UK manufacturers still sacrificing service for production efficiency
04.11.2002

While the bigger more progressive manufacturers have invested in improving their production and supply chain processes and enabling IT, they have neglected their customer-facing and sell- and demand-side systems, and are risking losing customers.

This is the key conclusion from research by e-business and integration software and services company HAHT Commerce, which provides some of the e-enabling for SAP and JD Edwards enterprise systems. The firm surveyed senior financial, IT and operations managers in 60 of the UK's largest manufacturing firms in the summer of this year at the extremes of new product development - the chemical industry and consumer packaged goods - and found what it describes as a worrying picture.

66% of companies are unable to integrate their ordering systems with their partners' enterprise systems; 75% cannot provide automated inventory and delivery information to their customers; 82% can't show sales teams live customer account status; and 92% haven't yet automated product returns. That means, for example, that bad debt customers could still be being given the red carpet treatment, and that customers in general may be finding service rather poorer than they would expect - and indeed are finding from leaders elsewhere.

At it's simplest level, manufacturers are also missing out: 85% can't let customers print out their own orders, and 95% haven't incentivised payment online. "In this economic climate, with overseas competitors snapping at your heels, being difficult to do business with is a crime," comments Steve Ashurst, HAHT's, UK managing director.

It sounds poor against the image of manufacturers as high tech, fast-paced, service-driven, connected businesses. But it begs the question, with web-based CRM (customer relationship management) systems and outbound supply chain systems still relatively embryonic and suffering the ROI (return on investment) challenge, have many competitors gone this route? And if not, do we need to worry?

Ashurst insists they have - and that more are doing so if his own company's sales are anything to go by. He claims 700 customers taking parts of HAHT's solution, and about 80 a more holistic whole demand- and sell-side approach. "Most are in the US, although Asia Pacific is growing fast and Europe is now starting to catch up," he says.

"In other manufacturing markets, such as the US, we've seen a big shift in focus from the supply chain to the 'demand chain' as manufacturers realise that they cannot compete on price alone. To turn this around, they are now investing in the systems and processes that actually increase their revenue and reduce the cost of sale."

And understandably he expects this to continue. 'Demand chains', however, are less well understood than supply chains: the reality for most manufacturers is a maze of disjointed and frequently manual processes for managing order, brand and product information and customers services.

What's beyond dispute is that they are complex and that taming them and turning real time knowledge to our advantage makes sense. Products are sold through multiple channels, and it's not difficult to see the potential value of additional, integrated applications, able to harness what's likely to be existing data (from ERP and supply-side supply chain IT) and provide everything from channel management to customer self-service.

In the same way that we have invested in manufacturing and supply chain improvements to remain competitive, the demand chain could well be the next area where margins can be improved and where attention should turn. Ashurst is unequivocal: "If we don't do this, UK manufacturing will go the same way as the UK automotive industry. For most manufacturers, when the products leave the factory gates they have no idea what's happening to them; for some the debtor days are longer than the whole product lifecycle. Improving [the demand chain] is absolutely feasible and it's not expensive."

He recommends starting by looking at the whole range of processes on the customer side, how you do business with your channels and what you could do better, particularly in terms of providing self-service, access to information and automation. Similarly, you need to take stock of your market strategy - how you currently service your different levels of customers and how you would like to improve profitability and competitiveness through appropriate automation and online services.

That done, systems to make the necessary improvements will cost around £300,000 including integration and services to, for example, facilitate taking orders and transacting many-to-many online, including integration with existing systems. Not actually that cheap, even for a mid size company, but less than ERP, and probably less effort.