As we find our feet in the precarious new world following the latest recession, discrete manufacturers are focusing their resources into customer retention and growth over and above customer acquisition. While one might argue that customer retention has always been a focus, we have definitive evidence that today, it is much more than lip service.
The evidence comes from research undertaken by IDC Manufacturing Insights. The 720 discrete manufacturers were interviewed in the largest survey of its type ever undertaken. The findings highlight that new initiatives are moving to the forefront to enable manufacturers to achieve newly focused customer growth and retention strategies.
In particular, bid and project management has taken centre stage, second only to customer fulfilment, as a top initiative over the next two years, particularly for those in the industrial equipment and hi-tech sectors. And most manufacturers admit to there being a substantial gap between where their bid and project management capabilities are currently, against where they need to be.
Where high capital investment items are being produced, well managed bid and project management can make a huge impact on the bottom line, optimising the financial, manufacturing and people resources involved, thus mitigating risk. However traditional bid and project management tends to fall short of achieving this best practice. And with customer retention strategies demanding investment, the contingency to absorb these inefficiencies simply isn’t there – any deviation from best practice eats directly into a manufacturer’s profitability.
As raw materials costs continue to rise, particularly for the metal fabrication industry, and prices continue to be driven down, the only viable approach to increasing profitability is to ‘turn up’ the efficiency of the manufacturing process itself. While cost cutting and productivity optimisation have always been a focus, manufacturers must now look far and wide at where additional savings can be derived, and our findings show that bid and project profitability is unchartered territory for many.
The biggest challenge in bridging this gap it seems, is system capabilities. While traditional Material Requirements Planning (MRP) based Enterprise Resource Planning (ERP) systems are effective in supporting production, managing inventory and tracking costs, many fall short of meeting today’s complex requirements.
If you’re one of the many manufacturers who have an ERP system which is 5-10 years old, it is likely that you also face a vast gap between the system capabilities of your ERP and business requirements to boost bid and project profitability.
While most of those surveyed, certainly in Western Europe and North America, recognise ERP as beneficial to a number of business initiatives from improved decision-making and overall profitability, to inventory optimisation and sales revenue growth, bid and project management features way down the list, with only a few respondents perceiving ERP to add value to this area.
The good news is that a new raft of solutions, which have functionally built in to maximise profitability from bid and project management, are available. Crucially, these are flexible enough to fit individual business requirements and evolve with business demands, while offering low TCO.
Amidst the uncertainty of the last few years, this research highlights a number of certainties. And the need to bridge the gap to achieve more profitable bid and project management seems to be one which discrete manufacturers must address if they are to capitalise on recovery.