When IT works properly, no one ever notices. Hardware sits hidden in a data centre or server room. The software that enables production, supply and sales is only ever remarked upon when it does not match expectations.
This belies the critical role of IT in manufacturing. If you are anything like a typical manufacturer, practically all of your production includes machines and those machines are controlled by technology.
At the risk of stressing the point, IT is THE heart of manufacturing. So much so that a recent IDC Manufacturing Insights surveya recent IDC Manufacturing Insights survey – the largest of its type ever undertaken – into discrete manufacturing, found that only 0.3% of discrete manufacturers in Western Europe believe IT plays no role whatsoever in their organisation.
The same research found 26.5% of European manufacturers believe IT is critical for the everyday support of business operations. Moving into strategic considerations, a further 19.6% said IT delivered competitive advantage in some areas and 44.2% said IT was vital to achieving operational excellence initiatives.
This suggests that, if even if they are largely invisible, the PLM and ERP systems that define production, the SCM packages controlling logistics and the financial management solutions delivering insight into profitability are ubiquitous throughout the industry and deliver real value.
The same study also revealed that just 9.3% of manufacturers felt that the role of IT was confined to the financial activities of accounting, sales, inventory and purchasing. It is worth remembering this split between perceptions of IT as operational, strategic or financial, for reasons we shall return to in a minute.
When we talk of technology in manufacturing, we often focus on the ERP systems that control so much activity. Across Europe, 81.1% of manufacturers have some kind of ERP in place.
The good news is that 64% of manufacturers in Western Europe see a tangible benefit from ERP, with just over 61% realising payback on the investment in under three years.
However, the nature of this return on investment differs a great deal depending on who you ask. The research discovered some significant gaps between the perspectives of the CIO and the CEO.
See if this sounds familiar: the CIO tends to place most value on the improved profitability that ERP can bring, but your CEO does not link ERP to profitability to the same degree. Instead, your “typical” CEO feels ERP helps with issues such as inventory optimization or supplier cost reduction.
The research suggests that CEOs believe that ERP systems can streamline operational processes, whereas CIOs believe it helps the company improve finances. It is the recurrence of the different perceptions of IT as predominantly operational, strategic or financial outlined above.
IDC believes these gaps are significant enough to warrant investigating better alignment of the CEO and CIO perspectives. There is some strong common ground among business leaders – for example both CIOs and CEOs see internal change management as the main barrier to further investment. How can you build on that common ground and establish a consistent perception of IT and the demands made upon it?
One possible route may be to look at the additional solutions favoured by CIOs and CEOs to enhance the results ERP delivers. CEOs favour supply chain management (SCM), whereas CIOs prefer business intelligence and analytics. A more rounded ERP system that covers off the operational elements of the supply chain and the strategic dimensions of business intelligence may yet yield a more visible IT system that is understood by all.