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Why Cloud is a Competitive Advantage for Manufacturers

Most manufacturing businesses are now making digital transformation projects a priority. According to a Forrester Consulting study in 2018, 95% of manufacturers believe moving business processes to the cloud would have a notable improvement in their ability to digitally transform their whole ecosystem.

In fact, 88% of innovative discrete manufacturers have started or have completed their digital transformation, compared to 54% of other discrete manufacturers, according to a Forrester Consulting thought leadership paper commissioned by SAP in July 2018.

Leading organizations invest in Cloud because it caters to their needs to adapt and change direction quickly. This improved agility enables streamlined internal and external processes, which in turn translates to better outcomes. Cloud enables manufacturers to have a single source of data to inform their decision making. Real-time access to information empowers the decision makers to better control manufacturing operations. Cloud provides the ability to share information beyond the four walls of the shop floor to enhance connectivity across business operations. Be it a complex global supply chain, the status of job orders from customers, or internal business and manufacturing processes.

In short, cloud is a platform that enables access to shared data via secure logins. It’s ability to access a single database to see and share real-time information that makes cloud the enabler of digital processes.

The word “digital” is very popular and almost always attached to “technology”. Let’s understand what we mean by digital. Digital is the automation of analog or manual processes.

In a 2017 report, Couchbase states that digital technology holds the potential to transform every industry, from retail to healthcare to transportation.

“Digital technology, pervasively, is getting embedded in every place: every thing everything, every person, every walk of life is being fundamentally shaped by digital technology — it is happening in our homes, our work, our places of entertainment. It’s amazing to think of a world as a computer. I think that’s the right metaphor for us as we go forward.”Satya Nadella, CEO of Microsoft

Out-of-control business operations lead to complexity in manufacturing. The cost of complexity remarkably affects the profitability of manufacturing organizations. According to A. T. Kearney, the top 30 companies in Germany could earn €30 billion more if they would lessen complexity, this will definitely increase their EBIT by 3% to 5% points.

Digital transformation is the process of using innovative technologies to create new — or transform existing — business operations, processes, culture, and customer experiences to meet flickering business and market needs. This reimagining of business in the digital age is digital transformation.

It transcends traditional roles like sales, marketing, and customer service. Instead, digital transformation begins and ends with how you think about and engage with customers. As we move from paper to spreadsheets to smart applications for managing our business, we have the chance to reimagine how we do business, how we engage our customers and with digital technology on our side.

These are a few defining characteristics of digital transformation that have emerged:

Automation is a top priority for digital transformation, not just because it makes operations faster and more efficient, but also because it can help mitigate the impact of the IT staff shortage, reduce downtime, increase security, and prepare businesses for embracing artificial intelligence (AI).

Single database
As you’ve likely heard, data is the new oil in this digital economy. Modern databases play a role in the digital transformations that companies are undertaking to stay relevant. ERP databases act as a single source of truth. Consolidation is the data theme for an ERP. The focus is on the deployment of the data warehouse, a central repository for all manufacturing data to reside for easy analysis.

Modern ERP architecture and performance capabilities allow for ERP systems to combine both operational and analytical workloads. These can reduce the amount of sprawl between databases and data warehouses, as well as potentially alleviate the need for additional systems.

The collaboration in ERP allows manufacturing companies to build modern, scalable applications that can support real-time engagements, a critical enabler of digital transformation.

Transparency is a cornerstone of digital transformation. It creates visibility into business processes and information through enhanced traceability and reduced risk across the supply chain on the shop floor.

40% of all technology spending will go toward digital transformations, with enterprises spending in excess of $2 trillion through 2019, according to IDC. 83% of innovative organizations, which rated themselves highly across the board for innovation in strategy, technology, people, process, and culture, have started the digital transformation, compared to 66% of other organizations.

It is wise to assess the digital technology landscape in order to identify and implement the appropriate tools to achieve product and performance visibility across the end-to-end value chain and support digitally-enabled information exchange.

Cloud computing is a vital vehicle for digital innovation. Cloud platforms and services are supporting a host of digital innovations that promise to radically change the manufacturing industry.

Blockchain technology, robotics, self-driving cars and other digital channels are completely dependent on cloud technology. It is cloud’s capabilities that drive these channels.

Let’s understand why businesses use cloud technology to trigger digital transformation.

According to a Forrester 2018 Report on Cloud, more than 80% of discrete manufacturing firms are interested in adopting industry cloud for their end-to-end digital transformation priorities, including digital supply networks, customer experience, connected products, smart factories and new business models or networks.

Here’s why migrating to the cloud is a must to be competitive in a global marketplace:

Better flexibility: IT personnel can focus on major areas instead of mundane activities. Resources can be scaled up and down to meet changing market demand.

Open to every new opportunity: New infrastructure can be added in minutes, giving manufacturers a platform that matches the speed of digital innovation.

Lower prices: Cloud computing and digital transformation enables massive economies of scale. It promotes lower variable cost.

Better resilience: Resilience is built in to protect you from equipment failures. If you have a fire in your premises, your customer system is untouched.

No capital expenditure: No hefty investments on capital.

Security: Cloud providers deliver data security, redundant systems, and back-ups at a level most companies cannot afford in-house.

Quicker implementation: There is no disputing that implementing an ERP system in the cloud is considerably quicker. Your software vendor provides an environment where most of the configuration is already done for you.

With all these benefits, manufacturers are finding that business is better in the cloud. Cloud equips them to react rapidly to new opportunities so that they can better accommodate customers’ increasing expectations for customization. Enhanced efficiency, increased productivity and improved profitability are an added bonus.

As shown in a recent report from Nucleus Research, manufacturers are experiencing a great return on investment (ROI) in the cloud.

In fact, results from the TEC Survey, June 20, 2016, corroborate these figures. Here are the top 5 Reasons why cloud is a competitive advantage for manufacturing businesses:

1. Lower Total Cost of Ownership (TCO)
Software as a service (SaaS) – like Cloud ERP – subscriptions include a variety of additional services that can be expensive to manage in-house. Cloud vendors handle the challenges of On-premise deployments such as software licensing costs, yearly maintenance, hardware purchase and maintenance, consulting costs, etc. Cloud vendors manage these challenges for you, freeing up manufacturers to redeploy IT resources. With Cloud, manufacturers have:

  • No capital expenditure (CAPEX) as with on-premise ERP
  • No hardware, software license updates, maintenance or hosting
  • Affordable budgeted monthly subscription

2. Simpler and quicker implementation
Cloud empowers manufacturers with state-of-the-art technology, for example, SAP HANA, which is designed for robust stability, fast and responsive computing power.

3. Flexibility to manage change
Advanced functionality can be added whenever there is a need to upgrade.

4. Scalability
Cloud makes it easy to add users and accommodates growth.

5. Security
Automatic back-ups and software updates and data recovery.

95% of discrete manufacturers believe moving business processes to the cloud would have a notable improvement in their ability to digitally transform their whole ecosystem.

Source: Forrester Consulting, 2018

An industry cloud that is delivered on a cloud platform would enable organizations to design and customize processes that are specific to their needs, which would, in turn, enable competitive advantage.

Isn’t it time to find out if your manufacturing business would run better in the cloud?

To gain the insights you need on why standing still isn’t an option, how your current IT infrastructure could be holding you back and the ways in which cloud-based ERP can strengthen your ability to compete more effectively, contact us at: https://www.optiproerp.com/contact-us