As we reported in “Data Intelligence Is a Must for Resilient Manufacturing Supply Chains,” 67 percent of the survey respondents contacted for the most recent wave of the Sikich Industry Pulse for manufacturing and distribution saw an increase in customer demand. Only 7 percent experienced a decrease. This finding might seem to contrast with the decline in optimism expressed by many survey respondents. Then again, some manufacturers may be worried because they are not finding it easy to meet customer demand. The main causes they shared for this are supply chain obstacles (43 percent), employee shortages (39 percent), and capacity constraints (17 percent). Today, we consider how the manufacturing industry can overcome these challenges and meet customer needs with the right demand planning.
Models for supply chain transformation
For some large manufacturers, building new production facilities may be one way to overcome capacity limitations and meet demand. That’s a long-term solution, not what helps you when you now as you aim to produce and deliver what customers need. For most companies, it will be easier and faster to update, simplify, and strengthen systems and processes in their existing facilities. Sikich clients—including Hamilton and Mid-Continent Instruments and Avionics—have accomplished remarkable growth and customer experience improvements by modernizing their technology infrastructures without slowing production or disrupting supply chains, even during the pandemic. For most of them, Microsoft Dynamics 365 Finance and Supply Chain Management, the cloud-based ERP system, serves as the foundation that enables efficient, agile operations driven by real-time data intelligence.
With this version of Dynamics 365, you gain a powerful arsenal of tools to create and evolve a digital supply chain to meet customer demand. Connecting formerly disparate data sources and making them intelligible, the solution delivers practical insight to enable smart decisions. You can create digital twins to model supply chain events and management strategies. By identifying potential supply chain disruptions early, you can shift to different suppliers, logistics services, or production facilities, and still deliver to customers on time.
Priorities in demand planning
In Dynamics 365 Supply Chain Management, you can incorporate priorities into demand planning and assign planning priority ranges to orders and inventory in order to meet more urgent demand. By working with these priorities instead of requirement dates, you can more easily avoid inventory shortages and cost overruns from emergency purchasing. At the same time, you can maintain high customer service levels and use stock efficiently. The solution can automatically separate replenishment orders into subsidiary orders with distinct priorities, thereby ensuring that you meet priority demand without overstocking your warehouses.
You can define priorities as you like, for example, by giving precedence to more profitable, loyal, or strategic customers. Some manufacturers still make customer-related planning and fulfilment decisions based on incomplete information and subjective assessments of account executives or finance managers. That means that prioritizing demand based on data insight regarding customers’ lifetime business value and profitability could give you an edge over the competition.
Advanced order management with ecosystem visibility
You can complement priority-based planning and inventory management with a consolidated, real-time view of inventory levels across all your business entities in Dynamics 365 Intelligent Order Management. Pre-built connectors let you access the systems of trusted logistics services, vendors, and trading partners to gain a wider view of supply chain events and adjust order management, fulfilment, and logistics to fluctuations in demand.
The solution’s AI capabilities can span the entire environment of your internal and your business partners’ data sources to manage orders and inventory according to the business rules you set, including automating the right next steps in response to supply chain constraints. For many manufacturers, Intelligent Order Management has become an essential tool for retaining loyal customers and exceeding their expectations.
Developing the workforce
As mentioned, 39 percent of the survey respondents shared that employee shortages exacerbate their difficulties in meeting demand. Given that 2.1 million manufacturing jobs could be unfilled by 2030, skills shortages and the competition for talent are important topics for manufacturers. In recent articles, we discuss how manufacturers can become preferred employers and how ERP can help them empower their workforces.
However, sign-on bonuses may be limited in their effectiveness. Only 28 percent of the businesses we heard from are using them as an incentive for new shift workers, and less than half see that these bonuses effectively help them attract more candidates. It’s possible that job candidates feel that the amounts promised by manufacturers and distributors to their new hires—most of them grant bonuses between $500 and $1,500—don’t make a sizable difference in their household budget, especially if they need to wait for them. More than half of the survey respondents pay out the bonuses between four and 12 weeks of a new hire’s employment start, and over a third delay them longer.
Planning considerations for larger companies
Company size appears to make a remarkable difference in manufacturers’ ability to meet demand. Five out of 10 companies with annual revenue below $100 million experience this challenge, whereas seven out 10 organizations with revenue greater than $100 million annually can’t keep up with demand. Why would that be the case?
For larger manufacturers, the scalability of transformative supply chain and technology initiatives to gain more insight and agility to meet customer demand may be more challenging than for smaller businesses. For them, the expertise of technology, supply chain, and manufacturing consultants may be invaluable in making timely process and systems adjustments involving multiple production facilities, international operations, and global logistics. Experts on the Sikich team can also help them perform efficient, fast-paced technology modernizations when it’s time to replace legacy tools, and offer guidance on evolving the engagements with their suppliers and service providers, which may also be larger, less flexible businesses.
Technology investments continue
According to the Manufacturing Industry Pulse, more than one-third of the respondents plan to invest in new supply chain systems and data analytics solutions. One can expect that most of these will be cloud-based. However, the transition from on-premises to cloud systems has slowed for many manufacturers. Only 11 percent are still planning on migrating on-premises applications, down 26 percent from one year previously.
Much like our clients, most manufacturers have probably already moved to the cloud all the systems for which that makes sense. If they still run on-premises software, it’s needed there to support production and distribution teams and workflows within a facility. Even such on-premises technologies often connect to cloud-based analytics and management systems which are available to engineers, planners, and decision-makers anywhere.
Here to help
You can thrive, grow, and outperform the competition even as the manufacturing industry grapples with supply chain challenges. Sikich supply chain and manufacturing experts will work with you to realize agile, intelligent supply chain management as a competitive advantage. We can also help you optimize your processes and prepare technology modernizations. Validating the trust invested in us by our clients, Sikich was recently named to Microsoft Dynamics 2022/2023 Inner Circle, the fourth time it has received that level of recognition.
To take a next step, you can:
- Contact our manufacturing and distribution team.
- Read our other article based on Sikich Industry Pulse results: Data Intelligence Is a Must for Resilient Manufacturing Supply Chains.
- See how Sikich supports manufacturing and distribution companies.
- Learn about our HEADSTART methodology for fast, transformative ERP deployments.