Many companies struggle with legacy IT systems that contain key business information and processes, but are woefully under-equipped to handle the new business models emerging in the manufacturing industry.
According to Gartner’s VP Andy Rowsell-Jones and other experts, 70 to 75 percent of annual IT budgets are spent supporting legacy IT systems. Companies that sink budgets into systems with growing costs that bring no added value to production will struggle to compete in the age of digital manufacturing.
Your company has likely already begun updating your business model to let customer insights guide product development, compress innovation cycles, and offer rich customer experiences throughout the buyer’s journey.
The difficult work that may still lie ahead is upgrading your IT infrastructure to better support fast-paced customer-centric manufacturing. Organizations will have to shed entrenched processes set up for reactive manufacturing and adopt a single integrated IT infrastructure to support data-driven production and more intimate collaboration across teams.
To help small and mid-sized manufacturers work towards a more modern IT infrastructure, here are 4 keys for leaving behind legacy IT systems:
- The problem with legacy systems
- The challenges to adoption and how to overcome them
- Making a plan for IT consolidation
- Long-term & short-term benefits
The problem with legacy systems
Unless your business was born in the last 5 to 10 years, it is likely that your IT infrastructure was built over a period of years by different IT professionals with solutions deployed via an on-premise data center. Today, this leaves organizations with the ever-expanding need for more on-premise hardware and crippling technical debt that stunts digital transformation.
Before the advent of the public cloud, organizations were compelled to host their own data centers requiring costly investments in servers, IT staff, climate control, data security, and other capital expenditures. Over time, the benefit of hosting your own data center depreciates and expensive hardware offers limited flexibility and diminishing performance returns.
As manufacturers realize the need to collect more data on everything from after-sales consumer engagements to warehouse floor efficiency, they’ll need to invest in expanding their data centers or migrate to third-party cloud providers.
Technical debt & data silos
Technical debt occurs when a project team defers non-urgent, but important, technical tasks due to time constraints. As a result, certain tasks are left incomplete or completed at a lower quality. An example of this is when IT solutions are developed independently of each other, with poor documentation.
In legacy systems hamstrung with technical debt, it is not uncommon for anyone except the original software engineer to know how the system works. This makes it impossible to modify, update, or integrate with new applications.
Technical debt also creates data silos, in which certain information remains under the control of one team or department because there is no easy mechanism to transfer it. This may have been fine when it was designed, but in a manufacturing world where design to dispatch cycles are being compressed and departments collaborate more closely, an amalgamation of applications that can’t share information represents a major disadvantage.
Perhaps the most salient sign of a legacy IT infrastructure is the continued existence of manual and paper processes. Manual processes are time intensive and error-ridden. Yet they persist because companies don’t know where their inefficiencies lie and are unsure of how to tackle digitization.
But manufacturers who pinpoint inefficiencies and digitize information-intensive processes can reap rewards across the board. According to Forbes, manufacturers with digitized processes and integrated IT systems can boost production capacity by up to 20 percent thanks to the ease of sharing information across the supply chain.
Here are some telltale signs that you may have an inefficient legacy system hampering production:
- Employees are still doing manual inventory counts
- Employees do manual machinery checks
- Paper record keeping
- IT staff spend more time on maintenance than innovating more efficient ways to work
- Purchasing or shipping frequently pay premiums for expedited shipping because production is behind schedule
- Managers are unable to correlate key business levers like revenue growth, customer retention, product quality, and manufacturing cycle times to specific processes
It will take sustained motivation and collaboration to modernize legacy IT systems, and you are sure to encounter some challenges along the way.
The challenges to adoption and how to overcome them
According to TechRepublic, 94 percent of senior business leaders describe digital transformation as a top priority. Yet, up to 84 percent of digital transformations will fail to meet their objectives. This is by and large due to failure to achieve three core prerequisites: internal alignment, adequate funding, and a new IT plan for legacy products.
Cultivate a shared vision
The notion that migrating to a single IT infrastructure is an “IT problem” is outdated. Digitally enabled manufacturing affects every aspect of production and leaders will need to get buy-in from all departments. This can be difficult since the goals and uses of technology can differ amongst job functions.
One way to cultivate a shared vision is to host value workshops to help illustrate the benefits of a single integrated IT system. This was the strategy used by Danish animal feed manufacturer Hamlet Protein. Hamlet invited representatives from every department to share their perspectives on digitally supported production processes. By including all internal stakeholders, Hamlet reached a clear understanding of how individual processes were connected and achieved broad organizational buy-in for digital upgrades.
Value workshops should evaluate how specific business objectives could improve with proposed IT upgrades. To demonstrate the benefit to various departments, it’s important to emphasize the impact more modern IT processes will have on the daily job tasks of individual teams.
For example, warehouse personnel will no longer have to manually enter inventory records into ERP systems, and procurement teams can reference one unified database instead of importing and cross-referencing data from unconnected information sources.
In many ways, funding shortfalls are an extension of the shared vision challenge. If an organization uses a large portion of existing IT budgets to maintain legacy systems, the IT budget alone could not finance the establishment of a new IT infrastructure, nor should it!
