Manufacturing Industry Leads Cloud Adoption

It was good to see a blog by Gary Mintchell revealing that the industry sector is leading the adoption of Cloud, yet so often I hear the words that “it will not happen in our company or industry for years!”.

Gary writes a great set of blogs always worth having a link to it.

http://t.co/LIPLIc6SgV

Some Quotes from this blog:

“global study that indicates cloud is moving into a second wave of adoption, with companies no longer focusing just on efficiency and reduced costs, but rather looking to cloud as a platform to fuel innovation, growth and disruption.

The study finds that 53 percent of companies expect cloud to drive increased revenue over the next two years. Unfortunately, this will be challenging for many companies as only 1 percent of organizations have optimized cloud strategies in place while 32 percent have no cloud strategy at all.”

So often I have sales and people saying that cloud is driven by a change in cost model, but also in all my interviews with customers and strategic thinkers it has been a platform for addressing the “changing speed of change and flexibility needed today” that is driving it. The world is changing faster and faster, and the ability to deliver the RIGHTS:

• Right Product
• Right Price
• Right Cost
• Right Time
• Right Location

Is key and this means rolling increased new numbers of products across a distribution of value assets (plants) that will produce smaller lots (production runs), at less cost.

Understanding NOW what the state of Inventory, Work in Progress, and equipment to get to market is key.

Also we seeing the “walls of a plant” expand, beyond the manufacturing plant to now treat the whole manufacturing, and distribution supply chain as part of manufacturing. So the traditional MES (manufacturing Execution System ) is expanding, to offer the ability model the plant to store as operations, where product must be tracked to compliance, and work items distributed to workers and assets in that distribution chain.

“In the study IDC identifies five levels of cloud maturity: ad hoc, opportunistic, repeatable, managed and optimized. The study found that organizations elevating cloud maturity from the ad hoc, the lowest level to optimized, the highest, results dramatic business benefits, including:

•        revenue growth of 10.4 percent
•         reduction of IT costs by 77 percent
•         shrinking time to provision IT services and applications by 99 percent
•         boosting IT department’s ability to meet SLAs by 72 percent
•         doubling IT department’s ability to invest in new projects to drive innovation.”

Cloud Adoption by Industry

By industry, manufacturing has the largest percentage of companies in one of the top three adoption categories at 33 percent, followed by IT (30 percent), finance (29 percent), and healthcare (28 percent). The lowest adoption levels by industry were found to be government/education and professional services (at 22 percent each) and retail/wholesale (at 20 percent). By industry, professional services, technology, and transportation, communications, and utilities expected the greatest impact on key performance indicators (KPIs) across the board.”

The above learnings and results do not surprise me, based upon my own engagements in the field, and observing the increased realization that speed of change is important, and tradition large projects are going out the door. Replaced by rapid projects leveraging existing expertise in the industry and adding through own operational process value to differentiate.  

Collaborative Manufacturing is Becoming a Reality

The concept of Collaborative Manufacturing has been attempted in the past and successfully with Toyota and others but the time has come for a change that will enable an ecosystem of small agile manufacturers to form a “product value chain”. So lets start with what is Collaborative Manufacturing:

In Collaborative Manufacturing, designated individuals and organizations – both internal to a manufacturing enterprise and extended to its suppliers, customers, and partners – work together for mutual gain. The objectives of Collaborative Manufacturing are to streamline end-to-end business and supply chain processes and provide a more comprehensive and

accurate information base from which to make decisions.

Collaborative Manufacturing allows multiple groups to act together as they set plans and policy, agree to actions, and execute operations. Collaborative Manufacturing can boost responsiveness, agility, and customer-centricity. It also fosters the most cost-effective methods to design, source, make, deliver, and service standard, mass-customized or to-order products.

An effective Collaborative Manufacturing strategy requires business processes to include more inputs and interactions than most traditional processes. To support Collaborative Manufacturing, information systems must integrate and aggregate information from across the manufacturing business and from its suppliers, trading partners, and customers. It must also provide the means to intelligently distribute that information across various business entities.

So why now what is different?

Key to me is that fact that small enterprises can now leverage “Managed service” in the cloud that deliver the rich operational business capability of inventory management, operational process and manufacturing, and specification management which was only available to much larger companies. Now an end to end product chain can be developed with aligned a process and enable a product manufacturer to divided up over multiple operations, each operation executed by a small manufacturing entity.

