World-Class Choices

Dec. 21, 2004
Plants on top choose cost-cutting and customer-pleasing applications.
Editor's Note: Results from the IW/MPI Census of Manufacturers will appear as a five-part series in the January 2004 through May 2004 issues of IndustryWeek. World-class manufacturing plants are more likely to use information technology and are better at squeezing profitability from that usage, according to results from the IW/MPI Census of Manufacturers. When compared with the overall pool of 828 participants, plants that identified themselves as having made "significant/full progress" toward world-class were investing in all listed business applications at a higher rate but especially asset management (17.7% more than all plants), warehouse-management systems (18.3%) and electronic data interchange, or EDI, at 18.8%. In terms of widespread usage, about 82% of the world-class plants are using design systems and financial management systems while those applications are used at a rate of about 70% throughout the Census population. This, perhaps, reflects the long history of these programs, whereas newer concepts, such as online selling, are being used at less than 38% of plants in both groups. As for warehouse-management and asset-management, the concepts are on the newer side but have resulted in highly visible savings for manufacturers as they've enabled them to reduce inventory and increase efficiency, both of which can have an immediate impact on costs. When the equation is flipped, however, and the emphasis is on profits, the world-class manufacturers say by a rate of 91.9% that manufacturing resource planning (MRP II) returns profits. Design systems (91.8%) and material requirements planning (90.6%) are also returning profits to many of the world-class perhaps because these systems are some that can directly benefits customers in terms of product design and on-time or shorter-lead-time delivery. Being world-class has a positive impact on deriving profits from IT investments, according to data, which shows in all but two of the listed categories the top plants are reporting profitability at rates above the overall population from 1.1% to 11.1%. And what of EDI, that pre-Internet buyer/seller technology with an astonishing survival rate -- used by 77.5% of world-class plants? "It remains in tact because it works, and people like things that work," says Shawn Willett, a principal at Current Analysis Inc. consultants, Sterling, Va. Willett notes as well that costs of using EDI have fallen dramatically, as have costs of many other technologies. Nonetheless, he sees EDI's weakness -- visibility -- helping to contribute to a slow decline in its usage. Adoption Of IT Applications
Application IT Applications in use, world-class plants IT applications in use, all plants
Financial management systems 82.2 70.2
Design systems (e.g., CAD,CAE) 82.0 70.5
Electronic data interchange (EDI) 77.5 58.7
Material requirements planning (MRP) 66.1 54.6
Online purchasing 64.6 53.5
Customer relationship management (CRM) 48.3 34.4
Demand-planning/forecasting systems (e.g., APS) 47.0 35.2
Manufacturing resource planning (MRP II) 46.5 30.6
Warehouse management systems (WMS) 44.9 26.6
Product data management (PDM) 43.3 31.2
Asset management (e.g., CMMS) 42.7 25.0
Mobile management (wireless systems) 39.0 29.1
Enterprise resource planning (ERP) 38.5 29.6
Online selling 37.4 32.3
Transportation management systems 36.2 26.6
Manufacturing execution systems (MES) 21.9 14.3
Product lifecycle management (PLM) 20.0 11.2
ERP II 17.4 9.9
IT Applications Improving Profitability
Application World-class plants, using IT applications, reporting profitability improvement All plants, using IT applications, reporting profitability improvement
Manufacturing resource planning (MRP II) 91.9 85.1
Design systems (e.g., CAD,CAE) 91.8 89.1
Material requirements planning (MRP) 90.6 82.1
Financial management systems 88.2 81.9
Manufacturing execution systems (MES) 87.2 79.5
Product data management (PDM) 85.7 78.6
Warehouse management systems (WMS) 85.0 81.9
Demand-planning/forecasting systems (e.g., APS) 84.7 82.1
Customer relationship management (CRM) 84.7 79.4
Enterprise resource planning (ERP) 83.3 83.7
Electronic data interchange (EDI) 82.1 74.1
Online purchasing 81.1 73.9
ERP II 80.6 79.2
Transportation management systems 79.7 77.1
Mobile management (wireless systems) 77.5 77.9
Online selling 76.1 65.0
Product lifecycle management (PLM) 75.0 73.9
Asset management (e.g., CMMS) 75.0 69.6
For a summary of the complete results or industry-specific data from the 2003 IW/MPI Census of Manufacturers, contact the Manufacturing Performance Institute, (800) 603-2272, or [email protected].

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