The future of manufacturing part 3: Getting data right
In previous instalments of this series, we discussed the key trends in the future of manufacturing and provided a checklist for new ERP and MRP projects. Now we need to talk about a critical commercial issue for any manufacturing business: getting the data right.
We meet many manufacturing CEOs who are frustrated that, despite spending huge sums on new systems, they lack visibility of the true cost of production, have higher than expected waste, and have no clear view of inventory.
New systems like IFS, Nav, AX or Dynamics 365, SAP, Sage, Epicor, Oracle or Syspro can cost big money. But if the project fails to deliver, often the root cause is that the master data is wrong. The system may be fine (though often it isn’t!), but if the data is wrong then everything is built on sand.
Poorly controlled master data confuses everything, embedding waste, errors and poor service in the organisation. For example, product costings, bills of material, recipes, or routings, may have not been set up correctly in the first place or may have become out of date.
We’ve frequently seen examples of businesses where the same customers, finished goods (FGs) or raw materials (RMs) are entered multiple times, but called different things, creating all kinds of confusion. The bigger and more widely distributed the company, the more possible this can happen.
This often results in reports that are wrong or time-consuming to fix. Staff costs increase, especially for the finance team, who may have to clear up the mess in Excel.
Procurement may over-order to create safety stocks, tying up cash; sales can’t accurately forecast delivery dates. Eager salespeople may pinch items from different orders to fulfil today’s priority, creating more problems down the line. Inventory turn is lower than planned and OTIF targets get missed.
Customers are disappointed by long lead-times or upset by incorrect, incomplete or late delivery. Labels or documents may be wrong, which is inconvenient at best and, at worst, can have legal or safety implications.
On the other hand, well-structured manufacturing data provides insights to senior managers, allowing them to answer important questions:
Who are our most profitable customers?
What are our least profitable products?
Which processes require the most rework?
Well-structured data also allows for accurate real-time data, empowering supervisors to organise work within defined boundaries.
Fundamentally, poor data can make it hard to take advantage of efficiencies of scale. You can roll out new systems, but the problems will remain. And a growing business becomes less profitable rather than more profitable.
So then, how does a mid-market manufacturing business get data right?
Data is difficult and detailed. And let’s be honest: it’s not very interesting. Solution vendors are contracted to deliver some tech, so they don’t really care about the data. Everyone’s too busy doing their day job, so it may get left to the Finance or IT teams to sort it out, and they may not have the knowledge to fix issues or the authority to get people to change bad habits.
But this issue has strategic implications, so a Board-level leader needs to take ownership. And whoever takes charge of the data needs to have time to get to the bottom of the issues, the experience of this kind of work, and authority to make decisions and get things done.
Production and business teams will have to be involved as well, taking responsibility to help get the data right and keep it that way. And since data quality is an ongoing exercise, the senior team should receive reports at regular meetings.
2. Identify the problems and their solutions.
It may seem obvious, but it’s often overlooked: data quality issues will keep reoccurring and snowballing if you don’t find the root causes and create solutions.
One place to start is to look for who is supposed to be in charge of data quality – if anyone. Data problems often reflect process problems or a lack of alignment between people and departments. It may not be clear internally who is responsible for what, for updating data as things change, or for correcting data when errors are found.
Perhaps data quality falls to some very overstretched, helpful people who may be vital but have a very low profile (the Directors wonder what they’re doing all day!). Or there may be no-one who has time to manage data quality.
Using multiple systems without proper integration is another common cause of data quality issues. Sales, finance and production teams’ reports simply won’t agree if they are working from different base information. Fixing the problem may require process changes, technology changes and some retraining (or even ‘redeployment’ if the real issue is particular people!).
There may be good reasons for using multiple systems: for example, specialist warehouse management solutions that work with advanced technology such as voice- or sight-picking, which isn’t supported by a basic ERP platform. But with separate systems, there must be clarity as to which system owns what data (e.g. ERP owns stock quantities, WHM owns stock location) and the interfaces need to be tested and working.
3. Make rational decisions about when to solve problems.
Data issues often arise because time and commercial pressures make shortcuts necessary. Getting data right may be a matter of diminishing returns, as obscure problems can be very difficult and time-consuming to fix, and they may just not be worth it!
The most important thing is to make considered and rational decisions. List the data problems, estimate the necessary effort for each and the business impact.
If short-term pressures mean that it won’t be fixed now, then perhaps it’s on the list for next month. In the meantime, monitor the impact of the problem. Deciding to tolerate a problem, for now, might be sensible. Ignoring it or sweeping it under the carpet isn’t!
Even poor systems can work effectively if the data is structured, maintained and policed. Most importantly, this is a good platform for system improvements: maintaining data quality can eliminate a whole range of problems and inefficiencies, can boost profitability, and can give everyone new energy as less time is wasted on distractions and snags.
Freeman Clarke is the UK’s largest and most experienced team of IT leaders. We frequently work with manufacturing clients to help deliver transformational programs. We work only for you: we are entirely independent of any technology or suppliers. Contact Us and we’ll be in touch for an informal conversation.
The future of manufacturing part 1: The six key trends of manufacturing 4.0
The IT industry often deliberately spreads ‘fear, uncertainty and doubt’ in the market. They create confusion about the future, and then, of course, sell you the perfect solution to a possibly non-existent problem. Is the so-called ‘Fourth Industrial Revolution’ and ‘Manufacturing 4.0’ part of the usual befuddlement bandwagon?
What is really happening? What are the technologies that will form this change? And what difference do they really make? Read the 6 key trends, but for a top line perspective watch the short video below.
Shop floor technology is increasingly information technology
First, a little context. Historically, there was a clear distinction: your operations teams owned shop-floor tech, and the IT team owned IT. But this gap is rapidly closing. For many companies, the challenge now is to have the right leadership to effectively lead these cross-border initiatives and to deliver value.
The winners will be those companies who are smart enough to use technology and data to meet customer needs more effectively and to innovate ahead of the competition. This is as much about leadership as it is about technology.
We believe there are six key trends to this generation of tech:
IoT/5G
Improved collaboration
Big data, AI and machine learning
Robots/cobots
Servitisation
3D printing
Here’s what they each mean.
1. How will IoT/5G make a difference to manufacturing?
Just to be clear, ‘IoT’ means the ‘Internet of Things,’ or using connectivity to control machinery and harvest data. ‘5G’ is the fifth generation of technology for cellular networks.
