Today’s industrial manufacturing industry is not for the passive player – it requires the utmost in competitiveness, innovation, speed and agility. It’s an industry where complexity and competition is ever increasing. As distributors and customers push industrial manufacturers to increase their flexibility, the rules of engagement are altering and the factors upon which companies compete are changing.
A New Criteria for Success
The trend towards globalization continues to be one of the most pressing issues facing industrial manufacturers. Gone are the days of simple, vertical integration and single, on-site manufacturing. The transition of manufacturing operations overseas has been remarkable – whether it is the growth of overseas competition or the establishment of an enterprise’s own plants or that of contract manufacturers and other partners around the globe.
Globally dispersed operations and partners increases the complexity of an organization, creating an extended supply network. This shift in geographic focus requires supply chains to be fundamentally reassessed and redesigned to accommodate a multi-enterprise context.
There are many advantages of overseas operations, the most obvious being a reduction in total manufacturing costs, particularly labor expense. Looking for cost savings becomes increasingly important as industrial manufacturers are plagued by sharply higher input prices (e.g., oil and other commodities), putting significant pressure on profit margins. Cost avoidance and reduction strategies are essential to improving the bottom line, which in turn is essential to staying competitive.
Maintaining competitive position is also about being able to satisfy the demanding customer, who is clearly in charge. With endless competitive offerings so readily accessible, consumer loyalty is hard to come by and customer satisfaction and confidence must be earned through each and every interaction. Today, whoever can deliver the product a customer wants, how and when they want it, wins. Leading industrial manufacturers are learning how to respond to customers’ last minute configuration changes without imposing additional lead time to order fulfillment…and without losing margin. Meeting customers’ volatile demands has also led to a life of continuous product innovation, involving increasingly complex product development and staggeringly short product lifecycles which can wreak havoc on the supply chain if not managed properly.
So in an industry characterized by globalization, increasing costs, intense competition, and aggressive customer demands, how do companies best manage and compete? Where is the point of differentiation – the criteria for success? Manufacturing success is increasingly defined by how well the enterprise works – how fast it can act and react. It becomes about one’s ability to execute in the face of today’s challenges. In an industry where there is no longer a “business as usual,” responding is the means by which you execute.
Response Management – Solving Today’s Problems Today
In this day and age, it is no mystery that best laid plans rarely exhibit the degree of accuracy one would hope for. Ensuring that the supply chain works as desired comes down to empowering front-line staff with the information and tools needed to respond quickly and effectively to change. In the face of frequent and unexpected changes in demand, supply, capacity, or product engineering, Response Management solutions can provide multi-tier visibility across the extended supply network, enable users to conduct real-time data analysis, and facilitate fast and intelligent course corrections. Establishing a competency in Response Management that enables supply chain agility and operations performance, will provide a key competitive edge in a world where problems can be complex, change is constant and speed matters.
Response Management solutions bring unmatched results in a crucial area not addressed by traditional technologies. “In-house” solutions that typically consist of people using tools such as Excel to manually accommodate and respond to change simply cannot manage the volume of data required or effectively model complex supply chain scenarios. An ERP’s strength is in providing sophisticated planning capabilities, which tends to be done by a small number of highly-trained people focusing on extended time periods - weekly, monthly, quarterly cycles. These, and other solutions, were not designed for a multi-enterprise, collaborative environment that requires the utmost in flexibility and agility.
To win, manufacturers need to solve today's problems today. When an issue arises, it is neither the time for more ERP reports or queries, nor the time to "dig for data" or perform ad-hoc analysis using spreadsheets. It is a time for rapid decisions and action, requiring continuously updated real-time information that reflects MRP, ERP and enterprise system data from across the extended supply chain. Supply chain participants must have immediate access to this information and be able to instantly model the data to assess and share "what-if" alternatives so collaborative decision making can be rapidly transformed into cross-enterprise action that aligns with corporate objectives.
Specific applications for Response Management solutions are far-reaching and can support a variety of manufacturers’ needs by empowering a broad-base of users to:
- Simulate "What-if" scenarios to gain instant insight into individual customer orders impacted by late supply. Enterprise and supplier participants can understand the full impact of alternative recovery scenarios on business metrics
- Quickly understand supply and capacity constraints impacted by changes in orders. Deliver accurate promise dates based on material and capacity constraints and easily simulate alternative supply strategies to satisfy the demand plan
- Rapidly simulate multiple engineering changes and NPI scenarios (new BOM, demand, timing, order policies) to meet customer and market commitments and evaluate alternative cut-in dates with an understanding of the impact on excess and obsolete inventory
- Proactively manage global inventory leading to decreases in excess & obsolete, increased inventory turns and reduced carrying costs
- Facilitate collaborative participation of key players at all levels of the extended supply chain to ensure continuous alignment of supply, demand, capacity, and product
- Use as a decision-making tool which provides input (back integration) into local ERP execution applications.
Coping with complexity and change comes down to a series of tradeoffs and compromises that people need to make together, based on the best information available. By having the right tools and technologies, one can drive significant breakthroughs in customer service and operating performance within the volatile and competitive industrial manufacturing environment.