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Bringing Manufacturing Into The Digital Era

While the new digital era offers manufacturers new opportunities to improve their products and revenue, there are also challenges and pitfalls.

Rapid advances in Information Technology have created new ways to communicate and share information. The company-customer relationship has shifted from transactional to interactive, giving consumers more power and making companies more responsive.

This has forced companies to rethink and reengineer the way they connect and interact with their customers. New types of customer service are being created due to the changing nature of the customer relationship. Banking and retail have been front-runners in customer engagement, due to the ability to have instant and ongoing exchanges with customers.

The manufacturing industry, however, has been slow to react to these changes. Many companies are uncertain how to leverage this new opportunity and to provide more value for consumers and increase market share through improved customer service.

The main reason can be found in the manufacturing business model. Historically, most manufacturers do not interact directly with consumers of their product. Traditional customer relationships are owned and managed by dealers and channel partners, isolating the manufacturer to the role of engineering and product management.

Even with opportunities to reach past their channels and dealer community to connect directly with consumers, some manufacturers are still hesitant or unwilling to have candid, real-time interactions with consumers.

In one case, a leading automaker was considering building an online forum where dealers could share product feedback based on what they observe at dealerships and in interactions with customers. In the end, they nixed the idea based on fears that the company could be exposed in the event a product failure was discussed in the forum.

How, when, and if a manufacturer seeks to connect with a customer, and how to determine the value of that engagement may depend on whether the product is merely a component in a final product, or the final product itself.

This can be better explained using the automobile manufacturing process as an example.

There are a large number of so-called Tier manufacturers that supply their product to another company that uses it as a component. Examples include the steel used in car production, the seat belts, or the seats themselves. These components are usually unbranded and their manufacturer is not identifiable.

Tier manufacturers typically do not seek out or need to interact with the end consumer. This anonymity also saves time and money on customer outreach. Instead, their primary customer is the manufacturer that purchases its product.

However, circumstances can thrust an unknown supplier into the spotlight, particularly if their product doesn’t perform. A well-known example is the air bag manufacturer that has been in the news quite a bit lately. In an effort to protect its reputation, a Tier company facing a public relations disaster may find it necessary to establish a connection with the end consumer, especially at the urging of the auto manufacturer that is the buyer of its product.

Then, there are companies that assemble inputs from Tier companies and sell them to channel partners, who in turn sell to end customers. Let’s call this second group of companies Distant OEMs. For example, if you purchase an automobile manufactured by Jaguar, the dealer from which you bought the car probably was not a contributing factor in your purchase decision, other than that it may be the closest Jaguar dealer.

Even though the consumer may think his or her connection to the product is with the manufacturer and not the dealer, the fact that you bought it through a dealer means you still only have an indirect connection to the manufacturer.

There is a third type of manufacturer that we’ll call the Connected OEM, those companies that have embraced the new paradigm and operate solely in a direct-to-customer model. This is best exemplified by Tesla Motors, which wants to sell cars directly to consumers. While some states prohibit direct sales, Tesla’s business model is to sell directly to the customer through its web site, utilizing a designated service center for the actual delivery of the product.

Connected OEM manufacturers — by virtue of being in direct digital contact with the consumer — have better insight into product performance, customer perception and demand trends. This is primarily because they have invested in technology solutions that offer platforms to hear what customers are saying about their products. They can rapidly incorporate that input into every phase of the business, from product manufacturing to marketing and customer service.

Fortunately, Tier and Distant OEM companies can also leverage the same digital channels and customer connection as Connected OEMs. Adopting one or more digital solutions makes it easier to connect and engage directly with consumers — whether it’s the end-user or a channel partner. This is an investment that pays dividends to all partners throughout the manufacturing process. A good place to start is to consider the benefit from the type of information that is obtained through these exchanges, and how it can help improve your own business processes.

This new customer interaction data can be collected and evaluated with analytics tools, and can provide valuable insight into your company’s practices. Supply chain analytics can provide insight about supplier performance, schedule compliance, shop floor quality, outbound logistics and route optimization, and a host of other factors that can help boost efficiency, reduce costs and improve quality.

Analytics captured by Distant OEMs from online forums and social networking allows them to anonymously scour data and gauge end user customer sentiment. This enables them to gain early intelligence about their products, and respond to problems before they become costly. Social networks like Facebook, Twitter and Pinterest also offer an effective mechanism to seed and tailor customer opinion to help build brand recognition at a fraction of the cost of traditional media.

Product forums are another aspect of social CRM that help manufacturers connect closely with their end customers. These forums act as specific platforms for product owners to ask questions, seek information and connect with knowledgeable product owners to build a close-knit user community. Manufacturers can assign representatives to interact and address questions and complaints, and share information about product usage, updates and enhancements.

Another solution to help manufacturers gather data about their product is by an emerging concept known as the Internet of Things (IoT). IoT refers to physical objects that are connected to the Internet and can identify themselves and communicate with other devices. This concept has created a connected network of wired and wireless sensors that allows manufacturers to maintain a nearly constant virtual connection with their customers. IoT can also help manufacturers gather huge volumes of product performance data.

While the new digital era offers manufacturers new opportunities to improve their products and revenue, there are also challenges and pitfalls. Due to the ability to easily communicate with a mass audience, consumers have become more empowered than ever before. Positive and negative feedback is more widespread and can have a bigger impact. At the same time, manufacturers now have the ability to cost effectively have a real-time dialog with a huge number of customers, as well as build sustainable relationships like never before.

This new digital reality has reduced both the requirements and constraints that used to challenge manufacturers to address product issues — whether from channel partners or consumers. Regardless of where their products are bought, sold or built, manufacturers can now become actively engaged with their customers thanks to new communication and information sharing technology. The only limitation is how proactive and aggressive your organization wants to be.

Avinash Salelkar (@avinashsalelkar) is the Vice President of Syntel’s Manufacturing, PLM and ES Business Unit.

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