When it comes to manufacturing, IoT and 5G is about incorporating sensors and controllers on the shop floor to make the production activity more visible and controllable in real-time. This requires new systems as well.
Most importantly, it requires skilled staff to deliver the benefits, which will include minimising costs and maximising output with more accurate ordering, production, and stock management.
One of the best aspects of IoT and 5G for manufacturers is how it improves reporting. Rather than basing decisions on reports that were manually created a week or a month ago, information flows into your ERP or MRP systems to provide accurate, up-to-the-minute information, with minimal manual intervention.
Ultimately, IoT lowers costs, increases profits, and delivers better quality and service to customers.
Continue reading the key trends below the video.
Find out how to meet manufacturing challenges with technology
2. How will Manufacturing 4.0 improve internal and external collaboration?
When you hear ‘Manufacturing 4.0’ or ‘Industry 4.0’ it generally means increasingly autonomous systems and information in real-time.
More specifically, Manufacturing Execution Systems (MES) allow the capture of more data about detailed process activities and individual operations on individual items. MES can make use of barcode or QR-code scanning, or automated collection of RFID information, or similar smart-monitoring.
As more real-time information is available, and office IT like Microsoft Teams becomes mainstream, your management, supervisors, and even skilled operators no longer need to be on the shop floor to manage production. Managers and supervisors can see precisely what is happening, managing production in real-time, or detecting issues as they happen. They can also look backwards to understand costs, cycle-times and quality. Managers can assess effectiveness of processes, teams, production batches, and even individual machines or staff.
E-commerce has reset customer expectations across all industries. Your customers will increasingly expect to be able to see and assess the progress of their own orders through your factory.
This technology has external implications as well. Fortunately, with Manufacturing 4.0, integration of your production activities with your customers, suppliers and partners becomes possible at a far more detailed level.
3. The impact of Big Data, Artificial Intelligence and Machine Learning in manufacturing
Of course, large volumes of data create new challenges as well as opportunities. Manufacturers need new tools to understand data patterns. Technologies such as Tableau and Snowflake make vast number-crunching and visualisation easy, and once the data is digestible it’s a small step to introduce automation for some aspects of decision-making.
It doesn’t have to be rocket science. It can be a structure of simple rules, such as alerting the customer to reorder ahead of time. Or it can be sophisticated Machine Learning and Artificial Intelligence.
The combination of data, AI, and machine learning is already proving to be extremely powerful. But it doesn’t mean that people no longer matter. The issue is often one of skilled leadership. Manufacturers need tech-savvy leaders to set the vision and to create a culture of data-driven, analytical decision-making. With the right tech leadership it becomes much easier—and more profitable—to exploit all this new technology.
4. The new generation of robots and cobots
In the past, due to their high cost, and the production volumes necessary to justify the expense, industrial robots were often confined to large manufacturers.
But now we have a new generation of collaborative robots, or cobots, which automate tactical elements of production activity. Their simplicity and flexibility mean they are easier to deploy and can quickly deliver value, which makes them far more appropriate to the mid-market.
Again, implementing this fantastic technology creates a leadership challenge. Cobots are often configured and programmed by skilled production operators working in tandem with IT staff. You’ll need a skilled IT leader who can facilitate this collaboration.
5. Servitisation Creates Greater Value
‘Servitisation’ simply means the shift from selling products to selling services. We live in an era where companies want to buy everything ‘as a service’; manufacturers can increasingly look to a future where they charge customers for using their products rather than buying them. Whether it’s car tyres, aircraft engines, or workwear, manufacturers are charging recurring revenues or licenses to their customers for the use of the products, often with support and replacement bundled in.
Servitisation will increasingly work in tandem with other aspects of Manufacturing 4.0. Perhaps the greatest opportunities are in monitoring and communicating with your products while in use. This enables new models for preventative maintenance, guaranteed service and support.
We will also see entirely new opportunities for value-added services, along with greater opportunities for upselling and better customer lock-in. The bottom line is that reliable, recurring revenues are more valuable than one-off sales. Manufacturers who make this change will become increasingly dominant.
6. The 3D printing revolution continues
3D printing will have a revolutionary effect on many aspects of manufacturing. Rw apid prototyping and iteration are already becoming the norm, but the real revolutions will be in mass customisation where customer expectations will undergo a major change. Customers will expect endless product versions and variations.
For manufacturers, the benefits are also enormous: 3D printing now allows for a wider range of materials, and data can be included directly onto the product. For example, QR codes or human-readable product IDs can be printed as part of the production process, with obvious benefits for process monitoring and stock management.
And 3D printing will massively reduce the need for stock holding, especially for spares, which will free up cash. This may have a transformative effect on smaller companies and their ability to invest in these new trends.
What this means for everybody (and the mid-market)
Along with the increased flexibility for customers and manufacturers, the above trends will have massive effects worldwide.
These changes will reduce labour costs, which in turn will reduce the attractiveness of low-cost economies as well as economies of scale. Together with an increased post-COVID focus on security of supply, this will enable a return to more local manufacturing.
Finally, it’s worth noting that more local manufacture would be a reversal of decades (or centuries) of growth in global trade of manufactured goods. Despite forecast increases in consumption, a recent ING report estimates a reduction in world trade by as much as 40% by 2040!
The reduction will affect a wide range of industries, from shipping to insurance, and may have very broad-ranging geopolitical ramifications as well. It won’t be the first time that manufacturing has changed the world!
It seems then quite reasonable to speak of another industrial revolution. But while many in the IT industry will want to sell solutions, we see it more as a leadership challenge. We believe that ambitious mid-sized businesses will find huge opportunities, so long as they have the right leadership in terms of their IT and technology.
Find out what a Tech Leader can do for your business: Get in touch
Freeman Clarke is the UK’s largest and most experienced team of IT leaders. We frequently work with manufacturing clients to help deliver transformational programs. We work only for you: we are entirely independent of any technology or suppliers. Contact Us and we’ll be in touch for an informal conversation.
The future of manufacturing part 2: Board checklist for successful MRP/ERP projects
Our previous instalment on the future of manufacturing discussed the main trends and their effects on mid-market businesses.
