Rapid Response to Change is Imperative for Manufacturers

September 18, 2019 Brent Dawkins, QAD

Digital cameras devastated the film market. Smartphones have greatly reduced the market for analog and digital cameras. Not many people have an alarm clock on their night stand anymore. Cable stations are being replaced by online services like Hulu and Netflix. These are just a few examples of change that we experience in our day-to-day lives. You might have heard a lot about the 5G network, and this is just one example of future change that will impact consumers and manufacturers. Imagine the future possibility of your car being able to slam on the brakes based on the ability to determine another driver is about to run a red light. But, there are so many other trends and technologies, resulting in disruptive change, that have the potential to overturn entire manufacturing sectors. 

CRISPR technology is a genome-editing tool that is faster, cheaper and more accurate than previous DNA editing techniques. For life sciences manufacturers, it has the potential to upend the business model of treating chronic illnesses by providing a cure. At the forefront of change impacting U.S. manufacturing today is the tariff uncertainty with China, at a time of year where Christmas orders need to be placed. In another example, autonomous vehicles are causing suppliers to reconsider how they design interior seating where it is less about driving comfort and more about the riding experience. Will there even be a demand for steering wheels or rear view mirrors for these vehicles? Many manufacturers will have to transition to evolved products and business models or risk disappearing forever.

Research from Scott D. Anthony “confirms that indeed, for leaders to thrive in today’s constantly disruptive way of life, they must be transforming today’s and tomorrow’s businesses.”

So, how does an organization adapt to change today and effectively plan for the future? How well does your organization respond to changing business, technology and customer demands? Does your enterprise solution effectively support a rapid response to change? Are you considering new and advanced technologies like IoT, machine learning, blockchaindata lakes or other initiatives to dynamically address changing business demands?

It was Heraclitus, a Greek philosopher, who said, “Change is the only constant in life,” highlighting the strong need to always expect and plan for change throughout our lives. This is certainly true for not just our personal lives, but also the manufacturing industry as cultural and technological changes increasingly place unexpected demands on businesses.

While change in and of itself is nothing new, the accelerating pace of change creates risks and opportunities in the markets manufacturers serve and the way in which they manufacture. The changes include, but are not limited to, geopolitical instability, changing business models, cybersecurity concerns, digitally connected products and increasing customer demands.

Take for example, Xaas or Anything as a Service versus connected products.

The term Anything as a Service – the essence of cloud computing – is becoming the new business model. This can be thought of in the context of jobs to be completed with the assistance of connected products.

General Electric pioneered XaaS by rethinking their jet engine manufacturing business and offering to sell thrust hours versus selling just the physical engines. To do this effectively, data access and intelligence is needed to optimize the outcome. The Internet of Things (IoT), connected products and advanced analytics enabled by machine learning make this possible across a growing number of use cases.

XaaS is rapidly expanding to products much less expensive than multi-million dollar jet engines. For example, fast food restaurants don’t necessarily want to buy fryers. They do, however, need to reliably deliver fried food. The expectation is that the kitchen equipment manufacturer will monitor and service the fryer via connected products to eliminate downtime.

These expectations shift the internal focus of the manufacturer. Products are being re-engineered to be IoT-ready and support remote monitoring. Information systems capable of serialized track-and-trace and lifetime unit history must be created. Service-based intelligence rather than traditional mechanical features becomes the imperative for winning the next fryer or aircraft engine order.

Rising transportation costs and the changing retail landscapes also require supply chain adaptability. The rising and fluctuating transportation costs consistently impact manufacturers.

To protect margins, manufacturers need to ensure they have the right inventory, in the right place, at the right time, to minimize costly movements. This increases global sourcing costs and creates new opportunities to push final assembly closer to the customer. Regional contract manufacturers are becoming a critical part of the greater manufacturing strategy. Transportation costs also create incentives for 3D printing/additive manufacturing as printing products on-site can help to avoid shipping costs.

Changes in retail can impact who manufacturers sell to and introduce new market opportunities. With 44 percent of online sales last year going through Amazon and an increase of food purchases online by at least 20 percent annually, manufacturers need to ask if their products are significantly differentiated or delivered at a low enough cost to compete against products in the local store and all products available globally.

Other questions need consideration too, like how quickly can a supply chain respond to new market opportunities and adapt to new business requirements; can a manufacturing operation and delivery supply chain match the “two-day” delivery mindset of the online shopper; or as a manufacturer, how do you prepare for similar disruptions or respond to an unexpected competitor entering your market as Amazon recently did with the introduction of privately branded dog food?

Now is the time to thoroughly evaluate your organization’s ability to adapt to business changes for improving production efficiency, exceeding customer expectations and becoming an Effective Enterprise. Is 2019 the  year for change? It is nearly done – so get going.

Brent Dawkins is QAD’s Director of Product Marketing with over 20 years of manufacturing and supply chain experience. In his spare time, you can find him hiking the Rocky Mountains of Colorado, coaching youth hockey or enjoying time with family.

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