Execs say they'll tackle market dynamics with demand-driven models, innovation strategies
By Staff -- Manufacturing Business Technology, 4/1/2006 12:00:00 AM
Accelerating the pace of innovation and adapting to change will be keystones to competitiveness through 2010, according to a report from The Economist Intelligence Unit, London.
The report, Business 2010: Manufacturing—Embracing the Challenge of Change, was sponsored by enterprise vendor SAP.
Based on interviews with nearly 900 senior manufacturing executives, mastering information and technology will be key in implementing innovation strategies.
"Because [companies] will find it more difficult to differentiate themselves through products alone," says the report, "the ability to swiftly adapt to change represents the greatest challenge manufacturers face in creating long-term value."
Obviously, the report adds, the faster a manufacturer can innovate, "the better positioned it will be to move up the value chain—thus insulating itself from competitive pressures."
Innovation was the most commonly cited way companies will change—by 37 percent of those surveyed—with 85 percent saying production will be demand-driven rather than supply-led. But heightened pressure to respond to changes in demand will put a premium on business models that can adapt to market dynamics. "Technology will do more to influence business models than any other factor, including competition from lower-cost rivals and declining margins," says the report.
With 77 percent of respondents citing the importance of distilling knowledge from information as a key challenge, the greatest leverage from that knowledge was viewed by 55 percent as being able to improve competitiveness—even more than driving cost-efficiency. Also, more than 80 percent cited IT as critical to their ability to change business models and implement strategies.
"An effective IT system acts as a repository for customer and production data, and provides the key performance indicators that measure organizational success," says the report. "The challenge is to create a rapid and efficient flow of information between all parties in the supply and distribution chain."
Seamless information flows will be essential to modeling, calibrating, and improving manufacturing operations—for example, reconfiguring a factory floor or determining the optimal location for inventory. For emerging applications, 40 percent of respondents say data management and analytics will have the greatest impact on their ability to innovate between now and 2010.
Overall, the report concludes, a majority of executives believe IT will generate greater value for manufacturers as a source of competitive advantage than as a tool for cost reduction.
The complete study included a total of 4,018 executives from 23 countries, with 872 in the manufacturing sector. Vertical industries represented include consumer goods, pharmaceuticals & biotechnology, engineering & machinery, electronic & electrical goods, chemicals & petrochemicals, automotive, and durable goods. Of those surveyed, 40 percent were C-level executives.
