Think of your technology investments as a journey that requires you to plan in detail how they will unfold. … (+)
In today’s world of all things tech, manufacturers are bombarded with sales pitches touting the next thing you need to achieve efficiency, increase productivity and unearth riches.
A lot of it looks pretty good. Some of it can produce real value.
But most small and medium-sized manufacturers shouldn’t bite. At least, not until they tie their technology investments to a coherent plan and, most importantly, a clear set of priorities. Without this broader strategic thinking, it’s easy to get it wrong: Nearly a third of all software spending is wasted, according to a recent study from Flexera. Here’s how manufacturers can ensure their processing efforts don’t add to this statistic.
Start with a strategy, not a technology
Each company follows its own path to deploy technology. To be successful, the path must be incremental and intentional, and it must align with business goals. You should never favor technology for its own sake. Technology should always solve a problem that matters to the business. We must always move the strategy forward. Otherwise, it’s a waste.
For many smaller manufacturers, things like tracking sensor data, introducing robotics, using a digital twin, and implementing AI-based tools to improve back operations -end can be of considerable value. But charting a path forward to maximize these investments requires taking a step back when it comes to due diligence and strategic planning.
Every day, manufacturers receive proposals for large, expensive, integrated technology systems that promise to solve their technology problems and modernize their operations. A recent one that stood out: a software provider specializing in monitoring people’s movements and activities with the aim of making work more efficient. This may well be an appropriate next step for companies that have reached technological maturity in many other areas of their business. For most small manufacturers, such a system would turn the wheel with a single click, while several other technologies could lead to major improvements for much less money.
That is: don’t invest your money in a technology that has a 2% chance of creating efficiency until you’ve made sure you capture all the low-hanging fruit, which could increase profitability of 10% or more.
Consider outside help
SMB manufacturing leaders constantly struggle to integrate everything: supplier management, customer outreach, hiring and firing, financial monitoring and much more. So when it comes to technology, they tend to make bad decisions that take one of two forms:
- They find a software vendor that seems good enough to trust, pay them large sums for a “2%” solution (see above), and neglect other, more profitable modernization projects.
- They are so overwhelmed by choices and hype that they find themselves frozen in analysis paralysis, finding it easy to ignore long-term transformation as long as the financial results look attractive at the moment.
To get around these mistakes, you need to invest time in strategic thinking. It also helps to listen to the concerns and ideas of not only senior management, but also employees throughout the organization. They sometimes understand areas of operational inefficiency better than anyone else because they experience them every day.
But sometimes even the most intentional efforts fail to create a list of transformation priorities that includes all the opportunities offered by Industry 4.0 technology. Manufacturing executives may be too close to their own operations to see the simple adjustments that could result in outsized results. If they could have identified their shortcomings, they probably would have already taken steps to correct them.
It may be a good idea to hire an external consulting firm to take a closer look at your operations with the goal of helping you create a transformation strategy. For SMEs, there are interesting options. Through the Manufacturing Expansion Partnership (MEP), the federal government offers assistance to small and medium-sized manufacturers that is provided at the state level. In 51 state centers and several regional hubs – MAGNET, the nonprofit consulting firm I run, is one – manufacturers have access to expertise that can help them sustain their businesses.
Understand the benefits
Small manufacturers who delay implementing technologies often cite their current profitability levels as justification. But it is this very success that should inspire them to reinvest in the business, creating operations more resilient not only to large-scale disruptions such as the pandemic, but also to changing market dynamics as a whole . For manufacturers, it’s about evolving or waiting for your competitors to overtake you.
The rewards can be enormous and it’s important to understand what matters most in each business. Machine downtime can decrease by 30-50%, labor productivity can improve by 15-30%, and inventory cost reductions can reach 15-20%, among other improvements. spotted by McKinsey.
You certainly don’t get there overnight. You also won’t get there by handing out checks to technology vendors promising off-the-shelf solutions that might not actually be a good fit for your business. Think of your technology investments as a journey that requires you to plan in detail how it will all play out. You’ll find yourself in a much better position five years from now by taking this strategic approach, rather than chasing the next shiny object or saying “yes” to the next fast-talking salesperson.