In this instalment, we’ll discuss something of direct importance to mid-market manufacturers: Material Requirements Planning systems (MRPs), which help manage manufacturing processes, and Enterprise Resource Planning systems (ERPs), which integrate your main businesses processes.
More specifically, how to ensure you get them right.
A manufacturing company’s internal efficiency and effectiveness are highly reliant on sound MRP or ERP systems. But all too often we meet CEOs whose systems just tie them in knots, add cost, and hamper customer service. These systems become a brake on expansion and growth.
Large systems projects are expensive exercises. And yet the results are often disappointing and rarely meet their business objectives. And then you are stuck with them: MRP or ERP systems generally have a lifetime of seven years or more. Get it wrong, and you can repent at leisure!
How can you avoid this?
This Board checklist provides some key pointers. It can be a useful review even if you’re halfway through, or a primer if you’re about to start.
Has there been an open workshop at Board level to agree on the basic business objectives? The objective isn’t to implement a new MRP or ERP, it’s to deliver specific business outcomes…what are these? Has everyone agreed on them?
Be specific. For example, an objective may be to halve manufacturing cycle/throughput time; to remove four FTEs by avoiding any rekeying between the ERP and website; or to eliminate errors in labelling by automating label production.
2. Be clear about the key requirements.
In everyday business language, document the key things the systems must do, or must enable, or must achieve. This might be a list of forty or fifty statements, such as, Telesales handling staff can see accurate stock info and pricing on any products within thirty seconds.
Often the emphasis is on how you go about things today, but the focus should be on outcomes, as there may be better ways to get there. And all department heads need to be involved, to agree, and to sign off—yes, put ink on the paper!
3. Get specific about who is involved and who is accountable.
First, pick the right people to own the project. Are there experts on the business who will need to be assigned to the project team? Will their positions need to be backfilled?
And don’t assume that every techie in your business understands MRP or ERP projects. Increasingly the line is blurred between shop-floor technology, automation, and information technology. The Ops team (who might have owned this project a decade ago) may no longer have the right skills or experience.
Second, everyone must be clear on their roles in the project. Are you aiming to involve some of your own people in the details so they can become expert superusers of your new system? Who on the Board is accountable for delivery? This should include not only delivery of the technology, but all the business outcomes identified at the start.
4. Get clear on the cost-benefit model.
Although you don’t know the detailed costs yet, you can establish the cost-benefit model. This means understanding how this project will deliver hard benefits, so that when compromises are necessary, you can identify what’s worth keeping and what you can drop. The cost-benefit should be based on improvements in Key Performance Indicators (KPIs)—for example, identify the target on-time, in-full (OTIF) and compare to current measurements of the same KPIs.
5. Select your products rationally.
There are hundreds of systems available: IFS, Nav, AX, SAP, SAGE, Epicor, Oracle, Syspro to name a few! This can be a minefield – but not if you’re clear-headed about it. Once you have all your requirements, you can use them to create selection criteria, a scoring system, and clear questions to ask.
You need to weigh up the advantages of integrated ERP with multiple specialised systems, which might offer better features but greater complexity.
For example, it can make sense to select a standard ERP and a specialist warehousing product for better goods handling (picking, putaways etc), or a dedicated Manufacturing Execution System to collect detailed process efficiency data. Make sure all the business stakeholders are part of the decision-making process so they all have a vested interest in success.
6. Select your partners rationally.
A partner will configure, customise and support your systems. As you will need to have a long-term relationship, it is critical that there is trust and a good cultural fit. Take up references, and check everything! Ask around: are they experts in your sector? Are they financially secure? Have they got a stable team?
And start early, so that you have time to negotiate a good price and contract rather than having to cave in due to pressing deadlines.
7. Insist that your partners have a plan.
The vendor or implementation partner must provide a credible plan, and you must extend it to your own plans for things like communication, data setup, and retraining. Most importantly, the plan needs to show all activities to deliver the business objectives, not just delivery of the tech; and the plan should include all the resources and commitments, not just the supplier.
8. Define target business processes.
Working with the implementation partner, you need to design your target processes.
Many MRP and ERP projects fail because companies try to configure new software to match the way they always have worked, as opposed to designing the most efficient processes.
This often leads to expensive bespoking; and, if the implementation partner is charging for this, then their salespeople will be delighted to help you make bad decisions!
9. Identify process and organisational changes.
With new systems come new ways of working. And change can be hard for some. You need to plan, document, and carefully roll out these changes, and communicate frequently with everyone involved. This may be the most difficult part of the entire project, especially if some of your teams are remote and not often in the office. It will not happen by accident; without proper management, many people will go to great lengths to avoid changing how they do their jobs!
10. Take the opportunity to clean up your data.
Start cleaning your data today. Because getting the data right can be make-or-break for a new system, and this task can be the biggest and most critical part of the project.
After all one of the key benefits of an ERP or MRP is how the information helps decision-making; if you take away that with poor and inaccurate data, you’re taking away the whole point.
Think about product codes and bills of material and how they can best be structured to deliver the information the business needs. Seriously, start now. Don’t wait until go-live. In our experience, those who wait until go-live end up bringing inaccurate and unclean data across to the new system!
11. Manage device integration.
Devices are going to be integrated with these news systems, so get started on identifying them and testing as soon as possible. For example, shop-floor data collection devices like scales, environmental sensors, barcode scanners, or RFID trackers are increasingly key sources of efficiency, so they shouldn’t be an afterthought.
Remember to test for more than just if the new software works. Are the devices suitable for the environment? Consider temperature, humidity, vibration etc. Whenever you can, involve the device suppliers.
12. Run a testing and conference-room pilot.
By making the vendor run their product through your business processes, you can check that the system and business practices will fit and that the key staff are ready for change. A pilot is more than a last chance to stop problems. It’s a great way to get superusers onto the system; it may also be an opportunity to identify additional benefits.
13. Manage the implementation / cutover / go-live.
A ‘big bang’ go-live can be complicated and risky; different parts of the new system may be ready at different times; and different phases will deliver different benefits. So there will normally be a progressive adoption of the new system(s) and decommissioning of the old ones. This needs to be thought through and carefully managed.
14. Train and monitor staff.
Staff will need training and coaching in how to work with new systems and processes. There may be a period of de-snagging and minor changes. This needs careful monitoring and policing to ensure that employees have clear ways of working and do not adopt bad habits. You should be prepared for some pushback: for many, change is daunting and can cause stress and resentment. And when they don’t yet fully understand the new way of working, they may blame the system for mistakes or slower processes.
