Anyone who writes any form of blog will, from time to time, suffer from writer’s block and that’s exactly the position I found myself in on Sunday afternoon as I sat down to write this blog, which I was calling “How Digital Business and S/4HANA is tackling the Challenges facing UK Manufacturing Head On”. Which perhaps explains why I had writer’s block!!
So, I did what I normally do at this point and pulled on my running gear, picked up my trusty iPod and hit the road. I enjoy listening to music while running but find I must be selective to what I listen to as something too slow, finds me plodding along like Eeyore from Winnie the Pooh, too fast and I can’t keep up and if it’s a mix of both I’m sure the cars that pass me by must find my running style amusing as I alternate between slow, quick, slow, slow, quick.
It was when I hit the last mile which is almost all up hill, so the legs really started to hurt as my concentration wobbles that a song from The Cribs called “Don’t you Want to be Relevant” came on and as the lead singer screeched out the chorus, which is “Cos you can't go taking it back - there's no time and no place for that, but don't you wanna be relevant? Oh no” a smile came to my face as I thought that’s the title I was looking for as in today’s ever changing market, you not only need to be “relevant”, which Kodak found out to their peril, you also need to be leading, which requires innovation of thought, process and speed.
In 2017, being “relevant” involves being a fully paid up member of the Digital revolution, which is full of buzzwords like … Digital Transformation, Digital Business, Digital Economy and of course Digital manufacturing and Industry 4.0, the fourth-generation industrial revolution. Regardless of what you choose to call it, it’s real, it’s exciting and your competitors will be doing it and as the last line in Don’t You Want to be Relevant states, “Tomorrow always comes too fast, if you’re not first to leave then you’ll come in last” no one will survive by coming last.
So, for those of you working in the manufacturing industry, here’s a question for you …. As an organisation are you looking to successfully embrace the opportunities afforded by this 4th generation, Cyber technology and build a foundation for successful digitalization and stay ahead of the competition through innovation? If the answer is YES, this blog will be of value you to you and I promise, there’s no more song lyrics.
Let’s begin by understanding the current market status and challenges faced before looking at how embracing Digital business and in particular SAP’s S/4HANA Enterprise Management solution, can help you succeed by realising new ways to deliver value to your customers be that through digital channels, creating personalized, digitally enabled products across all manufacturing sectors, from consumer products to heavy equipment and machinery, or simply delivering product to shorter lead times.
CHALLENGES OR OPPORTUNITIES?
Many industry experts, organisations and thought leaders have given recent insight into the state of the UK manufacturing industry and how certain recent political and economic events have affected companies looking towards the future. Despite the negative connotations of these events, UK manufacturers remain optimistic about their businesses, already seeing growth in both domestic AND export markets (the greatest since 2014). Depreciation of the pound continues to have the predictable swings and roundabout effect with import costs continuing to surge, while at the same time making the UK more competitive against other EU and non-EU countries. With this growth in demand and competition comes a push on productivity and the industry is seeing investment in product and process innovation and capacity expansion. Sadly, not all will be able to demonstrate the agility required to react.
Let’s explore these challenges further to give us a basic premise on what to address with existing and new SAP solutions and innovations.
1. LOW PRODUCTIVITY – Although it might be a costly initial investment, automating processes and introducing new technologies will allow your business to experience improved efficiency, making you more productive than your competitors. It is this key reliance on technological efficiencies that makes staying up to date with trends and research so important.
2. GET CLOSER TO CUSTOMER (take some power from retailers) – Customisation is a significant opportunity for UK manufacturers that are targeting the domestic market and other developed economies.
3. NEW MARKET OPPORTUNITIES (EXPORT) – With the advancement of technology where everything is becoming more connected, the world is becoming even smaller with companies realising that technology matters. Smarter products and services will refocus commerce on business outcomes and blur industry lines opening many new opportunities.
4. INNOVATE TO STAY COMPETITIVE AND RELEVANT (R&D) – Britain’s manufacturing success is no longer going to be the result of manufacturers ‘churning out large volumes of metal’, but rather how they utilise technology and talent to innovate and produce products the modern world now demands. And this demands manufacturing firms to part with their capital. It demands they make greater investments in R&D. It demands they take a proactive approach to crafting an advantage that is both sustainable and profitable.
5. SKILLS GAP – The recent UK’s manufacturing sector stagnation was partly attributable to a skills gap. Today, British manufacturing is at the mercy of those willing to innovate. This is most apparent in the medium-sized companies employing between 200 and 1,000 workers that are both well established in their markets and are consistently investing and innovating to sustain their success. This is wholly reliant on both R&D spend, and the skills and talent of employees in the first place. The reality is, the UK are not creating enough engineers or future leaders for tomorrow.
Despite these challenges, optimism, as noted above, is increased in the sector. So with these contradictions, how are the UK manufacturers looking to face these challenges ‘head on’ and transform towards a Digital Business?
To survive and thrive, Manufacturing companies need to redefine their core competencies and consequently re-build their business strategies accordingly. In working with leading companies across the globe, SAP see success being achieved through investments and activity around five strategic priorities:
• CUSTOMER CENTRICITY - Putting the end customers’ point of view at the centre of every decision is a prerequisite for success in the digital age. This does not stop in the sales department, but also applies to what products are built, what services are offered and how the customer can consume them.
