Digital Transformation, ERP Implementation Key to Metal Fabricators Bending -- Not Breaking -- During a Crisis
Paulo de Matos has more than 24 years of experience in ERP, serving in a number of business development and product management roles prior to becoming SYSPRO's chief product officer. He writes what lessons fabricators should learn if they want to survive another crisis like the current pandemic or if they simply want to transform their plant to a well-run digital operation.
The COVID-19 pandemic caused enormous disruptions in the metal fabrication industry. SYSPRO conducted a survey in December 2020 that quantified the scope of this disruption. For example, 60% of manufacturers were affected by supply chain disruptions, and nearly half (47%) were essentially unable to function because they were unable to access on-premises systems that lockdowns prevented them from operating.
But these disruptions weren't necessarily completely attributable to the pandemic.
Instead, the lockdowns and other public health measures exposed and amplified weaknesses that were already present. Supply chains were brittle and susceptible to disruption. Operations were inefficient and required a large number of people on-site to work. Management lacked enough data on operations, inventory and other critical areas of their business to make data-driven decisions to adapt quickly to changing conditions.
One main lesson of the pandemic -- manufacturers were not prepared for this level of disruption -- has not been lost on decision makers. They know that once COVID-19 finally recedes, they will need to weather future unexpected crises, major and minor. To thrive in the face of adversity, these businesses will need to accelerate their digital transformation efforts or, if they've not yet started, immediately begin the process of transformation.
As proof, a recent survey from Dimensional Research shows that nearly all (91%) of manufacturers have increased their investment in digital transformation, and more than three-quarters (77%) said the increase was significant or dramatic. An even higher proportion (95%) said that digital transformation is a requirement for the future success of their companies.
Digital transformation can be a journey that requires not just the deployment of new technology, but also careful change management. It's not just the technology that will change -- underlying processes and procedures must also transform.
However, the rewards are substantial. Manufacturers gain increased efficiency from automated and optimized processes. The creation and analysis of operational data provides insights that inform fast and accurate decisions. New technologies enable the organization to become far more nimble so it can recognize and respond to changing market conditions earlier and faster. All of this not only provides companies a significant competitive advantage -- it also makes their businesses more sustainable for the long-term.
The Challenges of Metal Fabrication
The metal fabrication industry is facing significant challenges. For starters, skilled labor and craftsmen are increasingly tough to find. There are fewer schools training students in metal fabrication, and as our current workforce retires, there aren't enough qualified people to replace them.
At the same time, customers are becoming more demanding, requiring much faster turnaround time to get finished products and pressuring manufacturers to lower prices. Combined with the rising cost of metal, margins are razor thin, leaving no room for error.
As a result, it's more important than ever for metal fabrication companies to ensure that equipment is always available and being used in the most efficient manner possible. Efficient scheduling is critical -- managers must be able to arrange the manufacturing puzzle pieces to minimize downtime. After all, every minute a machine isn't running, the company is losing money.
Likewise, metal fabrication companies have to optimize their inventory so that they're not carrying too much excess cost, but always have enough on hand to avoid delays due to a lack of materials. Accomplishing this requires customers and vendors to have access to the same systems so that all stakeholders have visibility into the supply chain to make planning more manageable and accurate.
Inventory itself must be accurate, which can be a time-consuming project if using traditional, manual methods -- time that many manufacturers really can't afford to spend.
Finally, for those metal fabrication businesses that still rely largely on manual processes and siloed data, there will be inefficiencies of decision making. Managers aren't confident about the reliability of the data, because it's broken up into many different functional silos and spreadsheets, none of which agrees with the other. Finance and production cannot be working off different data sets and expect the operation to run smoothly.
The Foundation for Digital Transformation
Digital transformation can address all of these challenges.
Increased automation can reduce the impact of skilled labor shortages; supply chain automation, advanced analytics and artificial intelligence (AI) can predict and secure the optimal amount of inventory to meet demand and minimize excess costs; analytics can optimize scheduling and, along with AI, enable predictive maintenance to increase equipment uptime and utilization. All these technologies combined can provide a wealth of data that can inform better and quicker decision making.
However, these technologies cannot operate as discrete systems, otherwise, they will just make the problem of informational silos even worse. Instead, they must be integrated into a holistic digital foundation that collects, shares and analyzes information -- a reliable, single version of the truth about metal fabrication operations.
An organization's enterprise resource planning (ERP) platform should form that informational foundation.
When people think about ERP platforms, they typically imagine a system for providing core financial and business process visibility. While that's certainly true, a well-architected ERP platform is capable of doing much more.
Organizations can integrate additional modules and point solutions into an ERP system to automate business processes, provide real-time analytics for data-based decision-making, and manage policy changes around procurement and sourcing. It should be simple to incorporate new, smart factory technologies into the ERP solution such as AI, analytics and internet of things (IoT) devices to provide real-time data and analysis within context. The ERP solution serves as the single version of the truth for the entire operation.
Take it Step by Step
Metal fabrication operations shouldn't try to do everything at once.
Certainly, the times require accelerating digital transformation, but even at a rapid pace, it's important to prioritize. Once the foundation of an ERP platform is in place, IT should collaborate with business, operations and financial management to identify where digital transformation can have the largest impact. Work that project to completion, demonstrate success and use what you've learned to make the next project even more successful. Showing strong results will increase buy-in from executives and employees, alike.
And that's important because the more digital transformation you implement, the more cultural changes will be required, especially at an accelerated pace. Leadership should communicate clearly and often how processes will change, the reasons for the changes and the benefits the entire organization will enjoy as a result. A single company-wide email or meeting is not enough. Err on the side of overcommunicating -- that's far better than unintentionally leaving people in the dark.
The metal fabrication sector faces some tough challenges as we emerge from the pandemic, but by establishing a strong digital foundation on which to build their digital transformation, they can position themselves for long-term success.
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