15. Get specific about who has ownership moving forward.
The project owners need to ensure the original business objectives and cost benefits materialise. But this is also the moment when the new system becomes ‘legacy,’ so it’s critical that ongoing ownership is clear.
Ongoing monitoring must be part of the routine, and new issues must be addressed quickly and without a fuss. Whose job is that?
In addition, you will need an annual budget for vendor support, for training of new staff, for fixes, and for amendments so the system stays aligned as working practices and products change (as they inevitably will).
Lay the foundation for your future
All too often we see a lack of focus on the key points of this checklist. As a result, projects become bogged down, with overruns of both costs and timescales. Eventually, in the dash to finish, the original vision is forgotten, there is no more time or money, and the aim becomes to ‘just get it done’!
But if you follow the checklist, you greatly increase the risk of success, and along with it, the transformational benefits of a new ERP or MRP system. Many of our clients have achieved significant uplift in efficiency and service and find new confidence to grow because their business starts to feel like a platform for scaling up!
When system issues are no longer on the agenda, the Board have more time to talk about strategy and growth. And effective systems provide data and reports to feed those conversations.
Freeman Clarke is the UK’s largest and most experienced team of IT leaders. We frequently work with manufacturing clients to help deliver transformational programs. We work only for you: we are entirely independent of any technology or suppliers. Contact Us and we’ll be in touch for an informal conversation.
How to Get Started with an ERP Project – Part 2
This is the second in a two-part series on how to launch a successful Enterprise Planning Resource (ERP) project. For more information on ERP in plain English, check out our Knowledge Centre.
How to Start an ERP Project, Part II
Read our continuation of how ERP products help improve integration with both customers and suppliers.
This is the first in a two-part series on how to launch a successful Enterprise Resource Planning (ERP) project. For more information on ERP in plain English, check out our Knowledge Centre.
How to Start an ERP Project, Part I
Read our full briefing to learn how ERP products help improve integration with both customers and suppliers.
A concise introduction to integration problems – Part II: How to solve them
This is the second of our two-part series on integration problems. Click here to read Part I: How to Spot Them.
So, you have identified that your company has integration problems. Morale is affected, reporting is overly complicated, you can’t plan for the future, and customer service is suffering. So, what can you do about it?
Look Before You Leap
When looking to fix integration problems, you have a spectrum of options: at one end is a long series of fixes to individual issues; at the other end is a major, transformational project.
Either way, strategise first! Before you do anything, your Board should consider these questions:
What is your ambition for growth? Meaning, how much do you intend to grow and change the business in the coming years? Do you need a platform for growth and acquisition, or can you continue to cope?
What resources are available? Are you prepared to invest significant resources in projects, or would you rather tackle problems piecemeal?
How serious are the problems? How much are they really affecting — or in danger of affecting — the business?
Is there a major opportunity to reinvent your business, or just an opportunity to remove some irritations?
Be aware that this discussion can reveal personal tensions in your organisation. In most cases, when systems aren’t integrated, it means that departments aren’t communicating with each other — so this kind of discussion can be quite stormy, as departments may blame each other for your company’s struggles.
Avoid the blame-game. Aim for a dispassionate acceptance of the current realities and the need for change. Then figure out who will have ownership of the solution.
Putting Together Your Integration Dream Team
You need focus to solve integration problems. So, start with a competent team that has resources and authority. Appoint a Director to be accountable and give them a twelve-week time frame within which solving integration problems is their priority.
Why twelve weeks? Because the time period needs to be long enough to actually make a difference, but short enough that business-as-usual issues can wait, so this project can genuinely be a priority.
The initial focus should be on creating a list of issues with (a) estimates of the three-year business impact of each, and (b) an assessment of how readily solvable the problem. From this list you can select, say, the top three or four problems with a commitment to solve or substantially reduce them in twelve weeks.
How to Take Small Steps Forward
Remember that integration solutions are on the spectrum between individual fixes and a big, transformational project. It may be tempting to think big — but it may not be necessary! For each issue, consider the following:
Can processes be changed to eliminate the problem? Perhaps small process and system amendments can streamline activities.
Are personnel issues contributing? You may need to improve your training programs or take a hard look at incentives (e.g. sales commissions) that influence behaviour. Are there individuals whose roles need to be changed?
If workarounds are necessary, can they be automated? For example, using Excel macros or templates, small bespoke programs, or other data processing or reporting tools.
Are there incompatible or obsolete technologies that must be upgraded or replaced?
More Serious Redesign Projects
If it turns out that more serious redesigns are necessary, you’ll need an even more strategic approach. Go back to the beginning and consider how to reorganise your business to suit the needs of your customers. For example, automate manual activities wherever possible, unless it makes commercial sense or provides enhanced service that your customers value.
Then start thinking through the main processes, key performance indicators, and options for back-end systems. (Naturally, if you reduce the number of back-end systems, there will be fewer technical integrations, so there should be fewer sources of potential problems.)
A word of warning: some vendors market their solutions as a single brand, when, under the bonnet, they actually provide multiple products which are not fully integrated. So, one ‘product’ may actually be composed of many partly integrated pieces of software.
The solution may then lie in Enterprise Resource Planning (ERP). Basically, ERP takes all of the core processes you need to run your company — finance, HR, manufacturing, supply chain, services, procurement, and others — and integrates them into a single system.
The goal is to provide all the separate aspects of your business with the same information in real-time. And the result can a huge springboard to scalability and growth.
For more posts on ERP and Integration issues, visit our Knowledge Centre.
A concise introduction to integration problems – Part I: How to spot them
A Concise Introduction to Integration Problems
Part I: How to Spot Them
Integration problems can cause your business quite a bit of damage. When systems don’t talk to each other, it inhibits growth and undermines morale. It means more mistakes and manual work. It makes reporting difficult — or impossible! To make matters even worse, the problems can be difficult to understand in detail, and even more difficult to untangle.
Of course, every company has its challenges. So how do you know if integration is behind them? The first step is considering the specific issues facing your company. If you’re seeing one or more of the issues below, take a hard look at how your systems are working together — or not.
The Six Most Common (and Frustrating!) Results of Integration Problems
Morale is suffering. Inefficient processes don’t just hurt the bottom line. They cause errors and delays, leading to frustration and arguments. And they make it harder to provide one of the most satisfying aspects of any business — good service to customers.
