According to a study by Deloitte and The Manufacturing Institute, 2 million jobs could go unfilled in the sector by 2030. The cost in 2030 alone could potentially total $1 Trillion. Worse yet, the manufacturers surveyed said it is 36% harder to find the right talent than it was in 2018, and 77% of manufacturers expect to have ongoing difficulties attracting and retaining manufacturing employees.

As technology, automation, and artificial intelligence (AI) continues to gain steam, lower skilled jobs are automated, but higher-skilled jobs become critical. The gap is significant. Additionally, as reshoring gains momentum and manufacturing expansion becomes a priority with the rise of geopolitical risk and the rollout of government funded programs such as the CHIPS act, manufacturing will increase, and the skills gap will widen. Finally, by 2030, the youngest of the largest generation in history will be older than 65, further decreasing the workforce.   

Simply hiring a recruiting firm will no longer be sufficient. There simply are not enough manufacturing resources to fulfill the needs. Proactive executives will put an increased emphasis on training and development. For example, an aerospace manufacturer needed far more machine operators than they could find, and so the company set up a training facility and hired trainers to put new hires through a comprehensive training and development program. They went from constantly struggling to creating a pipeline of qualified candidates. Another client sent employees to a technical training center in the region to gain manufacturing skills.

Relying on your planners, buyers, and analysts’ college education and prior work history is no longer sufficient. At least 80% of clients are struggling to hire resources with the appropriate education and training. For example, two power systems and electrical equipment manufacturers serving different industries went live with an upgraded ERP system. Although they brought on significant support, both struggled due to lack of production planning and inventory concept education and training for their resources. Proactive clients are arranging ERP and MRP (material requirements planning) education for their employees. For example, a significant beverage manufacturer has been coordinating with a local supply chain education partner to provide practical education.

Turn traditional thinking on its head. Supplement your employees with consultants to upgrade processes and improve efficiencies (refer to our guide for hiring consultants), hire temporary employees to fill gaps, and partner with specialist resources such as engineering firms to make quicker progress. Appreciate different pools of talent such as veterans and retired workers and reexamine your qualifications. For example, a building products manufacturer eliminated its requirement for a college degree and replaced it with practical experience and/or approved skills training. Not only did they find additional candidates, but the candidates were a better fit for the role.

Leadership and culture will be vital to closing the skills gap. People do not follow companies; people follow leaders. The best employees expect leaders to have high expectations, to address poor performers, to face reality with tough topics, and to appreciate and recognize progress. For example, an industrial equipment manufacturer was able to find and retain employees in a small town with limited resources and a key competitor because employees knew that the leader would expect high levels of performance, push for excellence, and cared.

Attracting and retaining talent will be key to success in the manufacturing industry in the next decade (refer to our article for strategies). Proactive executives are developing creative alternatives to traditional hiring, retention, training, and development strategies. The best remain committed to leadership and culture to retain top talent and attract scarce talent.  

Originally published in Brushware, March – April 2024

If you are interested in reading more on this topic:
Where the Talent Has Gone & Strategies for Success

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According to Polaris Market Research, the market size of artificial intelligence (AI) in manufacturing is predicted to grow more than 41% during the next decade. Although the latest Sikich Industry Pulse found that less than 20% manufacturers have started to implement AI, the ones that want to thrive in the next decade are pursuing AI strategies that make sense to support their business objectives. AI can help manufacturers target where to focus and automate mundane tasks.

There are many uses for AI in manufacturing. A classic example is predictive maintenance. Instead of preventative maintenance, target where to maintain with predictive maintenance to maximize your efforts. Collaborative robots (cobots) work alongside people and often can perform tasks such as those requiring heavy lifting. Digital twins are virtual models of physical objects or layouts, and they can receive information about the object through sensors to get information about maintenance needs etc. On the software side, manufacturers are using robotic process automation (RPA) to handle high-volume, repetitive tasks that can be automated. 

