What is in this article?:
- Cloud Deployment is a Growth Strategy
- Launch and Grow
Six tactics manufacturing technology companies can use to increase growth, each one of them made possible by cloud deployment.
- Upgrade ERP … Improve partnerships
- From global to local … to M&A
"Cloud deployment, because of its flexibility, agility and subscription pricing, offers definite advantages to growth-hungry companies ready to move to the next level of customer satisfaction, product innovation, and global competitiveness. "
Although manufacturing, as a whole, is experiencing a come-back, for machining and fabricating companies, the benefits are delayed. Further removed from the consumer, manufacturing contractors are slower to feel the subtle signs of today’s economic recovery. This slow organic growth is frustrating to many managers of machining and fabricating operations, who are eager for ways to jump-start more dramatic profit gains. Cloud deployment provides just the kind of agile start that growth-hungry machining and fabricating companies need.
For nearly two years, sparks of growth have been followed by disappointing dips in order volumes. According to the monthly U.S. Manufacturing Technology Orders report issued by AMT – the Association for Manufacturing Technology, the monthly total for new orders of machine tools and related products rose 12.6% from May to June, but the year-on-year results still show an overall drop.
The six-month total for 2014 machine tool orders dropped to $2,349.38 million, down 2.7% compared with the January-June 2013 total, AmericanMachinist reported. As order volumes vacillate, machining and fabricating operations find they cannot rely on economic recovery alone to return to pre-recession sales levels. Other tactics must be put in place if companies truly want to achieve dramatic growth.
Here are six tactics manufacturing technology companies can use to increase growth, each one of them made possible by cloud deployment.
1. Upgrade enterprise resource planning (ERP) solutions with a lower total cost of ownership. In order to accelerate rates of profitability, fabricating and machining companies need to take advantage of the modern functionality of today’s highly advanced ERP systems. Modern solutions offer greater visibility, the ability to stay connected through mobile devices and advanced reporting and decision-making tools.
With cloud deployment, companies can take advantage of these features, even if the recession drained their capital reserves. This is because cloud solutions have monthly subscription rates and can be covered as an operating expense, rather than a hefty one-time capital investment, making cloud an attractive financial option. Lower total cost of ownership is another long-term benefit, because the organizations doesn’t have to invest in servers or expensive security and IT support.
2. Enhance relationships with manufacturing partners. Success for machining and fabricating companies is tied largely to the manufacturers who subcontract work to them. Looking at this symbiotic relationship is one of the first steps to enhancing profitability. Visibility is key to the relationship, as is easy sharing of data and collaborative abilities. ERP solutions, deployed through the cloud, offer online portals and shared networks that can enhance communication with manufacturing partners. Orders, forecasts, inventory levels and production schedules can be easily shared to expedite the workflow and improve efficiency.
As manufacturers learn to adapt better to an extended supply chain, they will undoubtedly also need to monitor better the extended network of suppliers, contractors, and partners. A complete, real-time view of the end-to-end value chain will be essential to creating the collaborative and customer-centric approach needed to be competitive today. “Having a full picture of supply, demand, and capacity across all levels of their supply chain will enable future manufacturers to get trading partners working together more effectively, stimulate collaboration, maximize responsiveness, and improve performance,” declared an IDC analyst in the recent The Future of Manufacturing whitepaper.
That report also adds that full end-to-end supply chain visibility is an ambitious goal, as almost half of surveyed manufacturers say their current supply chain visibility ends at their immediate suppliers. Clearly, extensive work needs to be done to improve real-time connectivity with a vast network of partners and stakeholders, including customers. Cloud deployment, with its unlimited bandwidth and flexible storage capabilities, supports this type of multi-pronged approach to communication, data storage and data sharing between enterprises.
3. From global to local. The global economy is evolving at a remarkable rate. The market conditions that once made outsourcing and off-shoring such an attractive option for manufacturers seem to change daily—or with each breaking news bulletin. From 2006 to 2010, average real wages in China and India increased 75% and 175%, respectively, and in January 2014, Bloomberg News reported minimum-wage workers in Shenzhen, Guangdong province received a 13% boost, while those in Yangzhou, Jiangsu province received a 15.6% raise.
The changing labor costs, coupled with grassroots public demands for manufacturers to boycott countries with unsafe employee working conditions, have made many manufacturers reconsider their strategies for subcontracting machining and fabricating work.
The high cost of transportation and the consumer demand for accelerated delivery and service also help make the case for relocating fabricating and machining operations closer to the manufacturing operations, distribution hubs and the end consumer. In addition, moving fabricating locations helps place contract operations in closer proximity to product designers and engineers, helping the collaborative and consulting abilities.