Reportingis inaccurate and time-consuming. Managing a successful business requires accurate and timely data. But when there are integration issues, reporting is overcomplicated, requiring major manual effort. You may also lack simple dashboards for managers around the business, which makes it harder to make the right decisions and delegate authority.
Service is suffering. It’s not easy to provide good service when you lack up-to-date information on stock, delivery, or products. Your people should put the customer first, but their energy is drained by system problems.
It’s harder for marketing and sales. Due to lack of data, great ideas never get off the ground. For example, the sales director has a clever idea for a new campaign, but it’s almost impossible to crunch the numbers. Or new plans for intelligent cross-selling or upselling are impractical, because nobody can effectively analyse purchasing habits.
You can’t strategize. Your online strategy is impossible if back-end systems can’t provide a simple platform. Without seamless back-office processes, you can’t easily analyse product, stock, or sales data; you lack effective product searches and other simple “must-haves.”
People are choke-points. Individuals have their own vital lists and workarounds, so they become individually critical to the operation. When these key people are on vacation or sick, then the whole business is affected — and if they leave it’s a major problem!
Why Is It So Hard to Solve Integration Problems?
It can be hard to figure out solutions because busy directors just don’t have time to get to the bottom of it all. Put simply, there may be no one in your business with the skills, time, resources, and authority to solve these problems.
Another reason may lay in an accumulation of small problems, each intricate and complicated in their own way. For instance, when faced with integration issues many well-intentioned people create workarounds — their own special spreadsheets, databases, trackers, or the like. Each one solves an individual problem but adds further layers of complexity and time-consuming tasks.
Over time, more people are employed to deal with these tasks and, of course, they see it as their job. No one thinks of smart ways to eliminate their own job!
For more posts on ERP and Integration issues, visit our Knowledge Centre.
Freeman Clarke is the largest and most experienced team of part-time, or fractional, IT leaders. We work exclusively with organizations looking to use IT to grow their business. For an informal conversation, contact us and we’ll be in touch.
Digital transformations – Efficiency, effectiveness & risk management
For many companies, the technology strategy begins and ends with technical details in which the Board have little interest. The absence of a digital vision and any experienced IT leaders means that the IT slot on the Board agenda is a discussion of details, issues and gripes. The Board may simply see IT as a problem to be overcome or a beast that has to be fed.
But IT genuinely has the ability to transform a business. There are radical new ways to grow the business, to serve customers better, and to make more profit. Businesses that can connect with these benefits are, understandably, valued far higher than their low-tech competitors.
So what exactly is Digital Transformation?
For our clients, Digital Transformation simply means using IT to deliver dramatic improvement. That’s different to just an upgrade or fixing some niggling problems. It means: using IT to make a significant change for the better.
That may just mean simple IT done well – that’s surprisingly rare! Or it may mean genuine technology innovation, something that is breaking new (or new’ish) ground.
We simplify this issue by defining 4 different kinds of transformation:
For an explanation about the 4 types, read our post.
This document is a briefing on internal redesigns and risk management.
For one of our clients, detailed later, this meant not only radically improving how the business worked, but reducing IT spend by 75%! For other clients this meant halving delivery times, or massively improving competitiveness by calculating risk accurately and pricing products correctly for the customer.
Successful Businesses Focus Outwards
Directors of growing mid-market businesses tend to be focussed outwards – for example, they are often defined by an obsessive attention to the needs of the market, their customers’ perceptions and building revenue. Sometimes this includes supplier and partner relationships as well – securing excellent relationships, pricing and terms with suppliers can be of strategic importance.
Perhaps entrepreneurs are defined by their focus on seizing opportunities rather than worrying too much about details of how the deal will be fulfilled.
So as company revenue turns from millions to tens of millions, process, organisational and behavioural issues build up. Typically, people’s jobs become progressively less productive, there is increasing reliance on individuals, and often there is more argument and friction between people.
Many CEOs of growing businesses become exasperated as they feel that they are employing ever more staff who seem to spend their time making work for each other!
But, at every stage, the Board take the view:
the issues are manageable
the business is profitable
securing growth is more important – in other words securing growth is more exciting!
And this can result in a mid-market business becoming progressively complicated and management “papering over the cracks” using old-fashioned ERP systems and point-solutions.
Most importantly, many staff begin to see these issues as normal and they see handling and wrangling these problems as the purpose of their job.
People stop complaining about how much time they spend in Excel processing an order, instead they ask for more Excel training. They begin to look forward to being promoted to Senior Order Administrator. Everyone has forgotten that order administration should be entirely automated.
Three Main Opportunities
A useful way to navigate Digital Transformation is to consider 3 specific opportunities:
Integrate with suppliers and customers – for many companies, integrating with their suppliers is the greatest possible waste reduction; and their ability to understand and integrate with customers is their biggest potential market differentiation and means of providing great service and lock-in.
Address “swivel chair” users – traditionally lots of staff spend their time switching between one system and another, using their expert knowledge to correctly manipulate systems and data and to handle incoming emails and calls to provide expert assistance to other people in the business. We call this the “swivel chair” problem! Often these manual tasks are not at all simple and these staff may seem like vital experts in the business – but they are not really adding value. These people may be replaced by properly integrated systems or by software robots so that their expertise can be properly used.
Real-time and accurate data – having data readily available (without the need for teams of administrators!) is the basis for intelligent decision-making. This can be managers, making informed decisions; simple rules-based automated decision-making; or more sophisticated AI and machine learning.
Customer Integration is Changing
Integrating with customers allows you to provide higher levels of service and lock-in, but customer service is not what it used to be!
Increasingly customers of all sorts want to interact using mobile apps rather than call centres. Many people, especially younger people, expect a chat interface even in a B2B environment and many companies are using bots and language recognition to fully or partially automate their handling of incoming requests or queries. Bots can support call centre agents and increase their throughput and responsiveness or automate parts of their roles.
And modern back-office systems allow integration far more easily than they did in the past using APIs. So your prospects may well make their buying decisions based on how easy it is for their systems to integrate with yours and if you can offer faster, simpler, more reliable and secure integration than your competition then that can be a powerful USP.
Internal Redesign
In some cases it’s possible to bring about genuine transformation simply through a successful, well-engineered top-to-bottom system replacement programme.
