There are strong headwinds for manufacturers to deal with right now. But that is nothing new. All businesses have all weathered tough times over the past few years. However, this is no reason for any company to lower the expectations it has of itself — because your customers won’t.
The good news is that the pressures on your competitors are the same, so to get ahead in the current market, you just need to find ways to be better. Better with your manufacturing processes, better at running your supply chain, better at how you sell, and better at managing financials.
“Optimization” can be an overused word at a time like this, but what it stands for is still spot on. Smart companies know they need to increase business performance across all key business functions like those we just listed. Best-in-class companies know that the most efficient path to do so is through the data they already have, by leveraging business intelligence (BI) tools to drive meaningful change.
Before we explain how using data can drive company-wide optimization and how BI can facilitate this, here are some of the current issues impacting many manufacturers right now. Do any of them sound familiar?
High inflation – The cost of parts and materials used by most companies has been going up steadily since 2021, with U.S. annual inflation hitting 8.5% in March of 2022.
Volatile shipping costs – Shipping costs and delays are still near pandemic highs, with fuel surcharges often adding 20% or more to logistics costs.
Employee turnover – Unemployment is low, making it hard for companies to find good employees and keep up with “The Great Resignation” that’s happening right now.
Inventory struggles – Delays with sourcing parts and materials have made inventory management extra challenging while making lead times more unpredictable.
Complex planning – Sales forecasting and demand planning have become harder when supply chains and costs have become more unreliable and expensive.
Thinner margins – With so many cost uncertainties that can change monthly, financial management and budgeting are less accurate (especially in the mid- and long-term timeframes.)
Optimization Amid Uncertainty
Right now, market-leading companies agree that company-wide optimization is the goal. And, for complex operations like manufacturing, using BI is necessary. But doing so takes a firm grasp of quality data and the ability to use it. Being optimized means different things to different functions, but here are four areas we suggest businesses consider to start along their path to greater operating efficiency.
Sales Forecasting and Order Management
Optimized sales forecasting is not just about defining sales goals. Doing so accurately is central to every other business function. Sales are how market demand becomes tangible to a company and drives activity within the manufacturing and supply chain processes.
The ability to perform accurate sales forecasting is vital to proper demand planning. Through data, companies are able to instantly gain insights into what’s coming, spot sales trends (for better or worse), identify opportunities and risks, and measure overall performance.
A challenge for companies is finding ways to do these types of reporting efficiently and accurately, so the goal should be to automate management reporting processes and make the information as useful as possible. Building a BI solution that connects internal and external business stakeholders is central to realizing the benefits — doing so puts companies in a position to make business decisions quickly and strategically.
Central to a manufacturer’s success is its ability to produce its products efficiently (no surprise there.) There are plenty of ways to measure manufacturing efficiency and productivity by leveraging BI, but having a process to do so and taking action to optimize it is where most companies fall short.
Companies that struggle to drive improvements with BI likely have some of these limitations:
- Inability to find or aggregate data they need
- Have data but lack the context to make it actionable
- Data is siloed and not able to be shared freely throughout the organization
- Limited to the simplistic BI tools offered by their ERP
For companies that have worked past the initial hurdles of BI, the benefits are significant. They come when companies can efficiently gather and roll up information, consolidate data from multiple systems, and bridge data gaps.
A company will recognize it’s reaping the benefits of BI when it can drive more labor and machine efficiencies, manage inventory better, accurately schedule production, improve inbound material receiving, and track profitability with more detail.
Since the start of the pandemic, the sourcing and transportation functions have gotten more attention than ever before. The supply chain has become very popular, but for many of the wrong reasons. Delays with materials, difficulty maintaining the proper inventory levels, and all-around shipping chaos have become the norm.
Thankfully, the supply chain is another operation ripe for optimization with BI. By using their data to its full potential, companies can create visibility and efficiencies throughout the supply chain that directly improve profitability, supplier performance, and customers’ delivery experiences.
Some of the key service reporting that BI makes easy and fast:
- Demand forecasting and inventory planning
- Carrier performance and supplier scorecards
- Warehouse performance and fill rate reporting
- Shipping cost analytics and benchmarks
The benefits to a supply chain optimized through BI include better inventory management, lower shipping costs, and improved on-time delivery performance . . . to name a few.
The finance function, of course, has an interest in sales, manufacturing, and the supply chain as it relates to costs. It’s where money and data intersect and where many strategic decisions for the company’s overall financial health get made. The value of a capable BI tool to finance is self-evident.
Centralized business analytics make financial reporting straightforward, accessible, and up-to-date. The result for companies is that vital financial reporting (e.g., KPIs, EBITDA, AP/AR, operations [manufacturing / supply chain] expenses) becomes timely and sustainable.
Finance as a function has never lacked reporting, but BI also enables next-level visibility beyond the typical, including reporting such as on open orders, invoices, forecasts, detailed contributed value, and profitability by customer, product, and salesperson — all in one place.
With cost inputs and other market conditions changing fast, finance needs current and actionable BI to make business decisions quickly.
The Steps to Optimization
The importance and urgency of company-wide optimization are straightforward. Knowing what to do about it isn’t as clear.
So, what are the steps a company should take? The short answer is any company looking to drive optimization in these ways needs a process to gather the data, connect the systems, and build the reports. But of course, a key part of this is knowing which data and analytics will provide value and enable you to take actionable steps.
Let us offer a shortcut to optimization and all the benefits of BI. The fastest way to understand how BI can help your business performance and drive optimization is to talk to a business partner with prebuilt tools that cover your core business functions. To see what TransImpact’s Business Impact Analytics Solution offers, click here.