For example, in working with a water tank manufacturer, we wanted to upgrade the use of ERP and start using MRP (material requirements planning) recommendations for purchasing. Before turning MRP on, we had to perform a cleanup of data and add routing data steps in the system. The team was lean, and it was estimated to take a few months to prepare for go-live. The executive team did not want to wait to improve service and increase efficiencies, and so a technical expert on the team used RPA to write a code to automate the setups. We completed the preparation in three days instead of three months and started gaining results.

Another application for AI in manufacturing is a lights-out factory which runs with robots. Although full lights-out factories are rare, this application is gaining momentum across the globe especially as workforce participation rates remain low, manufacturers realize they need to gain control of their success and are reshoring, and margins remain tight with high material and labor costs. Robots can operate around-the-clock without lunches, breaks, and workers compensation claims.

For example, an industrial manufacturing client struggled to find the talent to run its manufacturing operations. They couldn’t keep up with demand, employees were frustrated, and customers were unhappy. They purchased a robot to perform production in a key bottleneck area of the facility; however, the robots couldn’t produce around-the-clock because there was nowhere to store finished product on second and third shift without material handlers. Thus, the engineering team developed an automated way for the product to be moved from the point-of-production. Past due deliveries plummeted as the system came online.

AI is also prevalent in supply chain applications that support manufacturing success. For example, sales forecasting and demand planning is supported with AI algorithms to better predict demand. Even in the most industrial of manufacturers, demand patterns have been difficult to predict, creating a need for AI to get in front of demand. AI is also used in inventory management and to prevent bottlenecks and predict what’s needed.

AI requires proactive design so that you can limit expense and minimize the high-skilled resources required to go live. Start with a rapid assessment of your business requirements, process and technical infrastructure and resources. Select a pilot to test your plans and results will follow.

Originally published in Brushware Magazine, January / February 2024.

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Only companies that automate, digitize, and utilize modern ERP systems and advanced technologies will survive, let alone thrive during the next decade. There is no doubt that volatility, uncertainty, complexity, and ambiguity (VUCA) have increased in importance since the pandemic, and even though progress has occurred, there is no end in sight. Navigating these turbulent times while providing superior customer service and delivering profitable growth requires different ways of thinking and doing business. Advanced technologies are no longer nice-to-have; they are cornerstone to success.

In the current business environment, executives must find ways to do more with less so that they can expand their business with fewer resources. Automation, robotics, the better use of ERP, digital twins, artificial intelligence, data analysis and predictive analytics are simply required to meet customer demands with limited resources as baby boomers retire and high-skilled talent is in scarce supply. Advanced technologies enable a more consistent quality with a quicker turnaround and tailored to the customers’ needs.

Although it is always better to evaluate ERP systems and related technologies to ensure the best fit to business requirements, it has become an imperative during these volatile and turbulent times. Cash is limited due to rising interest rates, increasing input costs, and greater investment needs required to support changing business conditions. Thus, wasted time and effort as well as unhappy customers and potential lost revenue and profitability is unacceptable. To ensure scalable growth, manufacturers must evaluate ERP systems and related technologies to protect their cash flow and ensure a robust return on investment.

No matter the system, start with your business requirements. Look beyond bells and whistles and technology salespeople to your business needs. Prioritize the functionality that will support your unique differentiators in the marketplace, your profit drivers, and what’s unique about your industry, product, or service model. In addition to focusing on these requirements, document your full requirements to keep your potential software partners in check. Put together a standard assessment process and expand upon these basic requirements with demonstrations, deep dive discussions, and proof of concepts for your critical success factors.

Review apples-to-apples pricing as every supplier will provide complex pricing that will lead you to the wrong decisions if not standardized across a three-, five- and ten-year time horizon. Finally, keep top of mind that evaluating the software partner is the 80/20 of success. Since ERP implementations fail to deliver expected results 80% of the time, you must ensure you are part of the 20%.

For example, a consumer products manufacturer wanted to evaluate ERP and related technologies to include WMS (warehouse management), e-commerce, CRM, and business intelligence systems to best support their future customer and business requirements. Flexibility, value-added ordering functionality and customer personalization were of critical importance to growing the business while automation, data analysis, and advanced warehousing functionality were important to the customer experience and profitability. We developed requirements and kept the process on track to ensure customizability, value-add features, and scalability while comparing pricing and partners.