• SERVING THE “SEGMENT OF ONE” - Providing solutions that precisely fit the needs of one single customer has been commonplace in traditional engineer-to-order environments. Now, the ability to capture customer requirements effectively and drive mass-customization is the key to giving customers exactly what they want.
• DIGITAL SMART PRODUCTS - Differentiation and specificity in products stems from digital capabilities and value-add services that are bundled with the physical products. Using digital capabilities like self-awareness of technical health and operational status or business system connectivity is key to enabling industrial manufacturers to differentiate.
• DIGITAL SUPPLY CHAIN AND SMART FACTORIES - Digital technology on the shop floor and in the supply chain is not new. What is new is the way production and logistics are intelligently connected to the rest of the business and able to deal with external impulses like short-term demand and supply fluctuations or changes in the configuration of a customer order that require different materials, parts, and machining operations, in real time.
• SERVITIZATION AND NEW BUSINESS MODELS - As traditional products are commoditized, manufacturing companies are shifting from selling physical products to providing complete solutions. Generating the magical 50% of revenue from services is a common goal for manufacturers that are looking for higher profit margins and increased customer intimacy.
TURNING THEORY INTO REALITY
But how do you achieve these strategic priorities? The starting point of the digital journey is the ability to reimagine your business together with customers. That means reimagining your business models, your products, your business processes, and your work. The potential is huge as leading industrial and discrete manufacturing companies are increasingly utilizing SAP technology and software to increase market opportunity, achieve profit goals, and in turn helping them grow market share.
As companies are starting to reimagine their entire business, they need an IT architecture that provides both stability and long-term reliability for their core enterprise processes, and at the same time allows for flexibility in areas where change is happening on a constant basis.
This concept, which is often referred to as “bimodal IT,” is brought to life through SAP’s digital core and business framework, pictured below.
1. The DIGITAL CORE is the foundation for the core enterprise processes, which need to run consistently and uninterrupted. It provides insight via analysing real-time transactions, provides ability to crunch with Big Data, while all connecting to the four outside pillars of the framework, which are Internet of Things (IoT) & Assets, Customer Experience, Business Networks and Workforce Management (see below).
2. SAP LEONARDO IoT and Assets connect both digital products you are providing to your customers and assets and machinery on your factory floor, to the digital core. A large amount of flexibility is needed to connect new equipment on a constant basis, therefore the agility SAP Leonardo provides is key.
3. Your customers require flexibility in the way they interact with you through multiple channels. SAP HYBRIS provides that consistent, Customer Experience on a single, integrated platform.
4. Flexibility and adaptability in working with BUSINESS NETWORKS are key in-order to on-board new suppliers quickly and shift supply to alternates.
5. And finally building and maintaining agile WORKFORCE MANAGEMENT is key if you wish to address the Skills gap and talent management challenge stated earlier.
THE VALUE CREATOR
The fundamental value from SAP S/4HANA comes through the ability to RUN SIMPLE with Big Data in real time, simplified processes all using built-in analytics.
• REAL TIME DATA: along the entire value chain - Effective Manufacturing companies require an end-to-end data flow from product development all the way to aftersales and service in order to ensure integrity and closed-loop processes. With SAP S/4HANA, this can be achieved in combination with large amounts of machine data, via IoT (SAP Leonardo) and Assets for example.
• SIMPLIFICATION: Today, delaying business insight is commonly due to processes that require lengthy data aggregation, or data imported in nightly batch runs. With SAP S/4HANA, insight is simpler and much more straightforward. For example, the ability to reduce your MRP run from many hours down to a few minutes to become even more responsive when balancing supply and demand.
• IMMEDIATE INSIGHT TO ACTION - Traditional analytics solutions use data that has been pre-aggregated into cubes that support predesigned reports. With SAP S/4HANA, analytics can be performed in a flexible way and without predefined reports directly on the transactional data, providing faster and more granular insight. Your competition and SAP’s, lacks the power of in-memory and SAP’s leading user experience to blend analytics with transactions to empower employees.
• CUSTOMER GRADE USER EXPERIENCE ACROSS ALL DEVICES - Traditional user interfaces are transaction oriented and often complicated to use. With the SAP Fiori® UX, SAP S/4HANA empowers front-line users with an end-user centric, consumer-grade experience allowing faster execution of tasks and more confident decision making. If you enjoy the simplicity of your IOS or Android experience, you will enjoy SAP S/4HANA.
Finally, I recently read a comment that stated manufacturing companies’ products are typically a key differentiator in the marketplace and the foundation of how these companies build their business and their customers’ businesses. This is very much how we here at CSI view our role with our customers…
• …to help them via our services, using our experience of transforming our business from typically on-premise reseller to that of a managed service/cloud provider and helping them transform their business models.
• …and let us worry about the technology and business solutions, whilst they concentrate on their field of expertise and innovation. We expect manufacturing companies will expand and redefine their business models by adding digital services to their currently mechanical predominant products.
There is great opportunity in moving from selling products (CAPEX) to selling performance (OPEX) and consumption based models. S/4HANA, private cloud and ‘Software as a Service’ brings you the convenience of cloud, with the power of S/4HANA.
Let CSI help you Transform, Manage and Secure. Call us today on 01623 726 300 or email:firstname.lastname@example.org