How Manufacturers Set The Stage For Strategic Operations In 2024
Amid changing customer expectations, diversifying supply chains, advancing technology, and growing ESG scrutiny, manufacturers must take a more strategic, customer-centric approach to remain competitive. Technology will play a key role in optimizing the entire operations model.
From inventory management to materials requirement planning (MRP), for many years manufacturing leaders have viewed operations as a cost center — a vital part of the company, certainly, but one that takes money off the bottom line rather than adding revenue to the top line. This, in turn, has created a tendency to treat it as a set of functional areas that must be continually optimized to reduce costs.
Yet, as we begin the new year, the industry finds itself at an inflection point. In an era of heightened customer expectations, diversified supply networks, rapidly advancing technologies, and enhanced environmental, social and governance (ESG) scrutiny, firms should challenge themselves to consign this long-standing, cost-driven view to the past.
To create the agility, resilience, and customer relationships needed to thrive in today’s dynamic marketplace, manufacturers must consider the impact of operations on enterprise performance as a whole. Crucially, they must then use this new outlook as the basis for a more strategic, customer-centric approach that delivers genuine competitive advantage in both the short and long term.
Supply chain demands
Doing so begins with the supply chain, the place where many of the challenges outlined above are being felt most acutely. Consider, after all, how firms must now balance global, regional and local supply networks — or how pressure to reduce and report their climate footprint requires the implementation of rigorous sustainability metrics.
Similarly, technologies like AI and machine learning are recalibrating systems and processes across the value chain while new customer expectations around responsiveness, delivery quality, and price are reshaping relationships and experiences at point of sale and beyond.
Yet these challenges bring opportunities, too. By taking a more strategic approach, firms can not only address the issues at hand but also think outside the box of traditional operations and turn their supply chain into the epicenter of enhanced operational and commercial performance.
Asking better questions
If that sounds like a significant shift, that’s because it is — but more in terms of mindset and culture than cold, hard actions on the shopfloor. And perhaps the best way to illustrate this is by looking at the journey in order.
Here, then, are three questions manufacturing leaders can ask to help set the stage for strategic operations in 2024.
1. What does making the supply chain an epicenter of enhanced performance look like?
For the vast majority of manufacturers, the supply chain has long been built on driving down costs using historical data. However, thanks to emerging technologies, firms can now move beyond an historical view and instead leverage product and consumer insights. These insights then inform customer- and market-backed approaches for everything from designing and sourcing to making and delivering products to the ultimate point of consumption. Today’s technologies are a jolt of caffeine that enables supply chain and operations to actually be the driver of enhanced customer satisfaction.
2. What happens when firms get strategic operations right?
When companies properly integrate their operations and start to make insight-driven decisions, the end result is greater agility. This carries a raft of benefits, including making it easier to respond quickly to shifts in market demand or changes in the supply ecosystem. Likewise, it makes interactions with customers nimbler and more effective — and when firms do a better job of meeting customer expectations, especially around delivery, satisfaction and loyalty go up too. It even makes employee experiences better, reducing complexity and motivating them with tasks they know are important to the success of the business.
3. How can strategic operations be achieved?
The most important step is to start making operational decisions based on insights and demand signals captured from across the entire organization. For example, rather than just trying to balance demand and supply to avoid a stock-out or excess inventory, successful companies will work to balance operations to successfully deliver the right product to the right customer at exactly the right time. Ultimately, it means moving away from fragmented systems and silos to integrate the supply chain across multiple enterprise operations. Yes, to continue to streamline costs but also to really improve customer service levels.
Connecting the dots
Key to it all is for manufacturing leaders to remain laser-focused on the fact that they are no longer just aiming to reduce the financial impact of operations on the bottom line. Instead, they are using the supply chain to orchestrate a unified decision-making process in which emerging technologies allow them to really optimize the entire operations model. For example, in the retail industry, firms have recently begun basing the ordering and delivery of inventory on AI-projected customer demand, not just cost.
What’s really exciting here is the potential this has to positively affect the top line as well as the bottom. By boosting customer satisfaction, empowering worker productivity and growing market share, strategic operations can help increase revenue and create real competitive edge for the business.
Indeed, considered through its purest, most logical lens, this is about manufacturers using their supply chain as the anchor for all their operational silos, one that delivers a truly integrated view with customers at the center — and profits, not costs, at the top. As we have discussed already, getting there is a journey. But begin connecting these dots today and firms will be reaping the rewards long into tomorrow.
The views reflected in this article are the views of the author(s) and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.
This article was written by Lisa Caldwell from Forbes and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.
