4 ways to leverage data in manufacturing and supply chain
Data is still an untapped source of value for many manufacturers. As the world becomes increasingly more complex, companies which are successfully leveraging it in their operations are seeing unparalleled improvements in efficiency.
Whether they wish to improve their customer experience, improve operational efficiency, or conquer new markets — data holds the answer.
Here are 4 ways manufacturers can leverage data to enhance the performance of their manufacturing and supply chain operations.
1. Improve customer experience
Experts believe that customer experience is overtaking price and product as the key brand differentiator. Historically, customer experience has been an area of weakness for manufacturers. But diligently leveraged data can change many aspects of any business, including long-standing shortcomings.
Business-to-business (B2B) customer-experience index ratings fall well short of those in the business-to-consumer (B2C) space, according to McKinsey & Co. While B2C companies generally score 65% to 85%, B2B companies score less than 50% on average. Experts anticipate that this gap will only widen as B2B expectations rise, mostly as a result of the high-quality customer experiences individuals enjoy online.
Huge wins await the manufacturer willing to adapt: improvements in customer experience can lead to a 10% to 15% reduction in customer churn, a 20% to 40% increase in the win rates of offers, and 50% lower costs to serve.
Offer a better customer experience with more transparency on the status of orders
An important consideration in the customer experience picture is a company’s capacity to reliably meet deadlines and shipment dates. This is essential for a strong customer experience and using data to precisely predict production outcomes makes it feasible.
Modern consumers have become accustomed to order tracking. This feature creates greater transparency about the status of their online purchases, generating trust and satisfaction. These expectations are migrating into the B2B space: fortunately, it is possible to offer customers these kinds of order tracking experiences there too. Far from being the reservation of large online marketplaces like Amazon, this is becoming a basic need for B2B customers with increasingly high expectations.
Wielded correctly, data also contributes positively to brand and quality. Although the episode was an acrimonious one, Tesla’s phoenix-like resurgence — after the production woes of 2018 — demonstrates the power of data in setting and meeting exacting production targets under pressure.
The e-vehicle manufacturer faced punishing consumer and investor scrutiny when it began producing 2000 Model-3s per week instead of the 5000 promised at launch. The strain of upscaling from being a luxury producer was also impacting quality. Adding to this, bad PR associated with a fatal autopilot crash had generated an unenviable setting.
However, the leading manufacturer placed data at the core of its business recovery. It used this resource to oversee when parts arrived and where they needed to go on the assembly line, while algorithms monitored production orders and quality issues. The result was a highly optimized operation that more smoothly met its objectives over time. As production picked up, this in turn led to greater levels of customer satisfaction.
Respond and adapt to customer demands faster
Data empowers companies to quickly simulate the impact of shifting customer demands on their operations. Finite resources, production plans, and delivery dates can run awry if manufacturers are caught off guard by changing trends.
With the right tools and data, manufacturers can immediately simulate what is feasible; they can use the resources and time they have in the optimal way, adding only what is strictly necessary. It is not uncommon for multi-unit enterprises, for instance, to have stock that they need for one unit present in another. Without the right data management tools these internal stock transfer options can go unnoticed. Consequently, additional inventory, often with expedited shipping costs, is ordered.
Empower customer support teams
Instead of waiting for a client to call to enquire angrily about the status of their order, with the right data, customer support teams can see quantifiably when they need to send an update. Centralized data from all stages of production give them complete situational awareness. Instead of being reactive, it becomes a proactive process of ensuring the customer experience is a positive one.
2. Improve operational efficiency in production
By improving the accuracy of information across the organization, manufacturers attain foresight about outputs based on current planning and known blockers within the organization. Clearer data on current and future shortages of parts, or production capacity, lends itself to higher accuracy about production.
With better visibility, rather than being blindsided by disruptions, manufacturers can adjust planning to sidestep problems. With this, enhancements are achieved in planning adherence and efficiency — in turn, reducing uncertainty and creating a clearer decision-making environment.
Reduce production costs by detecting and neutralizing risks in your supply chain faster
One of the greatest challenges for manufacturers traditionally has been forecasting and production planning based on incomplete supply chain knowledge. Heaping today’s volatility on top of this means that as risks or disruptions occur, organizations are caught flat-footed. By obtaining and analyzing various sources of data from across the supply chain, manufacturers increase their ability to anticipate risks and mitigate against disruptions.
In a volatile context, knowing which resources might soon be unavailable is extraordinarily valuable. Armed with these insights, manufacturers know which actions to take, and they can create contingencies within the supply chain to avoid future issues.
Detecting and neutralizing supply chain risks is so vital today that some players are taking steps to increase data transparency within their entire ecosystems. The Volkswagen Group, for example, will be a founding member of the Catena-X Automotive Network. The 25-member union aims to create uniform standards for the flow of data and information in the automotive value chain, helping to increase efficiency and avoid supply bottlenecks.
Improve throughput and manufacturing cycles
Better-leveraged data also leads to improvements in throughput and manufacturing cycles. A frequent concern for manufacturers is that one missing part can impact the ability to complete an entire production cycle. This might merely slow down processes or go as far as to prevent customer orders being fulfilled.
General Motors was forced to idle several factories in the US for a matter of weeks in September as a consequence of missing computer chips. Though it is an extreme case, the semi-conductor shortage highlights how acute this problem can become.
More generally, by using data to anticipate these bottlenecks companies can optimize the flow of work-in-progress, in turn, improving working capital management. With less work-in-progress left unfinished, a manufacturer’s throughput is improved.
3. Conquer new markets
An evidence-based response to important questions
Data allows companies to answer questions from prospective clients with added credibility. Being able to provide evidence to support claims, about your capacity to accommodate orders or to deliver on time — can be highly persuasive. More concretely, robust data in the B2B context can sway decisions about multi-million-dollar contracts.
These kinds of processes also allow manufacturers to move from relying on intuitive decision-making to drawing evidence-based conclusions. This helps in avoiding decision paralysis and can even be crucial for challenging long-standing assumptions among key stakeholders.
What-if modelling using historical operational, and sometimes external, data can answer questions and remove bias from strategic decision-making; with the right data, it can demonstrate the global probability of success.
4. Create entirely new business models
Enjoy the benefits of a service economy
In addition to conquering new markets, data presents a way for manufacturers to craft completely new business models; this represents an opportunity to bring added value to customers with a potential for new revenue streams. Michelin’s “Pay by the Mile” solution allows customers to pay only for the time they are actually using Michelin tires. The program is underpinned by rigorous data management to ensure customer benefits while also delivering improved profitability. Another famous example is the Rolls Royce subscription model of “power-by-the-hour.” Basically, it is an Engine-as-a-Service (EaaS) model. The subscription data-based model can be applied to almost any product; we see flooring-as-a-service, light-as-a-service, and many other examples.
All in all, we see that data is becoming a new type of raw material that can help to create value in supply chains and manufacturing. The starting point for any manufacturer is, as always, to prioritize their operational strategy objectives. But it is now also important to understand which data and modern data management tools are required to achieve these objectives. Data must be harnessed as an asset. This is vital if optimal operational and supply chain outcomes are to be realized.