May 15, 2023 Driving Business Growth Through a Downturn

The world’s greatest companies thrive under dire economic conditions. How can manufacturers make the most of this downturn?

By Rob McAveney, Chief Technology Officer, Aras

Economists are still debating the severity of the coming recession. Don’t wait for them to finish. We’ve already seen plenty of turbulence in the manufacturing industry over the past few years. It’s time for manufacturers to make changes that will improve their business resilience through evolving economic conditions.

Below are three strategies that can drive business success for manufacturers in 2023.

Leverage Iterative Digital Transformation

Studies from consultancies and researchers estimate that between 70 and 95 percent of Digital Transformation projects fail. Big-bang transformation efforts have been proven to be ineffective and are increasingly more difficult to justify. Companies have found more success by focusing on continuous improvement through smaller projects with measurable results.

Framing these smaller projects as iterations in a Digital Transformation journey can simplify the process of securing funding. Most manufacturers are anxious to make progress but are skeptical of achieving a timely return on their investments. Iterative Digital Transformation allows them to make a series of smaller investments with measurable objectives. They can continuously adapt to evolving business challenges by prioritizing the most important initiatives first and balancing investments over time.

There can be significant budgeting implications to taking the iterative approach. Securing a budget for a large Digital Transformation effort can be difficult, but most executives understand that they can’t delay indefinitely. Presenting a series of small projects for budget approval comes with the risk of the budgeting committee picking and choosing which ones seem important at the time. It’s important to strike the right tone and balance during the budgeting process.

Forward-thinking companies plan for shifting priorities throughout the budget cycle. This does not mean creating a “slush fund” for whatever priorities arise. Instead, we can create clear criteria that describe the characteristics of projects that may be funded this way. Projects must have a stated objective and well-defined means of measuring progress. When one project approaches completion, there must be a mechanism to select the next initiative based on priority. As business conditions change, we’re able to adjust investments accordingly. Iterative Digital Transformation provides the opportunity to achieve significant process improvement with more flexibility and lower risk.

Build resiliency with adaptive processes.

We’ve all heard the adage that the only constant is change – yet many manufacturers continue to operate using static processes supported by inflexible systems. Challenging economic conditions often come with an imperative to change the way we do business, but our processes remain optimized for the “old way”. Building flexibility into our processes can only enhance our business resiliency against unforeseen challenges.

The sudden shift to a globally distributed, remote workforce was a good test of resilience for large manufacturers. Those that built their processes with change in mind were able to adapt relatively quickly. Others are still struggling with the fallout. We now find ourselves facing a unique set of economic factors that are affecting industries unevenly and sometimes unpredictably. It’s a good bet that the same companies that adapted well to previous disruptions will again find their footings quickly.

When it comes to the business systems required to support evolving processes, there is a seeming contradiction. SaaS solutions utilizing cloud technology offer global reach and built-in compliance with security, privacy and other standards. They provide the ability to quickly scale up, down or out to new regions. However, SaaS offerings are often limited in the processes they support and unable to adapt to unique business requirements. Manufacturers that value resilience should seek out solutions that offer both global scale and flexibility in process.

Take a systems approach to supply chain challenges. 

The supply chain disruptions we’ve experienced recently are unlikely to dissipate quickly. Many companies have adapted by eliminating single-source situations. They’ve found alternate vendors for the same or similar parts, with an eye toward mitigating the risk of an individual company failing or a geopolitical shift affecting the vendor’s ability to deliver. This strategy is a prudent first step toward building resiliency into a supply chain.

A deeper look into the supplier ecosystem might surface more subtle risks. Being able to purchase a component from multiple vendors is great, but what if they all get their raw materials from the same unstable region? What happens when demand for a specific type of component increases, but supply is limited by manufacturing capacity? How do we react when regulatory winds shift? The next evolution of supply chain strategies will leverage systems engineering concepts to control these less obvious risks.

In a systems approach, a holistic view of a product and all its features is documented and tracked. As we make decisions to determine how each feature is implemented, choices and alternates are identified and captured. We may select a single system-on-a-chip that can cover several features as part of our product architecture. The notion that those same features could also be implemented through a combination of two or three different chips is important to document. When faced with significant changes in the supply chain, this information could become critical to maintaining delivery schedules and controlling costs.  

Recessionary times create an opportunity to focus on what’s most important. Improving operational efficiency, providing for process flexibility, and mitigating supply chain risks all contribute to the resiliency of an evolving business. The strategies outlined above can help manufacturers drive growth and innovation through a weak economy. As with previous downturns, the world’s best companies will emerge stronger and better positioned to take advantage of future opportunities.

About the Author:
Rob McAveney brings a lifelong passion for technology to the CTO role at Aras. For the past 20 years, he has focused that passion on building rich software platforms that solve difficult business problems for major industrial companies. Rob acts as Aras’ technology visionary and provides design oversight for future PLM technology, while remaining grounded in the realities of configuration management, systems integration, and the many other challenges of delivering enterprise software. Prior to Aras, Rob led technical sales engagements for Eigner, an early entrant in the PLM market. He began his career at Boeing, where he gained a broad understanding of engineering and manufacturing systems and processes.

Subscribe to Industry Today