In this instalment of @AuManufacturing’s ‘Working smarter with data‘ series, Kamal Prasad gives some tips on being prepared for the digitally-driven future.
There’s no doubt that COVID-19 has had a transformative impact on the way we do business – with many Australian manufacturers needing to innovate and pivot their operations to survive in this ‘new normal’.
However, if there is anything to know about this ‘new normal’ – it’s far from normal. In today’s global business environment, disruption and uncertainty are commonplace with the unprecedented now to be expected. This means that for manufacturers to survive and thrive, they need not only to be constantly looking ahead for potential disruptions and challenges but also build resilience so when – not if – a crisis occurs, they are prepared and can respond quickly and effectively.
So how can manufacturers respond to the unexpected?
This is where your data can come into play. Being able to effectively utilise and leverage data enables you to detect changes, trends and risks in your operations. This gives you a clearer picture of the issues and opportunities that may lay ahead and the best assumptions to adjust your business’s operations in response.
Moreover, businesses who invest in and prioritise building their data capability now will be better placed to manage future disruption, and take advantage of new opportunities and technologies (e.g., predictive modelling and Artificial Intelligence) which in turn drives innovation, growth and productivity.
For manufacturers, knowing what type of data will provide them with the best outcomes for their business is the hardest decision. In this article, I’ve outlined three key areas of opportunity where Australian manufacturers can leverage their data to strengthen, protect and grow their business. For each, I’ve also shared some helpful tools and strategies businesses can implement today.
- Enhance future-focussed decision-making
A key challenge front-of-mind for many manufacturers is how to make good decisions today that impact tomorrow without knowing what the future holds. Decisions such as whether to invest in a new facility, new product, purchase more inventory, change your suppliers or delivery channels and pivot your operations all come with a degree of risk that needs to be well understood to make the best decision for your business.
For manufacturers looking to enhance their decision-making, three strategies I recommend implementing are:
- Moving from gut feel to evidence-based decision-making – During times of considerable uncertainty, it is important that businesses adopt an evidence-based (e.g. data-driven) approach to decision-making as this can minimise risk, improve outcomes, prevent decision paralysis as well as give key stakeholders greater confidence in your decisions. For manufacturers, this will allow them to better optimise the use of key – and possibly scarce – resources as well as identify new opportunities to pivot their operations or even grow or enter new markets in a challenging climate.
- Investing in analytics to better understand buyer behaviour – Changing buying behaviours as a result of COVID-19 has led to several issues for manufacturers including sudden demand surges and greater forecasting errors. As a result, manufacturers can find themselves in a difficult situation where they are struggling to consistently produce the optimal amount of products and/or inputs for their customers. Utilising analytics and predictive modelling, however, can help manufacturers to better understand the purchasing behaviour of their customers allowing them to more accurately forecast future demand levels. This in turn can minimise costs due to overstocking as well as loss of revenue in the case of understocking. Finally, analytics can also assist in key business decision-makers when it comes to deciding future resourcing and pricing of supplier/customer contracts.
- Improving data management and reporting for cross-functional planning – As manufacturers today are operating in both an uncertain and lean cost environment, being able quickly to identify and determine how a change in one part of the value chain has flow-on effects to others is critical. This is where implementing fit for purpose reporting (underpinned by good data management practices) significantly aid manufacturers as it allows them to accurately estimate the degree of impact of a change (e.g. a supplier delay or border closure) on their business and which areas of their value chain will be most affected.
From this, manufacturers can then develop targeted and resource-efficient strategies to minimise disruption or leverage a potential opportunity. Moreover, if manufacturers invest in their systems and data capability to facilitate real-time reporting and analysis not only will they be able to respond more quickly, but they may be able to predict and mitigate problems before they occur.
Overall, in my experience working with clients affected by COVID-19, I’ve found that those who’ve introduced predictive analytics and modelling were able to make faster and better-informed decisions as they have access to more – and accurate – information.
- Digitise your supply chain to detect and neutralise risks faster
Risk and uncertainty tend to go hand in hand. For manufacturers, supply chain risks are a major concern.
With the rise of ‘Big Data’ and advanced analytics such as predictive inventory modelling, manufacturers are now able to detect and estimate the impact of disruption better than ever before However, to take advantage of these tools, manufacturers will need to focus on digitising their supply chain and integrating their systems both within the business and across the supply chain. This allows not only greater visibility of changes within their own business – but the ability to detect potential issues across the whole value chain including their suppliers and those they supply to.
The top risk indicators manufacturers should be monitoring are:
- Supplier production levels & lead times
- Changes in time to receive account receivables
- Equipment maintenance occurrences & time between maintenance
- Transport delays & costs
- Changes in staffing and weather
- Variations in quality control
- Stock/inventory levels & turnover
- Changes to demand and/or purchasing behaviour of customers
- Prevent skill shortages & knowledge loss by retaining implicit information
Another key challenge for manufacturers is how to retain and systematise years of implicit knowledge. Having worked with many manufacturers, one of the top issues they face is the loss of vital implicit skills and knowledge due to an aging workforce. As a result, many manufacturers are not only looking for new ways to attract younger skilled talent but also how to ensure the preservation and transference of ‘know-how’ from long-time employees to new employees.
While the introduction of the government’s JobTrainer program and Manufacturing Modernisation Fund will play a vital role in developing new manufacturing talent, it doesn’t necessarily resolve the issue of knowledge preservation. As such, manufacturers need to be looking at how they can effectively collect and codify this implicit information.
One way businesses are managing this challenge is through the use of IoT sensors and SCADA data collection systems on the production line. This technology records the movements and decisions that employees take in carrying out their activities. This data can then be analysed against other information such as the environmental conditions or outcomes to both prevent the loss of valuable knowledge and determine new and improved business processes.
Finally, collecting and analysing this information also opens the doors for greater automation and the introduction of smart robots in the future – who can then use this data to make real-time decisions based off changes in the environment or on the production line.
Making the right decision on which data – and therefore which digital and technological improvements are required for your unique manufacturing business – is a vital step that precedes implementation.
Kamal Prasad is a partner in BDO’s Digital & Technology Advisory team with over 20 years of global cross-sector experience in helping businesses with performance improvement, digital transformations, advanced analytics and emerging technology.
@AuManufacturing‘s series is brought to you with the support of Fusion5, the largest 5-Star NetSuite Partner in Australia & New Zealand, providing full-featured cloud business management software solutions.
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