Chief Information Officers (CIOs) in manufacturing are facing an inflection point today defined by challenges to growth and opportunities to improve quality.
Driving the inflection point are the many opportunities to grow revenue and improve operations, as the data points below show, versus the challenges of continually improving the speed, scale, and simplicity of manufacturing operations.
CIOs are facing many challenges going into 2018, with the ten mentioned here being their most commonly-faced ones.
- By the end of 2020, IDC predicts 50% of manufacturers will derive business value from the integration of Supply Chain, Plant Operations, and Product and Service Life-Cycle Management.
- 75% of supply chain practitioners say digital projects across their companies are not managed under a single governance process, making enterprise-wide integration a challenge according to a recent Gartner survey.
- According to IDC by 2018, just 30% of manufacturers investing in transforming the digital operations of their business will reach their full potential; the majority will be constrained by outdated business models and technology.
- By 2020, manufacturers will capture 20% more aftermarket revenue by using product and service quality measures to enhance customer experiences according to IDC.
- By 2021, 40% of IT staff will be “versatilists”, holding multiple roles, most of which will be business, rather than technology-related according to Gartner’s predictions for 2018.
Real-Time Data Is Driving The Inflection Point In Manufacturing Today
Using real-time monitoring to know the health of every machine on the factory floor is a strong catalyst driving the inflection point in manufacturing next year. Overall Equipment Effectiveness (OEE), manufacturing cycle times, quality yields by machine and production run, capacity utilization and supplier quality levels are a few of the many metrics that manufacturing CIOs are adopting now and will continue to in 2018.
Gaining predictive accuracy based on manufacturing data is also fueling the inflection point happening today in manufacturing. CIOs are planning how they can turn manufacturing intelligence into a competitive advantage and gain greater speed and scale over competitors.
The Best Manufacturing CIOs Are Business Strategists – And Future CEOs
In a recent discussion with CIOs of several major manufacturers including one based in Europe known for its electronics, engines, HVAC, and telecommunications equipment, the issue of what success looks like in 2018 came up in conversation.
Everyone one of them said their bonuses are now directly tied to revenue growth goals inclusive of IT’s contributions. The one from the European manufacturing conglomerate can earn a large bonus if customer satisfaction for online ordering, product configuration, and online service cloud-based applications is above 90% and double-digit gains in Net Promoter Score.
Customer satisfaction is a multiplier in their bonus calculations, so each of them is very focused on how to excel at improving the customer experiences their apps provide.
Based on the conversations with these manufacturing CIOs, it’s clear those that are progressing the fastest in their careers are balancing business requirements and technical expertise to enable revenue growth. All agree that customers’ preferences for where, how and what they buy are changing fast. In response to these fast-changing customer requirements, each of these manufacturers are redesigning manufacturing workflows to support shorter, more customized production runs.
Each of the CIOs shared their challenges for 2018, and the top ten are listed here:
1. Increasing revenue growth in 2018.
The greatest challenge CIOs will face in 2018 will be driving greater revenue growth with the IT systems they have in place and planned for implementation. Manufacturing CIOs will need to redefine production workflows to flex in response to short production runs on existing products and streamline new product introductions as well.
2. Enabling greater selling, production and service agility with existing IT resources.
Legacy and homegrown systems are still relied on by the majority of manufacturing centers today, mainly because of they meet highly specific information needs.
The challenge is how to integrate legacy and homegrown systems with the latest applications and platforms, while still improving production quality and efficiency. Improving everything from quoting accuracy, order cycle times, product quality to perfect order performance is going to be one of the most challenging aspects of any manufacturing CIO’s job in 2018.
3. Improving compliance reporting, quality management systems and reducing the time spent preparing for audits.
Manufacturers are spending more time than ever to stay in compliance with regional and national requirements.
Maintaining and excelling at Device History Record (DHR) compliance and reporting are foundational to any medical device manufacturer growing today. For CIOs in A&D manufacturers the greatest challenge will be staying flexible enough to take on complex, engineer-to-order projects while still staying in compliance with AS 9100 Rev. C and D standards.
Their greatest challenge is turning compliance efforts into a competitive advantage and streamlining audits, so they don’t impact company productivity.
4. Getting more value out of machine data and enabling greater manufacturing intelligence.
Real-time monitoring of each machine on the shop floor will become more commonplace in 2018. Pilot programs using the Internet of Things (IoT)-based sensors are running in hundreds of manufacturing plants right now.
All of these efforts center around how to get more value out of machine data and accurately predict when predictive maintenance is required. Machine data and manufacturing intelligence is a challenge for many CIOs to implement, however. The potential to predict production efficiency and improve customer responsiveness is going to make this area one of the most adopted in 2018.
5. Make the most valuable systems in the company align to how people work by improving usability.
IT teams’ most common request from across the company is to improve the interfaces of systems used daily, making them more match how work gets done.
CIOs are challenged with this often as the user bases they serve can quickly point to the current and future generation of Quality Management, Supply Chain Management (SCM) and Enterprise Resource Planning (ERP) systems as examples of superior usability.
Look for 2018 to be a breakout year for usability and user experiences as manufacturing software providers respond to these many requests with state-of-the-art graphical interfaces and apps.
6. Better supply chain visibility and collaboration to improve performance and drive down costs.
The greater the product complexity, the greater the need for supply chain visibility. Look for 2018 to bring greater focus on Demand Planning as manufacturers launch new products to drive greater revenue.
New product lines and entirely new business models will also force existing Distributed Order Management systems to flex and scale. CIOs are looking at how they can automate supplier enablement as well. CIOs will look to supply chain improvements to accelerate production and improve quality in 2018.
7. Improve production quality and accuracy by moving away from a CRM to a product-based system of record.
Relying on a CRM system as the system of record is prevalent in companies who do light build-to-order and make-to-stock manufacturing. This strategy doesn’t scale nearly as well as having a product-based system of record across the entire company.
Product Lifecycle Management (PLM) and ERP data are fueling these product-based systems of record. CIOs are facing this challenge today. It’s going to accelerate in 2018 as products get more complex and new product lines, many of them customizable, get launched into the market.
8. Relying on existing IT systems to support new business models that need new distribution channels.
The majority of IT systems are designed to support relatively simple distribution channel relationships. It’s a challenge to redefine how these systems operate to support more complex multi-tier distribution and partner-based selling strategies.
Adding in a software application to support Partner Relationship Management (PRM) support selling strategies but doesn’t scale to support true multi-tier product configuration for example. The challenges of supporting new business models and channels are going to become more pronounced in the next 12 to 18 months as manufacturers look to new markets for growth.
9. The constant challenge of providing current pricing while supporting price protection, optimization, and enforcement across channels.
From simple applications that track costs and price by product to complex databases that create and modify taxonomies of pricing data, pricing systems are becoming more complex and challenging for sales teams to use.
The typical manufacturer has five or more pricing models across its business model, and that’s going to increase in 2018. CIOs are responding to the challenge by adopting roles-based applications and workflows that simplify the complexities of managing price protection and enforcement across channels. Look for advanced analytics to enable greater price optimization in 2018 as well.
10. Improving the user experience of customer-facing self-service applications across all channels.
During conversations with CIOs last week the topic of how their companies are measuring customer satisfaction came up. One of the CIOs has their bonus indexed to Net Promoter Scores of self-service Web applications.
Improving the user experiences of customer-facing applications often requires redesign and development. CIOs are challenged with how to increase Net Promoter Scores while addressing the many other challenges faced by their organizations in 2018.