A path to modernize manufacturing

The manufacturing industry keeps changing, and the change is accelerating. Sometimes, leaders don’t know the best path ahead. When your business is built on reliable processes, any updates can feel like a risk.

But standing still is risky, too, when your competitors, employees, customers and stakeholders are moving forward. Now, manufacturing leaders need to reassess where and how they should modernize their businesses. “Many have started, but they still have technical debt from old systems that are anchored to expensive maintenance, workaround requirements or business limitations,” said Grant Thornton Manufacturing Industry Incoming Leader Kelly Schindler. 

Start with customers

It’s tempting to assume that you need to modernize what you’re doing for your current customers. That’s part of the picture, but manufacturers can take a cue from another competitive industry, technology, where many companies are stepping back to ask, “Are we targeting the right customers with the right approach?”

Take a fresh look at your potential market. Are there high-margin prospects that you aren’t targeting enough, or existing low-margin customers that you’re working too hard to keep? That might be a difficult question to answer if you have limited data. You need comprehensive FP&A data to understand product-level costing, so that you can factor in warehousing, supply chains and more, as well as strong CRM data to help you evaluate your pursuit costs by customer. “With back-office functions continuing to be lean, having the right skillset in a role might no longer be required as more analysis can be done with AI tools,” Schindler said.

Then, consider which customers you can serve most efficiently and effectively — even if you’re not serving them yet. Consider whether you can evolve to target a new market segment, offering a specific product, service, or a combination of both that wins them over. 

Explore manufacturing as a service

As you consider your target customers, also consider how to modernize your revenue model.

Traditionally, manufacturers have had a product-first approach. “We’ve seen a lot of manufacturers who basically said, ‘We manufacture X, Y and Z. Here are my products. Do you want to buy them?’ They structured entire sales forces and organizations around that,” said Grant Thornton Growth Advisory Managing Director Adam Bowen. That model was often effective before the range of possible products, services and markets exploded.

Now, more companies are looking at the option of manufacturing as a service, including:

• Customized services: Think about how you could expand from manufacturing products into offering packages of services for product integration, maintenance or other work that would create new revenue streams. Consider where your client relationships could provide the paths for these revenue streams, by helping your clients to meet related business needs.
• Customized products: Think about your product development and production cycle, considering whether you could create or customize products in a responsive model that solves customer problems, rather than just selling standard products to a larger customer base. Consider whether new options like 3D printing could open a door to quicker production and distribution of products that you’re not making today.

“From a growth perspective, we’re seeing a shift from a product-focused go-to-market strategy, to becoming seen as a solution provider,” Bowen said.

Build your engine

Workforce recruiting and retention have continued to be a turbulent issue in manufacturing since the pandemic, although some have found them to be stabilizing recently. Many leaders have committed focusing on maintaining their current workforces, but expanded markets, products and offerings can mean that you have new opportunities to offer for both existing workers and potential recruits.

Do you have the skills and capacity you will need, to meet new customer needs with products and services? New offerings can require new capacity in areas that include:

• services
• production
• supply chain
• distribution and logistics

As you see a need to acquire new skills and technologies, look at new workforce strategies and partners. Also, look at supporting technologies that can help you at multiple levels:

• Enterprise resource planning (ERP) solutions can standardize functions for large manufacturers — and for any manufacturer, they can have untapped capabilities, reporting and other insights that can help answer questions about new capabilities.
• Cloud-based software as a service (SaaS) solutions can help you quickly ramp up to achieve new back-office capabilities and insights.
• Composable architecture can help you combine existing solutions into a common interface so that you can maintain legacy systems without holding back your larger modernization. This architecture can use a cloud-based business planning platform (like Anaplan) to help unify systems and data in one interface.