United States

Strategic use of technology can drive manufacturing growth

INSIGHT ARTICLE  | 

Moore’s Law predicted that computer processing power will double every two years.1 Yet consumers—and the manufacturers who serve them—seem determined to deploy that power at even faster rates. How else to explain that within a few decades of the smartphone’s debut, two-thirds of U.S. adults own one?2

That pace of technology adoption among consumers and businesses is unlikely to slow, as nearly two-thirds of manufacturers plan to increase investments in IT. According to the latest RSM Monitor survey of manufacturers, manufacturers will focus on customer relationships, top-line growth and profitability. For example:

  • 27 percent of U.S. manufacturers expect new technologies to help grow sales in the next 12 months.
  • 28 percent of manufacturers expect to leverage technology to increase profitability in the next 12 months.3

Fortunately, implementing new applications and systems has never been more affordable or flexible, thanks to cloud technologies. In fact, 55 percent of U.S. manufacturers have cloud-computing solutions in place, and 21 percent were planning to implement cloud-based solutions.4

Experienced manufacturing executives understand, however, that long-term success requires long-term vision, strategy, and tireless deployment and execution. Success is never just about technology, but is predicated on aligning people, processes and technologies to design, sell, source, make and ship products that delight customers. If you don’t have good people with the right skills, even the best processes won’t be effective. If you don’t have the right processes in place, even the most sophisticated technologies will fail to achieve their full potential.

Continuously evaluating the use of technology is one key to advancing a business. Management must first ensure that a clearly defined business strategy—developed in collaboration with all functions, including IT leadership—puts the right people and processes in place, and then supports them with the right tools and solutions.

Build a solid foundation for technology implementations

Middle market manufacturers are especially vulnerable to gaps in talent or processes that can derail technology implementations. However, well-planned observations of business activities—current- and future-state value-stream, process or workflow mapping—can identify problems and solutions. Executives should see processes in action and talk with those involved in the work. How do supervisors and frontline associates think the process functions? Are they the right people for the process? Do they have the resources necessary to accomplish process objectives?

It is not uncommon, for example, for an IT star at a middle market firm to rise to vice president or even chief technology officer status without gaining the corresponding financial experience or people skills necessary to lead at those levels. Even more frequently, these companies often plateau and falter because production and back-office processes—and technology—that functioned adequately at lower volumes are not flexible enough to sustain further growth. Moreover, over time these processes may have been supplemented through firefighting, added workarounds and spreadsheet-based gap fillers—adding unnecessary cost, lowering operational efficiency and introducing waste.

Identify problems and establish technology goals and objectives

Yet despite these problems, many executives at growing firms find that new technology is not the answer. Rather, they focus their attention on fully utilizing their current IT assets and achieving a better alignment of their existing solutions and staff with business processes. Signs this may be appropriate include:

  • The existing system is not aligned with company objectives and business processes.
  • IT and operational staff hired since implementation are not fully utilizing system functionality.
  • Data accuracy has declined.
  • Existing software modules, not required at the start, are now necessary.

Middle market manufacturers with good corporate governance plan their technology evolutions with care, developing and deploying a strategy with measurable goals and objectives. From this strategy, they develop tactical plans, which also serve to cascade challenges and opportunities throughout the organization. Strategy deployment typically bubbles up issues from the frontlines that require IT improvements, such as:

  • Mitigating a patchwork of noncommunicative, disparate systems resulting from multiple acquisitions
  • Supporting priority customers demanding integration with their applications
  • Updating older technologies ignored by millennials who hold new technology skillsets and have expectations for pervasive technology deployment
  • Replacing legacy systems that cannot leverage emerging technologies or that truly lack the processing power required

Fixing technology problems requires leaders to envision a future state, one in which clear objectives are defined by corporate strategy. Technology-improvement targets will be specific to an individual company, but they typically include solutions that link directly to the IT growing pains:

  • Implementation of business systems that communicate across multiple units and functions, even within companies created via mergers and acquisitions
  • Adoption of technologies that share information—new product designs, production and shipping schedules, orders status and the like—with customers, allowing alignment of their planning and operations with those of the manufacturer
  • Exploration of new tools—mobile applications, enterprise social networks—for younger talent
  • Investment in IT with the processing power and bandwidth to sustain near-term growth

Research into IT plans and benchmarks in the manufacturing sector can offer a quick overview of a company’s relative technology strength or weakness compared to that of its competitors. In the RSM Monitor, for example, manufacturers reported planned implementations across a range of technologies (Figure 1).5
Many of these implementations will be deployed via the cloud, which offers multiple platforms (Figure 2).6 But executives at middle market firms also may find that the cloud offers its own challenges: requirements for enterprise bandwidth and connectivity; the performance limits of connected on-premise hardware; and the need to train staff in leveraging new capabilities. 


Deploy new technologies incrementally

Rarely does an entire IT infrastructure need to be scrapped. Implementation options can usually be tailored to an organization’s budget and resource constraints by:

  • Moving some of the IT environment to the cloud
  • Outsourcing IT components to third-party providers
  • Optimizing current systems, enabling additional capabilities
  • Implementing new systems or tools as required

All options should be subjected to rigorous return-on-investment analysis, within a context of laying a foundation for future innovation. High-performing manufacturers ensure this by creating an IT steering committee that regularly evaluates technology needs, establishes ongoing IT training to keep pace with changing applications and requirements, backfills talent as in-house IT staff retire, and strengthens IT alignment with overall long-term strategies and priorities. This committee not only reviews past returns and recommends new deployments, but also establishes a framework of metrics for technology investments—including productivity and profit improvements—that promotes proactive, continuous technology improvement, instead of large, reactive and exhaustive technology fixes.


ENDNOTES

1. Gordon E. Moore, “Cramming more components onto integrated circuits,” Electronics, April 19, 1965
2. Aaron Smith, “U.S. Smartphone use in 2015,” Pew Research Center, April 1, 2015
3. RSM Monitor, 2016
4. Ibid.
5. Ibid.
6. Ibid.

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