Manufacturing, by its very nature, is heavily centered on technology. Machinery, equipment and sophisticated factories are all varying forms of technology within the four walls of a manufacturing organization, not to mention all the software and process automation. However, increasingly it is what’s outside of the four walls that determine the success of a manufactured product — its launch and speed to market, its profitability and the innovation it brings to the market.
Over the last few years, uncertainty and volatility have become the new norm for manufacturers globally but so have rapid innovation, disruptive business models and new forms of competition. Manufacturing used to have a significantly high barrier to entry but today anyone can enter the industry. In this new normal, manufacturers are quickly realizing that they need to do more and in order to achieve the above average growth that most desire, they must pursue aggressive strategies with focused investments in technology, R&D and towards enhancing orchestration and collaboration across the value chain.
Make no mistake, a global manufacturing revolution is already underway. It is impacting how products are designed, made, delivered and serviced. As manufacturers continue to hunt for growth, they must consider accelerating new product development, entering new markets/categories and embracing emerging digital technologies.
Suppliers Are Key
Suppliers have never been more essential to success for manufacturers. Leading manufacturers today operate within a broad and closely connected ecosystem versus the traditional linear supply chain approach. In this ecosystem, suppliers are extensions of the team and viewed as partners and sources of innovation. Global supply chains are increasingly becoming a primary source of competitive advantage and facilitating deeper collaboration will pay dividends.
For many product manufacturers, focusing on creating entirely new products and services as well as making improvements to existing ones is a priority. Those able to leverage their value chain and ecosystem to address customer needs uniquely while adding value are the ones that will achieve growth and market share. In fact, IDC predicts that by 2019, 40 percent of G2000 manufacturers will use design democratization and collaborative innovation to meet revenue targets from newly developed products and services. There are very few companies, if any, that can match the innovation capacity of all its (strategic) suppliers put together.
Without collaboration across the value chain, it will be difficult for manufacturers to get to that “next level” of innovation and growth that many are pursuing. The ability to adapt quickly to anything — changes in demand, disruptions in the supply chain, regulations, external innovations — requires a synchronized level of agility. Procurement can play a key role in developing collaboration programs to meet specific objectives. Collaboration for cost reduction, value creation or innovation would require different approaches.
Procurement is an Important Actor
Procurement and Supply Chain organizations are playing increasingly central roles when it comes to suppliers, innovation and growth. These organizations are optimally positioned as gatekeepers to the invaluable intelligence and innovations that suppliers can bring to the table while having a handle on risk, performance and quality. Strengthening those relationships and becoming “customer of choice” places Procurement in the enviable position of being a source of innovation. As manufacturers enter new markets, market intelligence is critical and leading Procurement groups are heavily involved in such initiatives; helping to understand existing and new supplier presence, ability and quality of supply (particularly with specialized materials), ensuring regulatory requirements are met and lastly assessing various forms of risk (financial, quality, delivery, environmental, contractual, etc.) Additionally, leading Procurement groups are empowering themselves, their business and their suppliers by leveraging technology to play a part in different areas of the value chain, going way beyond their traditional roles.
Data is Gold
One thing is clear in all this, data is the essential element that will define the future of manufacturing — customer data, product data, supplier and supply chain data, Internet of Things (IoT) data and much more. How it is generated/captured, analyzed and harnessed will impact the entire value chain to ultimately deliver better products, faster and more profitably.
Generating data will not be a problem with connected products and digitized processes. Understanding and harnessing data will be an organizational muscle that will have to be trained to perfection (human or AI) to quickly identify patterns and relationships across the value chain. In product industries such as automotive, heavy industrials, medical devices, and others, technologies like IoT will unlock huge value and have significant implications across the value chain. 3D printing is already questioning the need to buy parts versus making them as needed. With most digital technologies, data will be the essential ingredient upon which value will be built.
Procurement and Supply Chain organizations are positioned well to help support growth, innovation and collaboration while keeping an eye on risk exposure. Leaders have evolved into dynamic, strategic and data-driven functions that can truly generate lasting value and build strong relationships internally and externally. Digital technologies like AI can strongly support and empower Procurement, Supply Chain, users and the business to make better, faster decisions and realize value. What these groups should watch for is the “one size fits all” approach to technology solutions. This may work for smaller and less mature organizations (and even then most likely temporarily), but large, complex, global manufacturers require more robust and flexible platforms.
Vishal Patel is VP of Product Marketing for Ivalua.