Improved IT infrastructure benefits the whole organization. With a shared understanding of the anticipated value, funds from various departments should be freed up for this type of project. Also keep in mind, if your next generation IT infrastructure scraps hardware for cloud-hosted services, you can cut costs by switching to monthly or consumption-based hosting plans.
Another funding hurdle comes from the fact that legacy products may require legacy IT.
What about legacy IT for legacy products?
Many manufacturers continue to support their products for years or decades after they have ceased producing them. Take Airbus, for example, which still supports helicopter models built in the 1970s.
According to a Harvard Business Review report, Airbus was not able to completely retire some IT infrastructures because aging chopper fleets rely on them for safety and maintenance data. In order to achieve cost-effective IT infrastructure upgrades while continuing to support products in the field, Airbus migrated hosting to cloud services and outsourced maintenance data collection to third-party software companies that have business models and IT infrastructure designed specifically for this purpose.
Even among the most difficult of barriers, with commitment and planning, you can build a better IT system designed for the future.
Make a plan for infrastructure consolidation
The first step in building an IT infrastructure for the future is developing overarching near-term and long-term industry outlooks for the space you operate in. For example, in the early 2000s, General Electric foresaw the rising trend of connected machines and began building the software their customers would need to manage smart factories.
By anticipating their customers’ needs, GE was able to build the IT infrastructure needed for this emerging business model and differentiate their value offering ahead of the competition. Pin down your own industry’s trends and let this guide your digital strategy.
Next, you’ll need to make an IT infrastructure assessment. The assessment should identify specific business objectives to be improved. To make an effective assessment, you may have to create a new set of metrics, that, in addition to measuring successful outcomes, highlight production and product failures.
For example, instead of just measuring throughput, measure production targets against a metric of unscheduled and emergency maintenance. And instead of just measuring order fulfillment, measure fulfillment against the percent of customer returns and rejects. Having a dual set of metrics will help make clear the processes that are most in need of improvement.
As mentioned above, value workshops can serve as a means to bring everyone onboard. As a followup to value workshops, appoint a dedicated project manager to help lead your journey to unified IT infrastructure. In collaboration with department heads, the project manager will set milestones to help focus the project. This person should serve as a single point of contact for digital transformation efforts and be tasked with keeping the momentum going across departments.
Finally, remember that a new single integrated IT infrastructure cannot be built overnight. Prioritize which processes you want to bring online first. Use a pilot program to migrate low-risk processes to your new platform first. As your IT team builds confidence and your staff receives the training they need to use new digital tools, work your way up to bring business-critical environments online.
The benefits of an integrated IT infrastructure
As your unified IT infrastructure comes together, some benefits will begin to appear immediately, while others will emerge over time.
By migrating hosting to third-party cloud providers, your organization will no longer need to support its own data center and the associated costs. Consumption-based pricing models will free up budget and enable the ability to scale usage up and down with business needs.
With manufacturing business management solutions deployed over the cloud, manual processes and digital record keeping can be retired. Thanks to tools like mobile barcoding and centralized order fulfillment dashboards, parts and products can be instantly counted, dispatched, and tracked as they move from one end of the supply chain to the other.
Furthermore, with universal tools for activities like cycle counts and backorder tracking, duplicated tasks can be eliminated.
Under a single integrated IT infrastructure, rather than working on fixes and workarounds, your IT team will be free train staff on new tools and integrate new solutions without the burden of technical debt.
The greatest benefit of an integrated system is a simplified IT infrastructure with greater visibility across your manufacturing processes.
With an IT infrastructure that all applications can operate on, you will be able to standardize digital processes across your organization. This saves time and improves efficiency. Employees at different facilities will all be using the same processes, and can more easily transfer to new departments, locations, or job functions.
For example, warehouse floor personnel whose primary duty is picking and packing can more easily assist with logistics and shipping by using the tracking functionality on the same platform. In this manner, the use of an integrated platform also encourages cross-department learning, helping to cultivate your next generation of leaders.
This brings us to the final and most important benefit: the break down of silos in favor of free-flowing information. With an integrated IT system, your various teams will be empowered to work as one towards common goals. Key information and business insights will no longer be locked in department-specific infrastructures but can be seamlessly shared and acted upon.
Sales teams can more easily share customer insights with research and development teams, who can then fine-tune product offerings. Customer engagement information can better inform after-sales service offerings. Procurement teams can use real-time sales and inventory data to optimize purchasing to achieve more lean manufacturing and reduce cycle times.
With the free flow of organized information, you can unlock untapped potential in your manufacturing processes.
Integrated IT for better manufacturing
A properly integrated IT infrastructure facilitates efficient digital workflows, sharing of information, and a flexible production system ready to respond to market demands. Replacing legacy systems with a more modern IT infrastructure is vital to long-term business health, and brings efficiency to your operations and value to your customers. With integrated IT as the backbone, your business can keep growing smoothly and adjust to changes with ease.