As Australian manufacturers prepare for the year ahead, a range of economic and business forces are making the task particularly challenging. Peter Dickinson writes.
While the falling dollar has boosted prospects for exporters, uncertain domestic economic conditions are making local markets more constrained. Add increasing competition from overseas players and the picture becomes even more complex.
As a result, the hunt is on for ways to improve efficiencies while at the same time keeping operating costs under control. Across the manufacturing sector, information technology is being embraced as a way to improve performance. Through careful selection and implementation of IT, companies can radically reshape their operations and attain a significant competitive advantage.
Yet, because of the pace of change in IT, making this selection can often be challenging. It sometimes seems that products have been updated or superseded almost as soon as they've been purchased.
However, while individual components change regularly, there are some wider key trends with longer-term impacts that have particular relevance to manufacturers. By understanding these trends and putting them to work within your organisation, significant benefits can be realised.
The emergence of choice
The last two decades have seen dramatic advances in information technology such as the introduction of smartphones, mobile apps, and cloud-based software with browser access. Core enterprise applications such as financials, human resources and ERP systems are now not only available as traditional on-premise solutions, they can equally be hosted by an external data centre, located in the cloud, or delivered via the Internet using a Software as a Service (SaaS) model.
A cloud platform means extra computing capacity can be 'dialled up' when required. For example, if a large design job requires extra computing and storage resources for a limited time, that extra capacity can be used and then discarded once the job is complete. Computing becomes an operational expense in the same way as electricity or water.
Under the SaaS model, access to software is obtained by subscription. Rather than outright purchasing, a business subscribes based on the number of users. This number can be increased for an incremental cost as the business grows, or if necessary, it can be decreased during a business downturn. This degree of flexibility can be particularly important for start-up and young businesses, where growth is difficult to accurately predict.
SaaS also shifts the responsibility for data backups, system security, upgrades and patches to the cloud provider. While the outcome is hopefully reliable, on-demand access to an organisation's most important applications the onus is firmly on the vendor to provide an ongoing, fit-for-purpose service.
The applications themselves have also changed. The emphasis is on access to information and to facilitate this modern software embraces designs that improve ease of use, offer remote and mobile access, real time data, excellent search functionality and smart use of templates and forms for easy capture and presentation of data.
There's acknowledgement that different people work in different ways, and users should have the flexibility to personalise their screens or workspaces accordingly.
In short, all these changes in technology have brought choice. Manufacturers have the opportunity to choose the software and the delivery model – or combination of models – that best suit their business needs, their budget and technology capability.
Having said that, history tells us that owning key plant is central to a manufacturers' business philosophy and a mission critical business system has been viewed as any other major asset. The preference has always been to own it rather than rent it even if that requires a degree of debt funding.
It is a philosophy which can be counter-intuitive when it comes to cloud computing – which is essentially a rental model.
The considerable benefits to be derived from cloud hosting are well documented and according to research firm Frost & Sullivan, 69% of Australian organisations already use some form of cloud computing services. But for those who view their critical systems as plant it is still essentially a rental model.
The ideal is to combine the best of both worlds; to be able to embrace the benefits of the flexibility that the cloud offers while still being able to treat your core business systems as an asset with the additional certainty that brings. Whether you host on-premise or in the cloud it should be a considered choice based on your business requirements not a decision that is driven by the system's developer.
While mobility has been gradually making inroads for a couple of decades, it's only recently that the industry has seen a tremendous increase in the number of organisations using mobile devices and in the way these devices are used.
This is in large part thanks to the rising capability of mobile devices and improvements in networks. Smartphones and tablets today have put the sort of power once only found in desktop computers in the hands of almost every employee.
By encouraging widespread use of mobile devices at work, employees are able to connect directly to the business engine from any location.
Real time access to systems is being used to streamline processes and improve efficiency. For example, on-the-road staff can use mobile devices to place customer orders or check inventory levels. Warehouse staff can query centralised systems while on the floor, logging stock movements and shipping details.
The Internet of Things
Another mega trend that has significant potential for manufacturers is the emerging Internet of Things (IoT). While we have already seen significant growth in communication between machines and other devices over the internet this is set to shift from being piecemeal to pervasive
IoT will allow an even greater level of automation. Already mining companies are examining the potential for driver-less trucks and trains while delivery companies are investigating the use of pilot-less drone aircraft and sensors log inventory in and out of a warehouse making manual stocktake obsolete Such changes will gradually become ubiquitous.
As the number of devices connected to the internet increases, the potential for information sharing and business benefit increases exponentially. Add the growing capabilities of both fixed and mobile networks and the trend becomes even more powerful.
While such overarching technology trends offer much to the manufacturing sector, it's vital for organisations to ensure they put them to work in the most effective way.
The IT industry is very good at drumming up attention for the "next big thing", but it's important for companies not to get caught up in the hype.
Instead, the benefits achieved from any investment in technology must be carefully reviewed before the investment is made.
A new cloud platform, mobile application or handheld device might seem a fantastic option, but if it doesn't meet the specific needs of the business, any investment will be wasted.
Each new technology should be viewed in the context of real-world business requirements. Only when it can be proven that an investment will reduce costs or improve efficiencies should that investment be made.
The next few years will undoubtedly contain surprises – good and bad – for Australia's manufacturing industry.
By carefully matching new and emerging technologies to real business needs, companies will find themselves well placed to manage the challenges, as well as identify and take advantage of the opportunities that lie ahead.
Peter Dickinson is CEO of Greentree
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