British Retail Consortium (BRC) are the go-to trade association for all UK retailers. Their membership encompasses over 70% of the UK retail industry (by turnover) and they have 25 years of history. Over the last 2 years they have been through a complete systems transformation project with impressive results.
BRC’s CEO, Helen Dickinson OBE, summarised their objectives:
“We had systems and ways of working that were deeply embedded but not always very efficient. Several areas of our business were caught up in this problem and it impacted people’s attitude to their work as well. Many aspects of our business are about publishing and our website was completely out of date. Not only did it fail to project our brand but publishing content was difficult and time-consuming.
And our working practices were looking old fashioned – lots of expensive office space and everyone chained to their desks. It was time for a major overhaul.”
A Freeman Clark’s IT leader became BRC’s CIO and over a 24 months period he shaped, planned and delivered a programme of changes. He explained:
“Real change is about systems and how people work, so a large part of this project was ensuring that communication was effective and people were lined up.
For example, once we had created a rapid and effective website and publishing system, we had to work out how to take BRC’s brilliant content and turn it into things people want to read, watch or listen to. This meant new ways of working as well as new roles and new attitudes.
We replaced every system in the business and we also moved to modern offices and implemented flexible working and hot desking to reduce space by 30%. This was a worry for staff and we spent a lot of time in workshops and discussions. We had to create policies and rules but also give managers strategies and simple ways to make these changes work.
But the end results speak for themselves. The old systems were not fit for purpose and overall IT costs were 10% of revenue. This has now reduced to 2.5% of revenue!”
Chillisauce are an example of both removing swivel chair problems and improving integration with suppliers. And, no surprise, this has also enabled them to radically improve their customer experience as well.
Chillisauce is an events agency, specialising in stag and hen parties. They offer a choice from over 5,000 different activities in 70 cities worldwide. Customers use their website to select all the components of their own bespoke event including activities, locations, hotels and transport.
James Baddiley, CEO of Chillisauce explained the challenge:
“Our website was very inflexible. If we wanted to add a new product then this was a very major undertaking, so it was a drag on our ability to really expand and develop our business. Choosing and buying a stag or hen do is a major decision for people, we want to make it fun and offer the best experience and the best options on the market.”
One of our Principals, Tony Tinnirello advised Chillisauce on a programme of work to transform the entire fulfilment activity. Tony explained:
“We implemented a suite of new systems, all based in the cloud, and we used some sophisticated technology to link them all together. It’s all largely automated. So the entire process is far less manual, far faster and less error-prone. Critically we generate prices dynamically so customers can see the price right in front of them – that’s very rare in our market!
Communication with suppliers is challenging as they range from airlines who have sophisticated systems, to a farmer offering Zorb Football in a field! For the airline we integrate with their system in real-time, for the farmer we create automated emails and he can login to our portal to confirm he has taken the booking.
The result is that customers can create their event online, book and then check the status of each element taking shape.
From our internal point of view the new systems also now provide a wealth of data. We can check revenue and margins on every product, check we’re meeting service targets and rapidly deal with any issues. In particular this has been a huge time saver for the accounts department.”
Availability of Information Can Transform Growth Prospects
The growth of many mid-market businesses is limited by the lack of availability of their Board to pursue major changes and expansion. And the fundamental reason is that the Board are too busy managing the business and this takes most of their time and energy.
As the business expands, it would make sense to build a layer of senior managers under the Board but the barrier is a lack of hard information which should be the basis for delegating meaningful decision-making authority and accountability.
When information is not available the business operation continues to revolve around the knowledge, experience and “gut feel” of the Board members and this becomes a serious choke on expansion.
Real-time and accurate data can be the basis for:
informed, objective decision-making by middle and senior managers according to rules, guidelines and set targets
introduction of machine learning tools and Artificial Intelligence to reduce effort, improve speed, reliability and accuracy
visual analytics technologies can allow people to better understand complex data, to get insights and new ideas.
Because data can allow the expansion of senior management to free up the Board, availability of information is more than just a detail, it can have a truly transformational effect.
Tame the Risks
Finally, digital transformation can be focussed on improving a business by addressing risk management. By understanding risk in specific contracts, products or customers, you can price more accurately and competitively. Provision for risk can be applied more specifically, perhaps by more sophisticated analysis of a company’s own existing data or by combining data from multiple systems, and potentially 3rd party data as well.
In some cases, the transformation might be achieved by more timely application of existing risk processes. For example, real-time calculation might allow more accurate pricing for sales people on the phone, or can allow real-time calculation of prices whilst customers are going through a purchasing process online.
Integrating systems can ensure that credit risk information is applied during the sales process as prices or processes can be adjusted dynamically in line with customer credit risk at an individual, group or aggregate level. Or, very simply, customers should be put on hold in real-time if credit limits are breached – many companies have had the experience of putting a customer on stop just a few days too late!
Having accurate risk reporting can also significantly reduce time wasted by Directors worrying about this issue. If simple risk data is available in real-time then the Board can understand the level of risk and take measures to adjust it as a routine activity. Automated rules engines or AI can pick out patterns or raise alerts when thresholds are near or are breached.
Simply having hard facts available all the time can reduce the level of anxiety and wasted energy!
For companies heavily reliant on IT, well-structured systems can reduce their existential risk by ensuring that they are more resilient in the event of a disaster.
In the past the British Retail Consortium (BRC) experienced a fire in their office and were locked out for 3 weeks.
Their CEO, Helen Dickinson OBE, explained,
“We basically had to shut down for 3 weeks because we were locked out of the office due to smoke damage and our systems were unavailable.
One of the benefits from our transformation project was that we were able to start again with our business continuity plans. And the tragic London Bridge terror attack in June 2017 put this to the test as our office was again unavailable for several days. But this time we were pretty much unaffected and were able to continue our business without interruption.”
For businesses providing critical or 24/7 services, a Digital Transformation might be justified simply in terms of providing a proper robust platform for continued operation in the unlikely event that the office or parts of it are unavailable.
Where to Begin
The opportunity for ambitious mid-market businesses is to start with a blank sheet of paper and design the internal framework you really want.
In our experience mid-sized businesses often have a huge advantage over their larger competitors in this kind of transformation because larger companies are mired in details and variations. The 80/20 calculation for a larger business is far more difficult because the absolute value of the 20% is much greater. In addition, larger businesses have layers of managers who are deeply entrenched in existing ways of working and the effort to change behaviours will be a huge task.