Smart manufacturers will pursue ERP and related technology upgrades to prepare for growth. Forward-thinking manufacturers will dedicate the appropriate time and resources to ensure success. Since it will have a significant impact on customers, profitability, and scalability, pursuing an ERP evaluation will be your most important strategy to protect your business. At a minimum, mitigate your customer and financial risk. At a maximum, leverage your ERP system and related technologies to take your business to a new level of performance.

Originally published in Brushware, November/December 2023

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Executives are tired after surviving the pandemic, navigating supply chain disruptions, handling soaring inflation, and dealing with one challenge after another. However, it is not time to rest as supply chain risks abound. From the Russia-Ukraine war to China’s aggression in the South China Sea and as well as hurricanes, strikes, and bank failures, supply chain risks are not abating; they are simply changing.

Prepared companies will thrive. The rest will dwindle and die. For example, the recent labor unrest was the last straw for Yellow Freight after years where they struggled to stay afloat. Which will you be?

Prioritizing Supply Chain Risks

80% of success is derived from what you focus on. Thus, priorities are vital. Each industry is different, and each company is different. Assess the likelihood and impact of your risks. For example, if you have a union, evaluate your risk of labor unrest, and assess the impact if it occurs. For example, in working with a beverage manufacturer that had a union, their risk of labor unrest was higher than a non-union shop; however, the likelihood was small because of their proactive process. Thus, although the impact of production shutdown would be high with unhappy customers, it wasn’t considered a priority risk.

In another example, a household manufacturer purchased materials from China and so had a high likelihood of disruption if China gets into a conflict with a neighbor in the South China Sea, yet they had a low impact since they have been purchasing 20% of their materials from a backup supplier in the U.S. who agreed to ramp up as needed. In this case, although the likelihood of risk is high, the impact is low, and so it wasn’t a priority. On the other hand, an industrial manufacturer purchased a key material from the Russia/ Ukraine region and didn’t have an alternate supplier outside of the region. Thus, not only was the likelihood high, but the impact was also high since it could shut down production, elevating it to a top priority.

Preparing for Supply Chain Risks

Smart manufacturers will focus on prevention and preparation to mitigate priority risks. For example, instead of hoping your union will continue to function without increasing costs to the point where you might have to file for bankruptcy as occurred in the Yellow Freight example, smart manufacturers will proactively meet with the union, establish, and maintain lines of communication, and roll out advanced systems, technologies, and applications to improve employee engagement and the customer experience.

In the industrial manufacturer example, the Purchasing team collaborated with their demand planning and SIOP (Sales Inventory Operations Planning) teams to confirm the sales forecast, secure supply for a year, and to pursue alternate sources of supply and the expansion of regional manufacturing. The best companies partner with suppliers to ensure excess supply and/or capacity availability in areas of strategic potential and differentiation so that they can take advantage of opportunities as they arise.

The Bottom Line

Those companies that prioritize, prepare, and prevent supply chain risks will be able to take advantage of opportunities to grow and thrive while the rest deteriorate.

Originally published in Brushware, September – October 2023

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Originally published in Brushware, July-August 2023

Manufacturing is in a state of flux. After seven straight months of contraction in manufacturing, it is not surprising manufacturers are thinking about cutting back. On the other hand, in many industries, manufacturers continue to have a robust backlog and are growing faster than their capacity. Simultaneously, there is significant transition and movement around the globe including dual source suppliers, reshoring, nearshoring, consolidation, and other changes. In this volatile environment, opportunities will abound for those manufacturers focused on creating predictable revenue and resilient operations.

How to create predictable revenue?

Smart manufacturers are getting ahead of customer demand instead of waiting to respond to changing conditions. A few of the best practices in addition to reviewing historical trends and growth patterns include getting on top of sales quotes, getting in sync with key customers, bringing market and industry conditions into the mix, and asking your customer facing team members for input.  proactively and aggressively managing inventory. These factors roll up into the demand planning and sales forecasting process within your SIOP (Sales Inventory Operations Planning), also known as S&OP process. Once you establish a sales forecast, you cannot rest. Depending on your situation, you must review exceptions and changes on a monthly if not weekly cadence.

