The manufacturing industry is facing a number of challenges, from global competition, increasing offshore innovation, cost and regulation pressures, to engineering talent crunch and rapidly changing expectations of the market place. In today’s economical context, manufacturers are faced with even greater growing uncertainty combined with profitability and rapid change pressures. Influencing patterns are diverse, interrelated and increasingly complex:
- Demanding legislation: economic and environmental developments will increasingly result in changes in legislation, notably around emissions and sustainability.
- New and old economy paradigm: the rise of the BRIC (Brazil, Russia, India and China) economies (and other emerging countries) will continue to shift economic power away from North America, Europe and Japan.
- Raw material, energy and transportation costs: the increasing costs of fuel and transport encourage new repatriation of production and ‘on shoring’.
- Skill access and retention: at some point, developed countries will need to restore knowledge and skills, which may be partly or wholly lost.
- Shift in product requirements: the rapid rise of the digital economy and an associated increase in customized products will impact traditional product requirements.
- Complex technologies and processes: smart vehicles and other products will successfully integrate existing technologies and processes alongside new technology to meet increasing consumer demands.
Recent economic uncertainties put business efficiency, service and product cost management at the top of the agenda for Product Development engineering and manufacturing organizations to sustain competitive advantages. This new context affects how business and operational risks are managed and mitigated, translating into tighter efficiency objectives across the entire product value chain, and extending these requirements to the extended enterprise.
Manufacturers are proactively looking at anticipating negative conditions in the environment – sometimes implying more scrutiny on how they mitigate business risks. To that effect, their Product Development strategic drivers include:
- Accelerating innovation and creating new improved business models to exploit innovation and capture value.
- Increasing percentage of new products launched on time, increasing first to entry success rate, increasing number of innovative features per products.
- Improving manufacturing quality and reducing warranty costs (cost avoidance).
- Exploiting the low carbon market, reducing usage of and securing fewer and cheaper materials (cost optimization).
- Improving product creation process efficiency and removing non or lowvalue add work (e.g. “hidden factories”).
- Improving supplier engagement and quality performance.
- Expanding global manufacturing capability to meet local market needs and cutting distribution costs (globalization and localization).
- Building and attracting necessary skills and talent, and improving retention.
- Improving competitive advantage in responding quickly to legislative changes.
- Constructively influencing the evolution of government economic, taxation and regulatory policies and ensuring ability to adapt, exploit and conform as these policies evolve.
These business drivers can be complemented by IT requirements to leverage new technologies, integrate and simplify IT landscape, and decommission obsolete legacy solutions. These can sometimes be translated in “IT transformation” terms, however this is a controversial subject. CIOs argue that IT transformation is off the table in recession times. The goal of IT transformation is to change the IT department from being a reactive, inflexible organisation to being a more proactive, flexible part of the business that can respond quickly to changing business requirements. For example, this might mean changing the perception of end users from being a “problem” to being a “customer”.
In the manufacturing industries, core business benefits will always remains the driving forces behind PLM justification. The cost of IT has slipped down the list of priorities for many organisations (for the ones which have IT at the core of their business)… unless IT has no choice but to change as a risk mitigation (back to the tool replacement argument).
What are your thoughts?
This post was originally published on LinkedIn on 28 January 2015.