For ambitious mid-market businesses, the Board can get close enough to the coal-face to personally see and hear what is happening, and the company is small enough to make rapid decisions and to make changes more quickly. Of course, a major change is never simple, but the scale of effort increases greatly for larger companies.
Starting the journey towards a Digital Transformation is perhaps the most difficult step. The following questions can be a useful kickstart for a Board workshop…
How much of your cost is not directly related to winning customers and fulfilling their needs?
How many experts do you have locked into “swivel chair” roles where they simply manage systems and data, and help other people around the business to do the same?
How could you really integrate with your customers’ activities?
How could you remove waste from your business by integrating with your suppliers or partners?
How much is it worth to you to correctly quantify risk at a supplier, customer or product level?
How much would it be worth if you were able to reduce the risk of a major outage affecting your business?
How can you remove the barriers to enable you to lead this transformation?
Imagine that, tomorrow morning, you read in your trade press that one of your competitors has made a radical change that leaves you behind.
All too often, IT is seen as an inward-looking function. The Board are exhausted and tired by issues and problems that the aim has simply been to provide basic services at the minimum cost. It’s a race to the bottom.
But a good IT strategy is aligned with the business strategy. And that means IT should be tightly bound in with marketing, sales and service. When this is executed well, IT genuinely has the ability to transform a business.
Businesses that can connect with this are, understandably, valued far higher than their low-tech competitors. These opportunities should be the focus of the Board’s discussions about IT.
So what exactly is Digital Transformation?
For our clients, Digital Transformation simply means using IT to deliver dramatic improvement. That’s different to just an upgrade or fixing some niggling problems. It means: using IT to make a significant change for the better.
That may just mean simple IT done well – that’s surprisingly rare! Or it may mean genuine technology innovation, something that is breaking new (or new’ish) ground.
We simplify this issue by defining 4 different kinds of transformation:
For an explanation about the 4 types, read our post.
This briefing is more information about the second kind, that we call: “Wow customers”.
But we’ve always done it this way
All too often we engage with customers in a certain way because this is the way we’ve always done it. Or because this is the way everyone does it.
And that may mean we put our clients through a series of steps that suit us, but may not suit them. And as a business grows and becomes more complicated it can become more difficult to see this for what it is.
Have you ever tried opening a new bank account? Don’t bother – it’s too hard!
Want to get your car serviced? Spend 10 minutes waiting on the phone, wait 2 weeks for a slot, then spend half an hour each way driving to the garage.
Buy a product online? You’ll be plagued by ads for the same product, but you don’t need to buy it again!
When done properly, digital technology can offer you ways to find and engage with customers in more personal and relevant ways; to offer them genuine value-adds; or to allow them to interact with you in the way they want to.
Avoid Competing on Price
These can be small improvements, but they can allow you to stand out from the crowd. And this can present a critical business advantage because it allows you to “de-commoditise” your products or services and to avoid competing purely on price.
Many customers are short of time and frustrated by inflexible suppliers. Quality and convenience can matter more than price. Many people want to really connect with brands they enjoy. Simple ongoing support mechanisms, reliable delivery and streamlined follow-on services can be more important than simply buying cheaply.
Many people don’t get around to making purchases or switching suppliers because they are simply not approached in the right way, at the right time with the right product.
Wow Customers
This kind of Digital Transformation is all about:
new ways of offering your products to new audiences, more specifically targeted or positioned
allowing your customers to get the experience they want, how and when they want it, rather than imposing processes on them that happen to suit you.
Without changing the underlying business model or products or services, new technology now provides ways to transform how you engage with your customers and how they experience your brand.
This area of technology often feels like it has become an “arms race” with companies offering ever-more and customers wanting ever more. For example,
next day delivery used to be a premium service, but is rapidly becoming normal
valuable information used to be expensive, now people are surprised if there is a cost
people expect companies to market to them accurately based on their needs, their browsing and their buying history, but of course they also want their privacy to be respected customers want immediate responses and find even a short wait in a telephone queue to be unacceptable
24/7 access to your progress on a job is now normal
many customers want to be able to interact with your systems using their technology rather than yours – they expect their mobile phone to be their “universal remote control” for the world!
People’s expectations have been reset as a result of their domestic experiences of ecommerce and the web and their expectations of B2B has been raised by their experience of B2C.
In this context, one of our clients, Sleeperz, a lifestyle budget hotel group wants to raise the bar for its customer experience.
Sleeperz is a company that believes in friendly service, stylish design, great value and a comfortable night’s sleep.
Their CEO, David Myers explained that:
“The hospitality sector is highly competitive and fairly low-tech, but we want to provide a best-in-class service for our customers. For example, the check-in and check-out processes can start to look quite antiquated – queue up, fill in forms, get a key or print your receipt.
We want to provide a more modern experience, to match or exceed the best in the business.”
Our Principal, John Cawrey, is Sleeperz’s IT Director and he explained about this ongoing project:
“We are researching solutions to allow guests to self-check-in and check-out using a tablet embedded in a pedestal kiosk or even allowing guests to check-in before they arrive using their own mobile phone or tablet. If their phone is NFC enabled then they could use that as their key, so effectively they can arrive and walk straight through reception to their room if they want. It’s how many airlines work now, where you print your own boarding cards or have the boarding card on your phone.“
David Myers added:
“This allows us to focus customer service where it matters. So we can still have staff on the desk but they can help guests who want to deal with a person or who have a problem. Or they can make you a coffee whilst you self-check-in at the kiosk”
Another client, ComXo, provide outsourced switchboard services to large professional services firms and IT is paramount to delivering the exceptional client experience that ComXo is known for.
Andrew Try, MD of ComXo explains:
“Providing outsourced switchboard to large corporates is very complex and requires a multitude of sophisticated technologies. The goal is to achieve an integration that delivers a seamless service to the companies’ employees and clients alike.
Our technologies enable us to deliver a highly personalised service, even to the largest businesses with over 30,000 staff, at a global level. Our skilled operators are able use these tools to identify callers and handle any enquiries appropriately and efficiently at any time.“
As ComXo’s CTO, Steve Clarke has created a strategy and overseen the delivery of technology for several years. Steve says:
“ComXo deliver a bespoke service for each of their clients. Off-the-shelf software is therefore not the right solution. We seek to find solutions that enable ComXo’s team of Virtual Personal Assistants to be experts on each of their customers. The systems need to be intuitive, user friendly and reliable.
