Enterprise Resource Planning (ERP) is the foundation of a successful manufacturing organization, responsible for promoting standards, discovering potential efficiencies, and managing front and back-end processes of the enterprise. As such, these solutions tend to have long lifecycles, which is not always a good thing, as change is the one constant in manufacturing.
Businesses may expand, add new product lines or any number of other organizational developments. But for process manufacturers, there is the added challenge of increased competition and rising compliance concerns. Today’s manufacturers are required to be increasingly innovative and agile in their decision making to both stay ahead of, and provide greater value to, their customers.
Process Manufacturers Must Look for New Ways to Operate
Executives in the process industries are generally managing asset-intensive enterprises at the mercy of global commodity markets and face both low margins and high-demand variability. Given these industry characteristics and the state of today’s economy, still rife with uncertainty, companies must find new ways to reduce operational costs as a means to stay viable; while continuing to ensure that these cost cutting measures are not at the expense of gaining new market share or operational excellence. Keeping all of these factors in mind, it is no surprise to see the need to keep costs low as the top pressure that process manufacturers face (chart below).
What also stands out among process respondents is the need to comply with regulations as a growing concern. When compared to all other industries, the need for compliance shows up at almost double the rate among process manufacturers.
Every year it seems that compliance regulations increase in number and complexity. These regulations extend beyond just products being produced and across numerous regulatory bodies (EPA, FDA, EFSA, etc.). Companies that do not pay attention to compliance risk losing thousands, or even millions, in lost revenue and fines associated with violations. Tighter control, documentation, and tracking of every component and process used throughout operations is now required.
Maintaining compliance of these mandates naturally results in a higher Cost of Quality (CoQ) for most process manufacturers, which highlights the fact that these pressures are linked. Combatting all of these pressures can be a challenge for those manufacturers that are not properly structured. While most consistently site reducing budgets and high costs as inhibiting factors to success, the top among process manufacturers is multiple/siloed datasets.
Best Practices in Process Manufacturing
Aberdeen used metrics that measure an organization’s ability to respond to pressures around compliance, operational efficiency, customer satisfaction, and traceability. Process manufacturing respondents were categorized into two groups: Leaders (Top 33%) and Followers (Bottom 67%).
The metrics above clearly indicate the ability of Leaders to manufacture and deliver compliant products in an efficient manner. Also, if a non-conforming product has shipped, it takes, on average, less than four hours to locate and hold the product after detection. This is a stark difference from the Followers. Not only are Followers less efficient and less likely to meet delivery targets, but they also take almost a full day to respond to shipments with quality issues. This greatly limits their ability to minimize disruption and quickly identify a root cause. Without the ability to track and trace shipments quickly, the risk and impact of recalls can be substantial.
All of this is reflected from an overall financial perspective when looking at company margins, Leaders outperform corporate expectations by 9%. Followers cannot say the same, their poor performance on new products reflects itself in their overall business performance, as they ultimately miss corporate margin goals by 4%. This raises the question: what are the Leaders doing differently to enjoy such superior performance?
That answer and deeper insights on process manufacturing ERP can be found in the full report.