For example, in working with an aerospace and defense manufacturer, the team was unsure if the demand was predictable enough to order materials and hire resources. Thus, we analyzed data, collaborated with sales and marketing, reviewed customer portals, and evaluated historical trends with contracts. Although the team was uncomfortable, we didn’t enable analysis paralysis. Instead, we took the plunge and piloted forecasts with 70% confidence. The team’s success seemed in direct opposition to their discomfort as their forecast accuracy was one of the highest in almost 20 years of consulting. Most importantly, by creating predictable revenue, Operations had time to prepare. Customer service rates (OTD, on-time-in-full) shot up and costs went down. Margins improved by 5%.  

How to create resilient operations?

Although having a directionally correct demand plan will provide an automatic boost in operational performance with solid leadership, it is no longer enough. To navigate volatility and prepare to take advantage of opportunities, manufacturers must be ready to scale on a dime or pull back without losing momentum. Creating resilient operations is key to success. SIOP remains integral to evaluating alternate strategies to fulfill demand such as make vs buy, dual source suppliers, reallocating production among sites, etc. Adding flexibility into operations is also important by cross-training, utilizing temporary employees, evaluating contract resources, outsourcing support functions such as maintenance, evaluating shift configurations and overtime strategies, and much more. Utilizing technology with automation, robotics, 3D printing/ additive manufacturing, and other strategies can provide quick scalability while maintaining profitability.  

For example, a food and beverage manufacturer invested heavily in cross-training and advanced skills development so that critical resources could respond quickly, and they developed strong relationships with temporary resource partners to be prepared to fill in rapidly when needed or scale back without losing meaningful critical talent. They also focused attention on automation, technology, and labor scheduling to ensure efficiency and scalability, and they were able to take advantage of opportunities to substantially grow the business.

The bottom line

Smart manufacturers will prioritize key customers’ needs and monitor quotes, sales orders, changing market conditions, and forecast closely. From an operations perspective, they will create flexibility, resilience, scalability, and utilize technology to not only save money and create a superior customer experience but also to ensure rapid scalability and flexibility. Leverage SIOP, best practice demand planning processes and uncommon common sense operational programs to ensure manufacturing success.

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Interest rates have increased by a historic amount within the last year. Increases of almost 5 points on such an aggressive timeline is already having a significant impact on manufacturers and distributor’s ability to fund and support their business growth. With typical business loans renewing every 5-7 years, the impacts will continue to pile up.

Published in Brushware, May-June, 2023

In addition to high interest rates for loans and lines of credit, costs have been increasing on a rapid pace during the last two years. The producer price index (PPI) rose by over 15% in the last two years. Typically, clients have been able to pass on part of these increases to customers, but most if not all have absorbed part as well, driving margins down. On top of that, wage rates have been increasing in alignment with these factors as well. Thus, manufacturers and distributors are experiencing higher input costs and higher costs to secure capital. This situation will not change anytime soon, and so smart manufacturers must take control of their destiny.

Smart manufacturers are proactively and aggressively managing inventory. They are not reducing inventory with no vision to the future as that would negatively impact their ability to service customers and grow the business; instead, they are right sizing their inventory with best practice supply chain planning processes. Start with SIOP (Sales Inventory Operations Planning), also known as S&OP as this process defines your demand plan and sales forecast and determines how to best supply that plan to reliably service customers at the lowest cost and with the least amount of inventory tied up unnecessarily. The SIOP process will also highlight the appropriate strategic decisions required to keep ahead of changing conditions.

Beyond SIOP, best practice supply chain planning processes encompasses the end-to-end supply chain from material planning to determine what to order from suppliers to production planning / scheduling to determine what to run to optimize your manufacturing facility, serve customers and minimize safety stock inventory to distribution / replenishment planning to get the right product to the right place at the right time. Depending on your manufacturing process (make to stock, configure to order, engineer to order, etc.), lead times, order frequency, and several other variables, there are different planning methods. In addition, provide training, mentoring, and education for your planners, add a heavy dose of common sense, and you will minimize your need to borrow and accelerate your cash flow. These processes have the extra benefit of minimizing your costs by maximizing operational efficiencies, reducing waste, providing advance notice to develop long term contracts with suppliers, and more.

