Leading in real timeAn investigation of the impact of real-time business on strategy and management.

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Manufacturers are slow to benefit from real-time business

5. MANUFACTURING

Manufacturers are awash with data. From their supply chains through to mechanical movements

on the shop floor, outbound logistics, sales, service and beyond, the amount of real-time information available to manufacturers is enormous.

Used effectively, this information can be used by manufacturers to make operations more efficient and to improve quality control. Looping in real-time data from the market allows manufacturers to respond quickly to fluctuating demand; and as products are increasingly equipped with sensors and connectivity, manufacturers’ ability to monitor how their products are used and how well they perform in real time is growing accordingly.

And yet, while the manufacturing sector mostly recognises the potential of real-time information, a survey by The Economist Intelligence Unit, sponsored by Cisco, reveals that its adoption by the industry has been slow.

Over one-quarter (26%) of the manufacturing executives surveyed say their organisation makes only limited use of real-time information and has no overarching strategy. Just 21% have successfully incorporated real-time information into their business processes, compared with 41% of respondents across all industries (see chart).

They are also less likely to have adapted their business to make better use of real-time data. For example, less than three out of ten (29%) have automated business processes to respond instantly to real-time information. Across all industries, this figure is 50%.

So why has adoption of real-time information been so slow among manufacturers? The survey reveals that the number one challenge they face in using real-time information is collecting it. This is a reflection of two particular difficulties. The first is the manufacturing plant itself. This is

Real-time information offers manufacturers the ability to manage production in response to the business environment, but its adoption by the industry has been slow so far

Written by The Economist Intelligence Unit

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24%

% of manufacturing respondents

We have successfully incorporated real-time information intoover half of our business practices

We have successfully incorporated real-time information intoup to half of our business practices

We have recently started to implement our real-time businessstrategy

We are developing a real-time business strategy

We make limited use of real-time information but we have nooverarching strategy

Not at all but we plan to do so in future

Not at all and we have no plans to do so

13%

8%

19%

16%

26%

18%

0%

How would you describe the extent to which yourorganisation incorporates real-time information into its

operations% of manufacturing respondents

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Visibility across the value chain

relationship with the customer is mediated through retailers, who may or may not share real-time insights with their suppliers.

These difficulties are preventing manufacturers from gaining a deeper, more timely understanding not only of their own operations, but of the world around them too.

of information services and supply chain operations. This “reduces waiting times within production processes, improves resource availability and enables better high-level decision-making,” he says.

BASF also tracks industrial statistics and macroeconomic trends to monitor the business environment in real time. “We use this information to increase our forecast accuracy concerning prices as well as internal and external demand,” says Dr Blackburn. With greater forecast accuracy and speed, costs are kept in check and service quality increases, he adds.

often comprised of decades-old equipment from multiple suppliers that may not integrate effectively. Extracting meaningful real-time information from this infrastructure is no simple task.

Second, many manufacturers are not in a position to collect real-time data from the market. Often, their

However, some manufacturers are beginning to use real-time information to monitor the world around them, and to adapt their production in response to up-to-the-minute developments.

One example is the German chemicals giant BASF, the fourth-largest manufacturer in Europe and the 17th-largest in the world. The company uses real-time data to achieve transparency across its whole value chain.

This includes collecting real-time data from suppliers, explains Dr Robert Blackburn, president

Real-time information initiatives in the manufacturing sector are mostly focused on internal operations. The chief driver among manufacturing companies is process optimisation, the survey reveals, and the most common area of application is operations management.

Now, the company is working to include weather information and social media data into its forecasts to ensure that it has the most up-to-date situational awareness possible. “During a railway strike, we expect that social media will deliver faster information than traditional information channels,” he says.

Another manufacturer using real-time information to improve visibility throughout its value chain is Procter & Gamble (P&G). In order to optimise production and supply, the American consumer goods giant pays particular attention to trends in retail demand.

“We are using real-time data to stay close to consumers and our retail customers across the globe,” says Guy Peri, chief data officer at P&G. “This helps us be more responsive to our retail customers, providing the products they want, when and where they want them in a way that is more cost-effective both for P&G and our retail partners.”

For one thing, P&G monitors social networks—as well as internal operational metrics—to ensure that quality is under control. “We analyse consumer data to understand potential product quality issues in the market and proactively make adjustments throughout our supply chain,” explains Mr Peri.

The move to using real-time information from outside the company to direct production requires considerable organisational change for many manufacturers, especially as decision-making is increasingly automated.

“Change management will become an increasingly important factor,” say BASF’s Dr Blackburn. “BASF will have a long journey to go when it comes to customers’ acceptance and reliance on system-generated planning data rather than manually planned data.”

It will also require new capabilities that are not traditionally associated with manufacturing. “Translating a real-world problem into a

mathematical model, hypothesis-building, interactive exploration and so on require new skills and capabilities,” Dr Blackburn adds.

Here again, though, manufacturers are behind the pack. Only 22% of manufacturing executives surveyed have hired experts in real-time information, fewer than in any other sector. In both transport and healthcare, by comparison, 49% of respondents have done so.

This is soon to change, however: 60% of respondents from the manufacturing sector expect to hire real-time experts in the next three years, more than in any other industry. Similarly, 59% of manufactures expect their company’s strategy to change as a result of real-time information in the next three years, and 51% will invest significantly in its acquisition.

The survey shows that while they acknowledge the potential, manufacturers have been slow to employ real-time information. Pioneers in the sector are using real-time data not only to optimise internal operations, but also to manage production in response to changing conditions outside the company. This will require considerable organisational change—and manufacturers expect to make the necessary investments to achieve that in the near future.

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This article, written by The Economist Intelligence Unit and sponsored by Cisco, examines global organisations’ use of real-time information and its impact on strategy and management. It is based on a global survey of 268 executives, just under one-third of whom hold positions in the IT department, while 47% are members of the C-suite. Respondents were drawn from companies in the healthcare, transport, retail, healthcare, manufacturing and energy sectors, 49% of which have annual revenue over US$500m.