Manufacturers recognize that their supply chains, which market volatility tested hard in 2020 and the first half of 2021, must be improved.
There’s no question that manufacturers are stepping up efforts to better manage supply chains through technology. However, many have vast networks of disparate and legacy systems that prevent the movement of information to decision-makers and systems as they are needed.
However, there is nothing new about this problem. Entire technology-related industries — think enterprise resource planning and supply chain management — sprung up decades ago around the promise of integrating or assimilating all key functions related to the production and shipment of goods into a single, smooth-flowing stream of information. Still, the silos and disparate systems prevail.
What is new is the pressure now on companies to be able to have real-time snapshots of what is going on across their production areas and supply chains, especially as their market spaces are eaten into by upstart competitors, and their operations are severely upended by unforeseen events, as Covid was in early 2020. It is no longer 1999 when companies could take their time rolling out gargantuan ERP systems with 24-month timelines. They need to be able to react and change course this afternoon.
Easier said than done, of course – even if there are multi-million-dollar ERP systems running in the background. Nine out of 10 (89%) of manufacturing companies surveyed by Cleo, a supply chain order management provider, say they are experiencing business problems caused by back-end integration issues. For more than 42% of them, annual revenue losses exceed $500,000. For approximately one in six (18%), those losses are $1,000,000 per year or more.
When asked to identify the specific problems caused by integration issues, 42% of survey respondents most often cited the difficulty of managing legacy or homegrown integration systems, making this manufacturers’ biggest headache. Other troubling problems include lost business due to failed or poor integrations (37%), and difficulty managing their supplier ecosystem (36%).
Digital transformation a must
In what is an unusual stat from an industry survey, 100% of companies responding to the Cleo survey have committed to digital transformation initiatives. Of course, just about every organization committed to some form of ERP in the 1990s. The question is: will digital transformation, as it is being pitched to organizations, deliver on the promise of finally providing real-time sense and respond to global or regional events? In the Cleo survey, 93% report that supply chain and integration issues delay business partner onboarding, a revenue-critical activity that nearly two-thirds (62%) felt should take seven days or less.
To address this, manufacturers are focusing heavily on becoming data-driven enterprises. Artificial intelligence and analytics top the list of technology initiatives manufacturers are considering in order to be more prepared for business disruptions (cited by 60% and 57%, respectively). Another 50% are launching smart factory initiatives, characterized by automated, real-time systems.
Revenue losses and poor customer experience are the two main business breakdowns most manufacturing companies are trying their hardest to mitigate. Successful mitigation though calls for focus on and problem-solving at the integration level. To combat supply chain disruptions, 59% of manufacturers say they’ve sought to achieve faster transaction response time. Fifty-five percent (55%) are looking for better data accessibility to improve decision-making. And 53% felt that improving their visibility into key business processes could help.
“From our research, it’s clear that manufacturing companies today recognize that their supply chains, which market volatility tested hard in 2020 and the first half of 2021, can be improved,” the survey’s authors conclude. “Modernizing their integration technology will help. Knowing the shortcomings of their current solutions, they understand that a modern, cloud-based approach can have a positive impact – both on their own organization’s business performance, and that of their entire multi-enterprise ecosystem.”