For example, while consulting with an aerospace manufacturer, executives wanted to focus on reducing inventory to free up debt and the associated interest payments while maintaining service to customers to improve their ability to sell the business for a maximum price. Thus, the client established priorities by dedicating an executive to the role, provided supply chain consulting support, rolled out SIOP and best practice inventory planning processes, and emphasized and rewarded the team for the common goal (inventory levels). The common goal was important in aligning the facilities to share inventory. Success followed and inventory was reduced by more than 30% on the core product lines.

Smart manufacturers will not only successfully navigate turbulent times with rising interest rates, but they will also be better prepared to serve customers successfully and be resilient to changing conditions. Prioritize SIOP, roll out best practice supply chain planning processes, and support your resources and success will follow.

The post How Smart Manufacturers Are Navigating Interest Rate Hikes appeared first on LMA-Consulting Group, a supply chain consulting firm.

Originally published in Brushware, March-April, 2023

According to Insider Intelligence, the US B2B e-commerce sales will be over $2 trillion by 2024. Digital Commerce 360 said that manufacturers’ B2B e-commerce sales have been growing at an annual rate of 16% since 2016 which is almost 1.5 times faster than total manufacturing sales. The opportunity is vast to grow even faster than the averages as not all manufacturers are willing to jump into the mix. Those with value-added B2B e-commerce

As customers see the advantage in gaining the “and” of improved support and greater collaboration with lower costs of going direct to manufacturers, sales will continue to increase for manufacturers that invest in B2B e-commerce. It is not for the faint of heart in that you’ll have to upgrade your systems infrastructure to accept online orders, provide inventory visibility, and tie it with your ERP system. Additionally, manufacturers will have to proactively address changes to their ability to pick, pack and ship smaller orders on a more frequent basis. On the other hand, those that offer this capability will grow faster than the competition, and, more importantly, they will develop a closer relationship with their customers.

For example, a bike helmet manufacturer wanted to take advantage of potential e-commerce sales; however, their greater near-term opportunity was in B2B e-commerce. In order to provide greater capabilities for their B2B partners, they upgraded their B2B capabilities with system upgrades. Since their customers gained a superior customer interface with value-added reports and capabilities, the company was able to leverage this advantage in the marketplace.

Additionally, by virtue of having B2B e-commerce capabilities, their B2C e-commerce capabilities and related customer opportunities grew as well. In concert with these upgrades, they also upgraded their ERP system, warehousing process capabilities and warehouse automation so that they could increase their efficiency, accuracy, and responsiveness simultaneously to meet these increased demands without negatively impacting operations.

Similarly, a hand tools manufacturer saw a significant opportunity in e-commerce sales during the pandemic. From a sales perspective, they could take orders from B2B customers as well as consumers to support aggressive and rapid sales growth; however, there were challenges in meeting customers expectations from a distribution perspective. Since their strength was in support B2B customers and their ability to pivot in manufacturing to changing needs and incorporate product changes rapidly, they wanted to focus on how to best serve these priority customers.

Thus, they performed an internal analysis as well as a 3PL analysis to determine the requirements and costs to pick, kit as needed, package, pack, and ship pallets (typically required for B2B) as well as pieces (typically required for B2C) while supporting a quick delivery window for their customers. Although they could scale up internal operations, space was limited, and so they decided to focus the 3PL experts on the B2B e-commerce customers to drive improved performance for the customers while looking for opportunities for efficiency and cost improvements in warehousing and freight. They kept the rest internally while focusing efforts on the 3PL pilot for quick scalability and dedicated expertise.

E-commerce trends will continue to increase as customer personalization and customization differentiate from the competition. It is not one size fits all but taking steps forward will open up opportunities. The proactive companies will thrive whereas the stodgy will see their competition race by.

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Supply chain has become an excuse. Although there has certainly been a slew of supply chain challenges that carry on with baby formula shortages, rail backlogs, computer chip issues, hurricane induced delays, fertilizer scarcity, and China’s zero-COVID policy delays, supply chain should no longer be the excuse. Only the proactive will thrive in the years to come.

