Effective Manufacturing Analytics Need Finance and IT

As digital manufacturing continues to expand, and the associated advanced analytics capabilities, organizations need to align information technology, finance, and manufacturing resources to ensure that the business is successful.

Larry White, executive director, Resource Consumption Accounting Institute
Larry White, executive director, Resource Consumption Accounting Institute

The Manufacturing Enterprise Solutions Association (MESA) has published its Manufacturing Analytics Guidebook, and it is a substantial upgrade from the Metrics Guidebook it published about five years ago. The Guidebook emphasizes that building effective manufacturing analytics is an organization-wide effort and is vital for managing operations, the business, and achieving profitability.

When I speak to manufacturing audiences, I always ask how many consider their accountants to be business partners who actively help manufacturing achieve its goals. Unfortunately, only about 10-20% of the audience raise their hands. When I ask how many consider their accountants to be an obstacle or barrier to progress, the rest of the hands go up. This needs to change for effective analytics in the digital age! The primary benefit of the Guidebook is it explains how this change can occur with practical steps, information, and examples. 

The Guidebook’s primary focus is on manufacturing analytics. However, digital manufacturing, Industry 4.0, Industrial Internet of Things, and the associated Big Data and advanced analytic capabilities are all-encompassing changes for manufacturing organizations. The Guidebook stresses that success in this onslaught of technology requires human capability, teamwork, elimination of organizational stovepipes, and innovative views of organizational performance. In developing a framework for manufacturing analytics, it focuses on aligning and coordinating an organization’s information technology (IT), finance, and manufacturing resource capability to facilitate success.

Digital manufacturing is demolishing long held “rules of thumb” manufacturing executives have used to guide operations. Increasingly manufacturers must test every “assumption” against facts and data. This often means creating data to establish information for facts in unexplored or shallowly explored areas of operational and financial systems. It also means extending and integrating manufacturing, financial, sales, and logistics systems in ways that previously have been difficult and expensive. IT departments cannot be structured around organizational stovepipe systems. IT must become a key enabler making necessary data available and identifying gaps where information doesn’t connect or exist across the organization. Finance must move beyond financial accounting and reporting requirements that often put manufacturing in a product cost and inventory value box. Financial information needs to reflect and clarify business decisions and processes—from marketing and sales to design and manufacture to delivery and customer satisfaction—not merely accounting regulations. A business process view will identify fresh opportunities for profit improvement and business growth. Most financial system logic has been designed with a view of manufacturing that is at least a half century old; it cannot support the data and information digital manufacturing is creating. It is time for both a system and thinking transformation by finance. Another perspective both IT and finance must consider is time. It is no longer enough to know what has happened or is happening. The demand of the digital age is the ability to project and look forward using data, information, and solid statistical and analytic techniques that support multiple scenarios. Because sensors can provide this information for equipment maintenance, the question becomes: What are the “sensors” for revenue and profitability? Failure to adapt the organization to these expansive changes is to stand in the path of a fast-moving digital steamroller.

If you are pondering the challenges to your business as digital manufacturing continues to expand, MESA’s Manufacturing Analytics Guidebook provides a solid input to your thinking for both manufacturing and business transformation. It provides a framework and solid examples of how to create a manufacturing organization fit for the digital age.