The transparency of the product manufacturer across the sites all using “managed services “ in the cloud for ERP/ Order fulfillment, and MES operations / quality etc., provides the visibility to enable this agility. Effectively one Product Manufacturing chain (route) is been executed updated on a particular site as the product moves through, transport, assemble are also managed in this higher MES.

Yes, it will require a new thinking and alliance of small businesses but the value on agility and cost and the ability to scale provides a real opportunity for a new manufacturer and deliver model to take on the larger companies.  

To maintain a competitive edge, manufacturers must make a major shift in strategy to effectively synchronize activities among functionally and geographically dispersed groups. Those with whom they need to collaborate include:

• customers and, in some cases, their customer’s customers;

• distributors and channel partners;

• materials and sub-product suppliers;

• outsourced or contract manufacturers;

• logistics partners for distribution, warehousing, and transportation;

• providers of services such as legal and regulatory advice;

• multiple departments and divisions within their own company and with any of those entities described above.

A Collaborative Manufacturing strategy can help a company maximizes the effectiveness of its value chain in order to better control profits and address changing market demands.

Is this real, my answer is yes, I was on a plane last week, and two fellow travelers talked about the alliance and the seeking out others to make this ecosystem, combined with the agility of 3D printing, and then assemble these two expected to grow and had a good pipeline due to satisfy the “pay on delivery, with small order sizes” also the ability to have local final assembly close to distribution centers and significant retailers make them more desirable to occupy the “shelf space”. Both agree the reality is only now that the tracking and management are common across the plants in a hosted “managed service”.

Food for thought! 

Manufacturing Trends towards 2050

Well it is a new year and in many of us we look ahead, last year I looked at 2020 from an operational landscape, this year let us take a little bit further look out for looking at manufacturing. These are long term trends that will evolve and impact architectures, and I believe the whole landscape of operational systems. It relates to the discussion I brought up late last year on the trend from globalization to continentalision, due to speed of demand, and cost relative to energy etc.

Some interesting charts that show another set of trends I found in reading from ARC:

The top chart shows an interesting but fully expected trend towards more local, often small businesses, this aligns with continentalision, where time and agility to deliver is key, combined with another trend which is the move to customization of the end product. (note this is the opposite to what we see in the industrial software/ commercial software market where customization is giving way to “good enough” applications.) People will shift from brand to local product that aligns with the way they live , environment etc, this means more than language it means the culture of the consuming product. To achieve this combined with optimization even multi national companies will shift to local manufacturing sites for final productisation.  Example is in tobacco manufacturing where primary manufacturing is trending to centralize, and the packaging is local, enabling supply chain optimization, while agility to serve local markets.

But the bigger trend this move to “local/ smaller manufacturing facilities” suggests is the shift to “collaborative manufacturing” across an ecosystem of smaller more agile manufacturing facilities often run and owned locally. The opportunity for this comes through shift in technology to the “cloud” and “managed services” which enable a multi site manufacturing chain to managed in a series manufacturing facilities across the “product value chain” even if they are not the same company, but now a “collaborative manufacturing value chain” for that product. Managed services also provide the ability for these smaller companies to adopt mature operational/ MES applications as “managed services” providing them with operational control and alignment which has not been affordable before.

The chart below also supports the big trends by functions:

The key trends of shifting to renewable s, the impact of energy costs as the end of the “second industry revolution (oil based) “ declines, the “bottom of the pyramid” which refers to lowest 4 Billion income earners how we raise their standard of living. This is much more holistic view of the world than the 20^th century, except for the mass customization demand of my local product.

My feelings that this time to deliver, and satisfy the market the old “shelf space” will rule, with immediate satisfaction and freshness driving buying habits, combined with costs as transport and logistic costs and risk rise.

The final chart to reflect on shows the growing factors that effect manufacturing and operational decisions and therefore systems. 

This diagram does not look into the future but shows how in the last 20 years the major factors that influence manufacturing have expanded significantly, and they continue to grow. I would add the big one which is the shortage of skilled people, or operational empowerment in a dynamic workforce. Where now we have plants coming on line faster, or being acquired either into a global supply chain, or being added into a “collaborative manufacturing value chain” relative to a product. Combine this with the dynamic workforce that will be rotating roles, locations at less than 2 years in a role, while the ability to deliver more customized products drives the complexity of the production process, and value chain.

All good food for thought, as we look at significant operational transformation.