Start with the simple. Assess your end-to-end supply chain. Focus on your strengths and identify what must be shored up quickly. Or should you completely change your supply chain strategy to better support your target customers’ needs? Why invest money in your bottom 20% of customers or products that utilize precious resources you should invest to take market share in what will be the largest opportunity since the Great Depression to solidify your position in your industry?

Instead, identify your target customers and ideal future state customers. Determine which products and services will meet their needs this year, next year, and 5 years from now. Quickly assess a directionally correct path forward, and incorporate these findings into your SIOP (Sales, Inventory, Operations Planning), also known as S&OP, process. Your SIOP process will provide clarity on changes in customer demand patterns, the potential misalignment of demand and supply, decisions required (such as pricing and the reallocation of capacity), and manufacturing and supply chain adjustments needed to support your growth and profitability goals.

If you are heavily reliant on manufacturing in other countries, it is time to reevaluate. How confident are you that you will be able to support your key customers? Most likely, you should assess reshoring, nearshoring, friendly-shoring, expanding capacity, or simply finding new partners closer to your customers. You must gain control over your ability to execute to support your customer’s needs.

Collaborate with your supply chain partners. Partner with customers in unique and creative ways for win-win solutions. For example, when working as VP of Operations for a mid-market manufacturer, we partnered with our number two customer to share demand information, coordinate agreements to share warehouse space and to build collaborative truckloads. Additionally, in a meeting of CEOs, 100% of the CEOs had worked with their competitors on win-win strategies. Rethink how to partner with customers and suppliers.  

Evaluate your use of technology. Although 90%+ of clients can better leverage their ERP system and related technologies to a greater degree to drive customer service, on-time-in-full (OTIF), profitability, and working capital improvements, it is no longer enough. Upgrading to a modern ERP system with advanced data analytics and business intelligence capabilities has become the new baseline to automate, digitize, predict, and provide a superior customer experience. It is likely you’ll need to think bigger with artificial intelligence (AI), internet of things (IoT), additive manufacturing, and digital twins.

Stop using supply chain as an excuse and start acting. There is no doubt the world is disrupted and will not realign on its own. Only the resilient and strong will survive, but most importantly, only the proactive and forward-thinking will thrive. Get ahead of the supply chain disruptions, or better yet, be disruptive and solidify your market position and EBITDA strength.

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As originally published in Brushware Magazine on Sept/ Oct 2022.

Inflation continues to plague the world with escalating prices across a spectrum of products and services. The price of oil and gas has continued to rise and supply chain challenges persist, creating inflationary pressures across the board. Even though interest rates are rising, inflation isn’t yet getting under control. Thus, what are the best of the best doing to thrive under these extraordinary pressures?

One strategy to successfully navigate inflation is quickly understand your sales forecast in conjunction with customer and product profitability and make the appropriate decisions. For example, an industrial equipment manufacturer saw a dramatically increased need for their large filter product. Although exciting growth, this increase created a capacity shortfall. Of course, not all capacity shortfalls are as easy to solve as others. In this case, they increased output as much as possible, but were limited by the lack of people and the appropriate infrastructure to expand the capabilities of the larger size filters. Additionally, although their offload suppliers could support expansion of small and medium filers, they also didn’t have the appropriate infrastructure to expand capacity quickly of large filters. Thus, lead times were extended.

Of course, as is true with every manufacturer, the prices of raw materials and components remain high. However, not all margins are created equal. In analyzing these filters from a product profitability standpoint, they also saw lower margins in comparison to the rest of their product line. Although they would invest in the appropriate infrastructure if it made sense from a strategic standpoint, based on the customer and product profitability analysis, it wouldn’t make sense to prioritize investment in this product line. This analysis propelled the Sales team to re-review large filter orders, customer profitability, priorities, and pricing strategies.

