Economic growth in mechanical engineering is slowing down. Sales are threatening to stagnate. Procurement and personnel costs are on the increase. In addition, high process costs are often putting pressure on profits. For manufacturers of multiple-variant products in particular, manual activities in the provision of individual variants are driving costs upwards. This can, however, be remedied by consistent information logistics with lean processes. With these achievable savings, a high degree of product variety once again makes good business sense.
It seems paradoxical at first: although the order books have been overflowing for years now, many companies – regardless of their size and industry – are experiencing a painful fall in profits. And this is set to get worse because mechanical engineering and the supplying industry are experiencing economic downturns and are thus facing difficult challenges. Given the decline in new orders, the companies now have to adjust to stagnating or even declining sales. At the same time, procurement and personnel costs are continuing to rise, resulting in the threat of a serious collapse in company profits. To secure the results, comprehensive cost-cutting programmes are currently being set up in many places in order to, for example, reduce material and personnel costs.
Our experience shows that there is another worthwhile consideration: make sure that you focus your attention on high process costs when dealing manually with multiple-variant, configurable products. The increasing product variety that results from the customers’ desire for individual products can be a cost driver. The complexity of the portfolio also drives up the process costs. This means that companies that are able to sustainably reduce their process costs without compromising quality are in a position to redress the balance of their sales and profits.
For providers of sophisticated solutions, increasing product variety is both an opportunity and a challenge. The opportunity is that thanks to the progressive possibilities arising from digitisation, manufacturers are able to respond individually to the wishes and requirements of their customers. The downside, however, is that if you do not have the right answer at the touch of a button, you will rarely get a second chance to turn your potential clients into customers. Because there is nothing that people get used to more quickly than convenience. When they find out that they can reach the desired result with just a few clicks, then this will become the norm for them. In other words, they will expect their requirements to always be perfectly met: faster, and in a more comprehensive and customised way, and including the relevant information on the desired product variant such as data sheets, visualisations, and EPLAN and CAD models.
What used to be the exception is increasingly becoming the standard: custom-made products. This does, however, mean that if you still try to manually put together customised solutions for specific requests, you will find yourself looking for the proverbial needle in a haystack. This consumes a great deal of time – time that the employees need for other important tasks, and time that the customer is unwilling to spend waiting. In addition, decentralised data silos and manual data maintenance lead to gaps and errors in the valuable master data. These errors occur slowly and unnoticed, but gradually turn into a serious problem for the entire company.
While most companies have already almost completely exhausted their optimisation potential in production and sales, process optimisation based on seamless information logistics is the strong lever for the future success of a company. With increasing digitisation, however, this requires a solid foundation in the form of integrated processes and product data structures. One example: the drive technology and automation specialist Lenze has a product variance of as much as 1030. That is more than there are stars in the universe. Managing this portfolio would be unthinkable without highly automated processes and end-to-end systems that are free of media discontinuities.
Poor master data is the hidden champion of process problems
If you want to keep your process costs under tight control, it is essential that you have stringent information logistics. This ensures that the right information, in the right quality, is in the right place at the right time. It can, however, only succeed if seamless processes and error-free master data are ensured. However, this is precisely where things often go wrong, because many companies pay too little attention to their data. The maintenance and cleaning of the master data is often treated as if it were of secondary importance to day-to-day business. There is no trace of the attention that is required, let alone investment in the right processes and systems for maintenance. Poor master data is, however, the hidden champion of process problems! This negligence is actually understandable when you consider traditional management theory: product data maintenance itself is a support process and as such does not represent any direct value when viewed in isolation. A return on investment (ROI) is therefore difficult to quantify. However, things look very different when all the internal processes and dependencies are included in the calculation. It is therefore important to contrast the investment in a systematic data management system with the value of all the processes that benefit from a holistic product data supply.
So what does a successful strategy look like? Essential here is realising that digital processes produce and consume an enormous amount of data. This data is pure gold – if it is purposefully managed and holistically maintained and is not left to languish in the isolated data silos of the individual business units. This is why all end-to-end business processes – from those relating to the customer and one’s own added value right up to the supply chain – have to be considered. Where in this chain are activities repeated, such as the creation of material numbers, routings and documents required for a product variant? These are the many forms of waste of resources that drive up the process costs. This can be remedied through the modularisation of the products including their digital image. In combination with rule sets, this can significantly reduce the engineering effort – from design, construction and order entry to production and logistics.
Customised products with the lowest process costs
Here too, however, automation and maintenance are extremely difficult and expensive without the right data, information and rule sets. The attempt to transport a historical product programme into the digital future is often doomed to failure. Thanks to our many years of experience as a leading full-service provider in the field of Configure Price Quote and variant management, we at encoway know that a restructuring of the existing product portfolio can help significantly here. Lenze, for example, realised this at an early stage. For several years now, the Lower Saxony company has together with encoway been building up an end-to-end information logistics system in order to be able to produce customised products with the lowest possible process costs. The objective is to generate the product information needed at the anonymous digital touchpoint for an individual variant on the basis of demand – without any manual interaction or delay. The initial results are very promising. For example, at Lenze, it is already possible to create new materials, including routings and other variant-oriented documents, in different systems for a part of the portfolio at the touch of a button. These include, for example, data sheets, user documentation as well as CAD, EPLAN and visual representations.
Do you want to regain an optimal relationship between the sales and profits in your company? Then let us look together at your process costs and create a powerful information logistics system.
We look forward to your challenges!
Dr. Thorsten Krebs
Head of Consulting