Manufacturers' digital transformation initiatives lag behind other industries

Confidence in manufacturing teams' abilities to handle digital transformation declines.

The biggest challenges manufacturers face in IoT At the 2018 LiveWorx conference, Pascal Brosset of Capgemini offered advice for managers working with manufacturing IoT projects.

A significant number of manufacturing organizations rely on outdated analog processes, lagging behind other industries in digital transformation initiatives, a Levadata report found. For example, some 50% of manufacturers still rely on Excel spreadsheets for data warehouses to track inventory, which provide limited insight into market intelligence. 

Levadata's recent 2019 Cognitive Sourcing Study surveyed more than 200 senior procurement and supply chain leaders in global manufacturing companies. The majority (58%) of respondents said their supply management sources are still managed by individual commodity managers, rather than central systems for storing data and insights. 

SEE: Digital transformation: An IT pro's guide (free PDF) (TechRepublic)

While technology is rumored to the over the manufacturing industry by 2024, only half of respondents said they have some sort of central system for housing supplier insights and spend data, and 44% of respondents said they don't use a cost management tool for NPI (New Product Introduction). The reason behind this lack of innovation is mainly due to cost, with respondents preferring to save money than innovate, the report found. 

"This year's survey shows that a surprisingly high number of enterprise NPI and sourcing teams are still using the same analog systems and processes that they have been using for more than 20 years: Individual category managers with spreadsheets. The lack of centrally located data alone exposes these companies to significant risk," Rajesh Kalidindi, founder and CEO of LevaData, said in a press release

The manufacturing industry has made slight progress, with 8% of respondents reportedly using a purpose-build sourcing platform this year, which is an increase from 5% in 2018.  

"A small, but growing number of companies are adopting transformative technologies that will allow them to strategically consider millions of data points affecting the supply chain," Kalidindi said in the release. "These companies are able to significantly outmaneuver competitors."

Strategic sourcing can improve a company's speed and agility, but only 5% of respondents cited "building a competitive advantage" as a key measure of strategic sourcing success, the report found. Most (68%) said they were focused more on cost-cutting. However, this prioritization hurts companies in the long run, with 46% of organizations reportedly spending at least a quarter of their time "fighting fires" caused by their lack of digital transformation. 

Confidence in manufacturing teams' abilities to handle digital transformation continues declining. In 2017, 52% of respondents said their teams were somewhat or very ready for digital transformation, but this number fell to 46% in 2018, and now 40% in 2019, according to the report. 

WIth cost-cutting at the highest focus, the majority of respondents (89%) said they are concerned with tariffs that will contribute to production cost increases. To save money, 45% of organizations said they hope to make production processes more efficient. The majority (54%) said they would have to pick up the slack by increasing costs for customers, and 43% said they will renegotiate part supply deals to save funds. 

To remain relevant and keep pace in the digitally transforming market, however, manufacturers must reprioritize goals to focus on digital transformation initiatives, the report found. 

For more, check out Levadata and IBM bring intelligent procurement sourcing solution to supply chain on TechRepublic.

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Image: Stratasys