In addition, the company looked at strategies to offset inflationary pressures by getting ahead of demand with suppliers and increasing efficiencies in operations while keeping customer service intact. Since material shortages continued to plague production, they prioritized material forecasts to proactively work with suppliers and prioritize deliveries. Sales and Operations worked together to align on a sales forecast and converted that forecast into a product line forecast so that they knew how many of which types of products would be needed. From there, they could derive a directionally correct materials forecast so that they could align with key suppliers, get ahead of the curve to minimize prices, and prioritize critical purchases.

From the operations perspective, they focused on creating a master production schedule so that they could see what was coming down the pike and plan appropriately. This longer-term view allowed them to put together cross-training, hiring, and equipment plans. In addition, instead of jumping through hoops daily to determine if they had the materials to produce and adjusting schedules constantly, they put together a production schedule for the week that was sequenced optimally in advance. This allowed them to check material availability and establish a flow so that materials were delivered when needed and schedules stabilized. They were able to increase output by 40%, increasing efficiencies and profitability.

By staying resilient with changing conditions, this manufacturer successfully navigated inflationary pressures, partially offset the negative cost impacts and was able to successfully serve customers. Establishing a collaborative sales and product forecast was key to analyzing changing demand patterns and customer and product profitability while proactively managing materials deliveries and operational plans. The company grew substantially and gained marketshare.

The post Case Study: Strategies to Successfully Navigate Inflation appeared first on LMA-Consulting Group, a supply chain consulting firm.

Manufacturers utilize less than 20% of the full functionality of their ERP systems. But the key question is, why does it matter? In today’s inflationary and supply chain disrupted business environment, manufacturers need to automate and digitize to ‘do more with less’ and thrive during these volatile times. One important way to achieve this goal is to further leverage your ERP system where it will make a difference.

No matter which ERP system you use or how archaic, there will be opportunities to use additional functionality. In 30 years of working with manufacturers, there hasn’t been one example of a client that couldn’t benefit by expanding the use of ERP. Beyond customer, profit, and cash flow benefits, ERP systems can help you automate the repetitive and mundane. The people benefit. Turning jobs from repetitive and injury-prone to exception-based with opportunities for learning and development can engage people’s interest. With the shortage of talent as the number one issue to top executives, it is worth investing in the expanded use of ERP.

Start by exploring and assessing which functionality would provide the most value to your organization. ERP systems support your order to delivery cycle, which is essential to successfully fulfilling your sales order demand, improving delivery performance, and reducing lead times. ERP functionality also supports the procure to pay cycle, which is key to purchasing the right materials to arrive at the right place at the right time to support manufacturing and most efficiently manage inventory levels. Almost every client can improve upon the plan to produce cycle, which can achieve three objectives simultaneously – improved customer service, increased efficiencies, and accelerated working capital.

Beyond base ERP, there are many technologies that support the customer such as customer relationship management (CRM), sales forecasting, and e-commerce. Additionally, there are software options to automate and digitize for increased efficiencies and improved quality standards such as the use of barcoding, RFID (radio frequency identification), robotics, autonomous vehicles, digital twins, and automated storage and retrieval systems. Critically important are software options to aid in analyzing and predicting data such as business intelligence (BI), artificial intelligence (AI), and predictive analytics.

As easy as it might be to get caught up in fads and trends, take a step back when assessing where to focus efforts. Understand your customer requirements and business requirements. Which functionality will provide the greatest benefit to your business? Which software functionality will best position you for growth?

For example, in a building products manufacturer, an assessment was completed of their use of their ERP system. Although they might benefit from advanced functionality such as available to promise (ATP) and advanced replenishment planning methods, they discovered they could benefit greatly by simply further leveraging their planning systems to increase OTIF (on-time-in-full) and add value to their service. By focusing on this simple objective, the sales team was able to grow the business during times of significant volatility and uncertainty.

As manufacturers focus on the expanded use of ERP and related technologies, they can create unique value for customers and in their supply chain. Taking it a step further, to thrive during these inflationary times, it is important to automate, digitize, reduce repetitive labor requirements, increase efficiencies, and standardize so that more can be achieved with less. Create value by better utilizing your already-existing ERP asset and engaging your people in solutions and progress.

As originally published in Brushware Magazine on September-October, 2022

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