Manufacturers Should Head to the Cloud

Feb. 10, 2011
ARC President Andy Chatha emphasizes importance of building a cloud-based, companywide network to bridge gap between R&D and other disciplines.

U.S. manufacturers "need to become more innovation-centric" to increase their global competitiveness, according to ARC Advisory Group President and CEO Andy Chatha, and "technology is our ace in the hole."

"Technology can help us compete with anybody in the world," Chatha asserted during a Feb. 8 keynote address at the ARC World Industry Forum in Orlando, Fla.

But in the race to develop more products faster, some manufacturers are being hamstrung by legacy IT systems that make it difficult for R&D to collaborate with other disciplines and with each other, he added.

"The issue now is companies are finding that their design and engineering solutions don't talk to their business systems. They don't talk to their supply chain network," Chatha said. " ... That is, in our view, the No. 1 problem."

As part of a concept he called the "collaborative value network," Chatha emphasized the need to transition to a "single corporatewide network" that tightly integrates all facets of an organization, including its business partners.

Chatha said the platform should be as user-friendly as Facebook, making it easy for employees to "get the information they need whenever they need it and wherever they need it" with minimal training.

Such a platform should be "on the cloud someplace," Chatha added.

A few years ago, creating the type of network Chatha described "was probably very expensive," he noted, and in many cases, the network "didn't quite work the way you wanted it to."

Today, however, we have the technology.

"If Facebook can handle 500 million [users] on their network everyday, I think you can build a platform that can do what you want so your people can work together everyday at a reasonable cost," Chatha asserted.

Executive Support Needed

Still, it won't be easy. IT executives who haven't tackled this already will need to educate their organizations on the urgency of building a companywide network. Companies also need to have "shared goals" and adopt "common business processes and standards" to lay the groundwork.

And perhaps most importantly, the initiative needs support from the chief executive.

Chatha pointed to Robert McDonald, chairman, president and CEO of Procter & Gamble. McDonald, in a letter to shareholders in the company's 2010 annual report, talks about the company's push for "digitization."

"With digitization, our goal is to standardize, automate and integrate systems and data so we can create a real-time operating and decision-making environment," McDonald says. "We want P&G to be the most technology-enabled company in the world.

"We are targeting a 20% to 25% reduction in some spending areas and we are looking for a sevenfold increase in real-time data. By getting the right data to the right decision-makers at the right time, we can become increasingly efficient and productive."

The takeaway from McDonald's comments, Chatha said, is that "the message has to come from the top."

Chatha noted that manufacturers have done a good job over the past decade of optimizing and automating their supply chains. Now the focus needs to be on "end-to-end" integration that fosters collaboration between R&D, engineering, operations and other functions.

"You truly need to bring your entire organization together," Chatha said.

ARC Advisory Group's World Industry Forum was held Feb. 7-10 in Orlando. The theme of the 15th annual forum was "Driving Innovation, Sustainability and Performance."

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