Think of your technology investments as a journey that requires you to plan in detail how it will … [+]
In today’s world of tech-everything, manufacturers get bombarded with pitches from salespeople touting the next thing you need to achieve efficiency, supercharge productivity, and unearth riches.
A lot of it sounds pretty good. Some of it may produce real value.
But most small and medium-sized manufacturers shouldn’t bite. At least, not until they’ve connected their technology investments with a cohesive plan and, most importantly, a clear set of priorities. Without that broader strategic thinking, it’s easy to get it wrong: nearly a third of all software spend goes to waste, according to one recent study from Flexera. Here’s how manufacturers can make sure their transformation efforts don’t add to this statistic.
Start With A Strategy, Not A Technology
Every company is on its own journey to deploy tech. To be successful, the path must be incremental and intentional, and it must align with the goals of the business. It should never be technology for technology’s sake. Technology should always solve a problem that matters to the business. It should always advance the strategy. Otherwise, it’s a waste.
For many smaller manufacturers, there can be massive value in things like tracking sensor data, introducing robotics, utilizing a digital twin, and implementing AI-backed tools to improve back-end operations. But charting a course to maximize those investments requires stepping back for due diligence and strategic planning.
Every day, manufacturers receive pitches for big, expensive, integrated technology systems that promise to solve their technology woes and modernize their operations. One recent one that stuck out: A software provider that specializes in monitoring people movement and activities with the goal to make labor more effective. That may well be an appropriate next step for companies who’ve reached technology maturity in many other areas of their operation. For most small manufacturers, such a system would turn the dial just a click—when several other technologies could lead to major improvements for much less money.
That is to say: Don’t pour your money into technology that has a chance to create 2% efficiency until you’ve made sure to capture all the low-hanging fruit, which could increase profitability by 10% or beyond.
Consider Outside Help
Leadership at manufacturing SMBs are in a constant fight to fit it all in—the supplier management, the client outreach, the hiring and firing, the financial oversight, and so much more. So, when it comes to technology, they tend to make bad decisions that take one of two shapes:
- They find a software vendor that sounds good enough to trust, pay them significant amounts of money for a (see above) “2%” solution, and neglect the other more cost-effective modernization projects.
- They get so overwhelmed by the choices and hype that they end up frozen in analysis paralysis, finding it easy to ignore long-term transformation so long as the bottom line looks attractive right now.
Steering around these mistakes requires investing time in strategic thinking. It also helps to listen to the concerns and ideas not only of the C-suite, but of employees throughout the organization. They understand sometimes better than anyone the areas of operational inefficiency because they live it every day.
But, sometimes, even the most intentional efforts fail to create a list of transformation priorities that is inclusive of all the opportunities Industry 4.0 technology affords. Manufacturing leaders may be too close to their own operations to see the simple adjustments that could create outsized results. If they’d been able to pinpoint their deficiencies, they likely already would’ve taken action to fix them.
It can make sense to bring in an outside consulting firm to take a deeper look at your operations with a goal of helping you create a transformation strategy. For SMBs, there are some strong options. Through the Manufacturing Extension Partnership (MEP), the federal government offers assistance for small and medium-sized manufacturers that is delivered at the state level. At 51 state centers and several regional hubs—MAGNET, the nonprofit consultancy I run, is one of them—manufacturers get access to expertise that can help them future-proof their businesses.
Understand The Benefits
Small manufacturers that put off technology implementation often point to their current levels of profitability as justification. But it’s that very success that should drive them to reinvest in the business, creating operations that are more resilient not only to large-scale disruption a la the pandemic, but also to the shifting market dynamics all around. For manufacturers, it’s evolve or wait for your competitors to pass you by.
The rewards can be massive and it’s important to understand what matters most in each business. Machine downtime can sink by 30% to 50%, labor productivity can improve by 15% to 30%, and cost reduction from inventory holding can reach 15% to 20%, among other improvements pinpointed by McKinsey.
You certainly don’t get there overnight. You also don’t get there by handing out checks to technology vendors promising out-of-the-box solutions that may not actually fit 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.
