February 2006 | Commentary | IT Matters

Discrete Manufacturers Adapt to Global Economy

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Supply chains are the lifeblood of discrete manufacturing—the production of distinct items. As manufacturing operations continue to transform to global enterprises, discrete manufacturers face new challenges.

Orchestrating the movement of parts and components around the world is becoming as intricate as brain surgery, driving discrete manufacturers to information technology (IT) solutions to help manage global operations.

As constant change becomes the norm in manufacturing, it is imperative that manufacturers continuously evaluate trends that have the potential to impact their supply chains. This evaluation equips manufacturers with the information they need to implement IT solutions that alleviate stress in the supply chain.

Several factors contribute to supply chain stress, including:

Development times are getting tighter. The time available to develop and introduce new products is growing shorter, especially in the mercurial specialty consumer products sector. These manufacturers often have a window of only a few weeks or months to recoup their investment in a new product.

The order-to-cash cycle is growing shorter. More customers are calling for automatic payment processes. Significant payment delays can result for those lacking the appropriate IT systems. Leveraging IT to automate invoice submission can significantly improve cash flow.

Price pressures are squeezing harder. Most discrete manufacturers are forced to achieve more with less. Competitive pressure in all global markets prevents manufacturers from raising prices. Concurrently, overall manufacturing costs are rising, due to increasing labor, raw materials, and energy costs.

Globalization is an inescapable force. Many discrete manufacturers find themselves up against competition from half a world away. Offshore outsourcing is hurtling forward as many manufacturers move operations overseas.

The demand for custom-configured products is growing. From boxes of cereal to huge earth-moving equipment, manufacturers are increasingly adopting an engineer-to-order, manufacture-to-order, configure-to-order business model. This trend is driven by greater IT systems capabilities, as well as expectations among consumers and businesses for more flexibility and choice.

Extreme pressure to manage costs is now a daily reality. Discrete manufacturers in mature economies are under siege from emerging Pacific Rim operations that are often hands-down winners when it comes to producing simple, high-volume items.

Despite these current trends that place new pressures on discrete manufacturers, some positive trends provide balance. With development exploding in China, India, and other emerging economies, a global rise in discrete manufacturing is inevitable and presents opportunities for growth.

Discrete manufacturers are increasingly turning to IT investments as part of their growth and competitiveness strategies. With today's technology, it is possible to cost-effectively implement an IT infrastructure that gives an executive anywhere in the world the real-time information needed to maximize supply chain operations and efficiencies.

Additionally, manufacturers must be perceived as trusted suppliers. They can earn that trust by deploying a modern IT infrastructure that efficiently develops and delivers the right product at the right price to the right place at just the right time.

This demand-driven approach eliminates the costly practice of stockpiling inventory. Discrete manufacturers now must manage their supply chains based on demand from their customers, and their customers' customers.

Because a discrete manufacturer's success largely depends on its IT infrastructure, choosing the right solution is critical. When evaluating IT vendors and solutions, executives should ask a number of questions about the vendors' industry knowledge, IT expertise, and financial viability for the long haul.

Another important consideration is the depth and flexibility of the IT vendor's solutions. The ideal IT vendor can deliver an end-to-end solution that meets all requirements, as well as one or more point solutions to address narrower business results.

It clearly pays to know your IT vendor. For discrete manufacturers, any investment in enterprise systems will have a direct and obvious impact on the company's health. Buy the wrong PC or copier and your business can continue with only minor inconveniences. Invest in the wrong supply chain management solution and you may be in store for a business-threatening challenge.

The evolution of global discrete manufacturing is a marathon. Long-term success will come to companies that invest in understanding industry trends, their own inherent advantages, and what it takes to prevail.

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