Manufacturers should focus on operational excellence to take advantage of upturn

During tough economic times, manufacturers around the world are increasingly reliant on IT to ensure they survive.

Global independent research and advisory firm IDC Manufacturing Insights has published a new research study that describes the operational strategies that manufacturers are currently adopting and recommends strategies that manufacturers should deploy in the near future to take advantage of the expected upturn in the global economy. The study is based on the results of a Europe-wide survey conducted in April 2009. Respondents included operations managers (50%), CEOs (25%) and supply chain managers (25%).

"The current economic situation is forcing manufacturers to reassess their business strategies, processes and practices. Operations must support the business strategy change, and to compete successfully, manufacturers should focus on operational excellence," said Pierfrancesco Manenti, EMEA research director at IDC Manufacturing Insights. "Operational excellence is by no means a new concept, but in the current economic environment it is essential, both to short-term survival and to building a platform to take advantage of the expected upturn."

In a climate where declining sales and conserving cash are key concerns, managers’ short-term goals are to reduce costs and improve productivity. However, survey results clearly show how a downturn fosters innovation as well. In fact, during normal business conditions, and particularly in Europe, fostering innovation ranks in importance far lower than cost reduction does. The picture now looks completely different: manufacturers are considering the downturn as an opportunity for restructuring their businesses through product innovation and closer relationships with key customers.

Operations must support the main business strategies, such as cost containment, productivity improvements, and customer satisfaction. And to compete successfully, manufacturers should focus on "operational excellence."

Survey results highlight that about 40 percent of business managers believe that IT plays a lead or important role in supporting operational excellence efforts. This represents a significant shift in attitude. In fact, until recently, many practitioners didn’t see IT investments as integral to operational excellence initiatives.

Yet, among the most critical issues impacting manufacturers’ ability to achieve operational excellence is the "lack of understanding of what data represents," according to the survey. Most manufacturers already have lots of data from multiple sources; what’s needed is the right tool to analyze and interpret the data in terms of impact and risks to the business. Indeed, 50 percent of survey respondents say the most important IT application that can best support their operational excellence initiatives is manufacturing intelligence.

This report, Business Strategy: Achieving Operational Excellence Today to Take Advantage of the Expected Upturn, by Pierfrancesco Manenti and Lorenzo Veronesi, is available for purchase at www.idc-mi.com.