We have developed technologies that enable ComXo staff to work remotely; whether in their offices, at their clients’ offices or at their home. This helps to manage costs and of course provides a great work/life balance to employees.
We have also created a simplified and automated billing platform that not only reduces costs but also provides a better service for clients. For instance, when clients use ComXo’s Muiltivoice conference system, calls are tagged with a cost code which appears on the client’s bill. That enables professional services firms to track their costs against cases and bill accordingly – particularly beneficial to Law firms who form a large part of the client base.”
Steve added:
“ComXo are able to stand out from the competition and punch above their weight, working for large firms and major corporates, because they understand the market and move quickly. They stay focussed on transformation projects that make a major difference to their clients and don’t get bogged down in details.”
Where to Begin
The opportunity for ambitious mid-market businesses is to think about your real customers’ needs and to work backwards from there. Start with a blank sheet of paper and work out what your customers really value (which might not be the same as what you currently give them!).
In our experience mid-sized businesses often have a huge advantage over their larger competitors in this kind of transformation because directors are close enough to the coal-face to personally see and hear what customers are saying, and the company is small enough to make rapid decisions and to make changes quickly.
Starting the journey towards a Digital Transformation is perhaps the most difficult step. The following questions can be a useful kickstart for a Board workshop…
1. What is it your market really needs? What do customers really care about and value? 2. If you started with a blank sheet of paper, how would you do things differently? 3. How can you remove the barriers to enable you to lead this transformation?
Imagine that, tomorrow morning, you read in your trade press that one of your competitors has made a radical change that leaves you behind.
Let’s start with a definition. For us, digital transformation means using IT and technology to dramatically change your business for the better.
That may mean a custom or bespoke software product. Or it may mean integrating your systems on the back end, or a complete overhaul of your IT systems and suppliers. Whatever the tech issues, it means focusing on your customers, your market, and your risks. Every choice is to ensure that the internal operation of your company is not limiting its growth.
Another important point is that the transformation is individual to your company. There is no one-size-fits-all solution, and anyone telling you so is after your wallet.
That doesn’t mean we won’t see big changes in the next few years. Again and again we’ve watched as what used to seem like extraordinary technologies—such as voice recognition, complex mapping and routing, and software robots—quietly become a part of the everyday life of a mid-market company.
Similarly, though the excitement about drone deliveries and artificial intelligence seems to have faded, we still think they’re coming. Whenever I see such innovations being tested, I think they’re important guides to what will gradually come to our sector, the mid-market.
How the Pandemic Transformed Digital Transformation
Before we get into what’s coming, it’s useful to look back. The pandemic changed digital transformation in two fundamental ways.
First, everything went online, and faster than we had thought possible. Everyone now expects online sales, service, and support. Business and domestic consumers rapidly adopted online channels for finding and buying a wide range of products and services. This also extended to after-sales and re-ordering, which are online now in a way that seemed unlikely in 2019.
Similarly, paper is on its way out. Cash has been side-lined by electronic payment. Printed brochures and catalogues have disappeared from many sectors. In fact, if your business is still reliant on paper, that would be the place to start a digital transformation of your company. (More ideas here.)
Second, we saw a rapid shift to remote work. Not that it was a simple process: we saw business struggle when their systems and processes were badly integrated and ill-defined. But everyone, whether they liked it or not, quickly got used to collaborating online.
In every situation above, old-fashioned managers were saying, “It will never work.” Which leads me to conclude that often digital transformation is driven by attitude rather than what is technically possible. And attitudes have changed irreversibly.
What’s Coming to the Mid-Market
In the near future, for many mid-market businesses the next phase of digital transformation will focus on the following:
Data, data, data. It’s never been easier to accumulate data. Companies will leverage these new assets for smarter use by humans and AI. Combining data from different sources is now far easier, and cloud-based processing allows for rapid insights that would have been unthinkable even quite recently. The businesses that adopt data visualisation technologies, simple machine learning, and process automation will have a competitive advantage.
External integration. Internal integration and adoption of the cloud should be in the rear-view mirror. (If that doesn’t describe your situation, that’s the first step to transforming your company.) Businesses should only select tech products that support integration and should gravitate towards suppliers, customers, and partners who form integrated communities. Because integrated communities will out-perform those that are not.
Points of difference. As cutting-edge technology becomes more widely available, companies will have to work harder to distinguish themselves by their actual product or service. Their brand really must mean something, and they really do need a competitive edge. For example, now any company can stream movies like Netflix; Disney+ has surged ahead on the strength of its content.
Environmental, social, and governance concerns. Both regulators and consumers will insist upon more transparency when it comes to data use and environmental sustainability. Traceability of products, optimisation of materials and energy consumption, privacy, security, and justifiable decision-making will all become part of the digital transformation agenda.
Virtual currency. Products and services will be increasingly virtual and paid for with virtual currency. It remains to be seen which form of digital currency will prevail. But mid-market companies need to tune into this accelerating change and invest in new types of virtual storefronts and virtual branding. Though I hate to use the term, this is the metaverse.
What Hasn’t Changed—and Likely Never Will?
Most mid-market businesses are deeply concerned about supply chain issues, recruitment, and energy costs. New technologies—and the judicious application of existing solutions—can ease all these issues, but only if you successfully meet human needs at the same time.
Zoom and shared docs are no substitute for real face-to-face collaboration. You cannot have a real creative discussion, shift entrenched opinions, or lift someone’s spirits online. Digital transformation can drive everyday productivity. But for most people, an enjoyable job also means human contact.
Most people also want their company to have a vision beyond profit. They want to draw more from their work than just their salary. Digital transformation can absolutely make a difference in a mid-market business—but only when you include the human factor.
No matter what your sector or the size of your business, a digital transformation won’t take unless your staff feel included and valued.
With all that in mind, now it’s time to think about your company. If you redo your IT and technology with a magic wand, how would you do things differently? What barriers to growth would you remove?
For more guidance on digital transformation, see our free, plain-English guides here. And for a no-strings, no-pressure conversation about the digital transformation opportunities within your own business, get in touch.
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Graeme Freeman Co-Founder and Director
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