality had in the market. They also target companies running multiple manufacturing modes, and wanted to gather input on the perceptions and priorities of companies in their targeted demographic.
The study was executed in December 2010 and was administered over the Internet among subscribers of ManuÂfacturing Business Technology (MBT). Respondents were pre-qualified for being involved in decisions regardÂing ERP applications and related software solutions for their company. Individuals were further qualified for being employed in companies estimating 2010 revenues at $100 million or more.
In total, 207 corporate, operations, and IT executives and managers in manufacturing companies participated in this study.
About the Respondents and Their Facilities
Respondents to the study are largely senior IT and manufacturing operations management (22%), design or control engineers (17%), supply chain executives (11%), consultants and systems integrators (10%), procurement executives (9%), operations and plant managers (8%), corporate executives (3%).
A broad range of industries are represented and includes aerospace/defense, industrial machinery, petroleum, automotive and transportation, wood and paper, chemicals, food and beverage, metals, computer systems and medical devices, etc.
Respondents were classified into three categories based on their organizations: 2010 projected revenues: comÂpanies under $250 million (28%), businesses reporting revenues between $250 million and $999.9 million (26%) and organizations having $1 billion or more in sales (46%).
For more information, visit https://www.ifs.com/en-us.