Responding To Demand: New Tools for Competitive Manufacturing

By James Gorham, Vice President, North American Sales Support and Install Base Sales

Manufacturing has always been like walking a tightrope – balancing supply with demand, balancing a stable manufacturing plan with flexibility, and balancing often competing objectives, such as high quality, low cost and outstanding customer service.

To be successful, you have to keep all these elements in perfect balance. At the same time, you must be able to differentiate your company from the competition to win new business and maintain your existing customer base.

In the 1980s, quality was the great competitive differentiator for manufacturers. Then mass quality initiatives adopted by manufacturers leveled the playing field to the point where quality became assumed – you either made high quality products or you made nothing at all.

At one point, cost was a key way to stand out from the competition. However, the relentless drive to reduce expenses through outsourcing and shifting manufacturing operations overseas has made low cost a necessity, not a competitive differentiator. To succeed today you must continually squeeze costs from your operations.

Now, customer service has increasingly become the way for manufacturers to differentiate themselves, though customer service can stress your company as you struggle to deliver customized products on tight deadlines without increasing your costs.

With quality assumed, cost under constant, global pressure and customer service expectations on the rise, how can manufacturers gain a competitive edge? The answer is responsiveness.

Responsiveness allows you to meet customer demands – even for complex or highly configured items – while controlling costs. However, being responsive requires you to rethink how you run your business and shift to a more demand-driven mode of operation where customer orders are pulled, rather than pushed through your company.

Keeping Your Customer King
If you wonder how responsiveness can help you increase your competitive stance, ask yourself this simple question: Which company would you be more inclined to purchase from-one that provided you accurate cost and delivery information about an order almost instantly or one that took a day or more to respond?

The ability to respond to customer orders quickly – from providing accurate order promising information to ensuring a valid product configuration – has become a hallmark of successful, demand-driven manufacturers and a chief reason why they are at the head of the pack.

Keeping Your Supply Chain Lean
Manufacturers used to be able to satisfy variable customer demand by simply making more of everything. While this allowed them to be responsive to their customers, it came at a high cost: excess inventory and a bloated supply chain.

Now, manufacturers realize they have to change their behavior from the traditional "push" to a more advanced "pull" method of operating supply chains. Instead of pushing orders through their supply chain regardless of demand, leading manufacturers are having customer demand pull orders through their operations. By using demand to drive the rest of their operations, manufacturers can have more accurate production and material planning as well as more efficient procurement operations.

New Tools for Responsiveness
Leading manufacturers are realizing the key to becoming more responsive lies in the effective use of enterprise applications and sharing information. Supply Chain Management (SCM) solutions and new Collaboration & Integration technologies are the enabling tools for a successful demand-driven manufacturer.

SCM solutions, such as order management and supply chain planning, enable manufacturers to improve responsiveness dramatically. Order management systems provide more accurate information about customer demand, which can be used to drive more efficient production and materials planning and procurement. Order management further enables manufacturers to provide instant and accurate order promising information, even for configured items, helping to increase customer service levels.

Enterprise-wide supply chain planning solutions allow manufacturers to match production and procurement operations with demand. By moving planning closer to the point of actual demand, manufacturers can continually realign their operations with changing demand, further improving customer service and reducing costs.

Being more responsive also requires a re-examination of how information flows throughout your company. A simple way to do this is to determine how long it takes for information to flow from a customer order to your factory floor and to your suppliers. Unfortunately, this can take days or weeks for many manufacturers. The faster this information flows, the more responsive you can be and the more efficient your supply chain will become.

To shrink this information cycle time requires new collaboration and integration technologies that can link together disparate information systems and speed the transfer of information. Successful manufacturers have not only extended their ERP systems by implementing SCM functionality, but they have also deployed integration solutions – such as XML – to improve the flow of information throughout their organization.

Collaboration and integration technologies are an essential part of responsiveness. They allow a change in customer demand to be transmitted instantly where it is needed throughout your organization – helping to make sure you do not make a product a customer no longer wants and ensuring you do not order unnecessary supplies.

Another common hurdle that leading manufacturers have overcome is the disparate nature of their information systems. With multiple applications, data sources, and even formats, many companies find it difficult – if not impossible – to share mission-critical information internally or with external trading partners. They understand that to be responsive, their operations require total visibility that is only made possible with collaboration and integration solutions.

As Profitable As Possible
While part of us might long for the days when we could mass produce products and push them out to the market, we know that times have changed. This outdated mode of operation resulted in higher costs and customer dissatisfaction.

Today, responsiveness has become the greatest competitive differentiator for manufacturers and is the answer to burning questions: How well does your business respond to the individual needs of your customers? Do your customers consider you a strategic partner or a replaceable vendor? What are you doing to make sure you get a customer's business the next time?

To be competitive today, you must operate in a more responsive, demand-driven mode where everything that happens in your organization is based on actual demand that pulls supplies through your operations. Being more responsive allows you to be as efficient, lean and profitable as possible, regardless of how the market is performing.

For more on this subject, please see our white paper in the Thought Leadership section of The Extended Enterprise.