Manufacturing Retools for Growth
Nimble and disruptive, industry leaders are rapidly embracing the cloud
By Roman Bukary, Head of Manufacturing and Distribution Industries
Manufacturing has come a long way since Henry Ford popularized the assembly line in the 1910s and declared to would-be buyers, “You can have any color you like, as long as it’s black.” Ford helped to standardize and revolutionize manufacturing across the world, and today a similarly profound transformation is under way.
The world is now a global economy and manufacturers have to deal with a more complex supply chain, shorter lead times, reduced product lifespan, and customer empowerment. These and other forces are prompting manufacturers to search for new ways to innovate, increase agility, and reduce costs. Leaders are fine-tuning supply networks and improving partner collaboration. They’re crowd-sourcing ideas on new products, features, and, yes, colors other than black. They’re retooling for global growth and rethinking their technology application infrastructures.
For decades, manufacturers made do with disparate applications for production, financials, supply chain management, distribution, CRM, and disjointed forecasting and demand planning tools. These first-generation systems served the industry well, but now the game is changing. Manufacturers that adopt cloud business applications are gaining new speed and efficiency versus rivals that labor on with the technological status quo, and that’s starting to divide the competitive landscape—the successful innovators and the also-rans.
Nimble, diversified, and disruptive characterize the best modern manufacturers, and many of them are meeting their goals in the cloud.
The Shift to SaaS Manufacturing
The manufacturing transition to Software as a Service (SaaS) solutions is rapidly gaining momentum. Consider: A 2012 NetSuite survey found that 47 percent of mid- market North American manufacturers consider SaaS an effective way to reduce expenses and improve efficiency, up from 27 percent in 2011. Meanwhile, Gartner forecasts that 47 percent of manufacturers worldwide will be using or piloting SaaS applications by 2015, up from just 2 percent in 2010!
Besides reducing IT costs by eliminating the massive, initial capital investments in software and servers and never-ending maintenance fees, cloud business software is helping manufacturers achieve strategic objectives in such areas as leveraging information, driving efficiencies, and optimizing supply networks.
Harness All Business Data
As we enter the era of “big data,” manufacturers are seeking streamlined data infrastructures that make all business information accessible and shareable in real time. Innovative manufacturers recognize the inefficiencies of manually piecing together data from disparate, disjointed, out-of-date systems and spreadsheets, and that fragmented data compromises decision-making. Generating insights from a unified source of all business-relevant data (whether that’s web traffic, forecasting plans, or manufacturing product profitability analyses) is essential to making data-driven decisions.
Achieve New Cost Efficiencies
Based on complete and timely data, manufacturers have the opportunity to identify new cost efficiencies. For instance, they can incorporate shipping, warehousing, and labor expenses into overall profitability calculus of a given product line. This provides the basis for decisions on adding new distribution centers or moving production off-shore, near-shore or on-shore—including their own country of operation as localization grows in importance. Understanding all costs associated with servicing a customer can drive informed pricing and contract levels. Imagine that a customer is driving top-line volume growth for your business, but with razor thin margins and negative returns for serving the buyer—what decisions would you make?
Boost Supply Network Collaboration
For 21st century manufacturers, the concept of the supply chain is giving way to the supply network—a dynamic, many-to-many ecosystem that enables manufacturers and their trading partners to collaborate in near-real time across the globe. Shared data and instantaneous exchange in the cloud lets manufacturers anticipate and adjust to spikes in demand or fluctuations in raw materials to quickly ramp up production, switch suppliers or components, or satisfy a special customer order.
Consumerize B2B Ecommerce
B2B buyers are retail consumers in their personal lives, and like everyone else they have grown accustomed to the ease, richness, and personalization on leading ecommerce or retail websites. Manufacturers can meet the expectations of both business and individual consumers for a robust and content-rich experience by “consumerizing” B2B ecommerce, offering greater interactivity, real-time inventory information, and deep self-service capabilities for product configuration, maintenance, returns, and more. In addition, consumerizing B2B ecommerce positions the manufacturer to capitalize on direct-to-consumer sales opportunities.
Accelerate Innovation and Production
The pace of innovation that some manufacturers are achieving is remarkable, and it’s raising the bar for shorter cycle times and “mass customization” of products to meet market demand for greater variety and specialization. The lengthy, lumbering processes of the past stand to cost manufacturers profits and market share; to excel, a leaner, more nimble approach is required. Integrated data and end-to-end business visibility are critical enablers to accelerate innovation and production while controlling costs.
As these trends unfold, manufacturers are coming to grips with the fact that retooling for growth with legacy in-house systems is like fitting a square peg into a round hole.
NetSuite’s Approach to Manufacturing
NetSuite is focused on manufacturing as a core industry for our integrated SaaS suite. Over the past several years, we’ve invested heavily in development and product management resources with manufacturing expertise to build out the NetSuite Manufacturing Edition, a complete solution for ERP/financials, ecommerce, inventory and warehouse management, and customer and partner management.
Recent functional additions include standard costing for more granular visibility and control over expenses. Demand planning helps to forecast needs and streamline materials replenishment based on historical data, sales projections, average trends, and seasonal fluctuations. Work-in-progress (WIP) accounting improves visibility and ability to adapt on the fly. These capabilities build on core functionality for production engineering, shop floor and project control, multi-site and multi-division operations, lot and serial control, bills of materials (BOM), and more.
In addition, we’ve tripled the number of manufacturing-specific ISVs in our SuiteCloud Developer Network in just two years, expanding the scope and depth of partner solutions aimed at addressing manufacturing challenges. A study by Nucleus Research found that manufacturers running NetSuite reduced inventory carrying costs by 20 percent and increased sales by up to 25 percent.
For manufacturers, the payback of transitioning to the cloud is strong. For instance, wood products manufacturer RedBuilt achieved 158 percent ROI in six months by moving from SAP to NetSuite. Action camera maker GoPro has grown revenues 300 percent year-over-year after retooling its supply chain on NetSuite.
Optimism for the Future
Manufacturing is bullish on its future. For example, the NetSuite survey found that 94 percent of respondents felt that the business climate would improve or remain steady through 2012 and beyond. With a dual focus on driving revenue and reducing costs, the majority (54 percent) reported that they planned to invest in new or upgraded business software over the next year in pursuit of their objectives. You can bet that most aren’t looking at on-premise systems in black boxes. Instead, they’re looking at the rainbow beneath the cloud.
