Smart manufacturers ride economic roller coaster by thinking ahead

Top performers in global manufacturing are capitalising on the fluctuations in the economy by hedging their bets and making IT project choices strategically, rather than just reacting tactically to events. What’s more, they span all industries and five of the top 10 are UK-based (Imperial Tobacco, Gallaher, Smith Nephew, Unilever and Reckitt Benckiser). These are key findings of a study by Deloitte Research, which concludes that leaders like Dell, Oracle and Nokia don’t only focus their investments on improving immediate competitive advantage but simultaneously shore themselves up against forecast future developments. Not surprising maybe, but if success here is determined by companies’ ability to deal with uncertainty, then manufacturing businesses currently focusing only on tactical IT system extensions that offer rapid implementation and fast ROI (return on investment) could be getting it wrong. Given the roller coaster that is today’s picture of manufacturing production output, as the UK apparently but tentatively climbs out of recession, a more strategic and holistic approach (at the very least in terms of matching investment to the big picture) looks better. Figures for April from the Office of National Statistics, released as we go to press, show manufacturing output up an impressive 0.8% on March, although still showing a fall of 0.3% quarter on quarter and 5.6% year on year. Nevertheless, the rise indicates again that the long term manufacturing recession may well now be over – particularly with the NOS previous month’s figure of a 0.8% fall now revised up to a 0.5% gain, and thus closer to analysts’ predictions then of 0.3%. Add to this February’s good news, albeit revised down from the original posted 0.4% increase to just 0.2%, and there is encouraging consistency. Over the last three months, the difficult areas have been electrical and optical and the transport equipment industries, along with telecoms and high tech, although these are now recovering . There remains a question mark over the pharmaceuticals and automotive sectors which had been high performers. Meanwhile manufacturing producer prices are rising, according to the ONS, albeit only by 0.1% year-on-year, while input prices have fallen 6.2% in that time frame. But engineering turnover in the three months to March had decreased 5%, mostly due to an 11.5% fall in export turnover, although the trends look more positive. The year-on-year fall was 22.7%. Deloitte’s own IT recommendations are CRM (customer relationship management), systems that support product innovation, supply chain management systems, HR, and business intelligence infrastructure. Although the firm counsels for the advantages of thinking holistically, it also expresses a preference for building on existing technology investments, rather than going for additional, large and potentially risky implementations. Says Julian Thomas, UK Manufacturing & Automotive Industry Leader for Deloitte: “By focusing on [these], flexible companies are well positioned for this current upswing. “Over the last 18 months, we have seen the manufacturing sector uniquely affected by this period of uncertainty. This is evidenced by the fact that it is one of the earliest industries to begin an upswing. “We’ve seen that organisations employing strategic flexibility, planning for various contingencies and making educated choices about the path they follow, typically have the resources in place for multiple eventualities.” Deloitte’s ‘Performance Amid Uncertainty: A Global Manufacturing Perspective’ explores the winning practices of the best, and describes guiding principles that can make any company more successful, irrespective of economic conditions. It includes the firm’s Top 100 global manufacturing performers, with rankings by industry segment and region, and shows that good manufacturing organisations have grown savvy about their economic environment and are planning and implementing systems accordingly.