Analytics changes the face of manufacturing... slowly

Manufacturers are anxious for the insights analytics can provide -- but most are still employing spreadsheets.
Written by Joe McKendrick, Contributing Writer

To date, analytics has been a tool primarily seen in financial, marketing, and customer service situations, used with encouraging results. Now, a new survey finds, manufacturing companies are starting to adopt analytics as well, with the potential to operate more efficiently, improve business visibility and support faster, more effective decision-making. However, most are still at the starting line, and the tool most often deployed is the common spreadsheet.

Analytics set for takeoff in manufacturing. Photo Credit: US Navy National Museum of Naval Aviation via Wikimedia

Data analytics can play an interesting role in manufacturing operations. For example, employing pattern-matching algorthms, analytical tools can spot problems before they happen, such as supply-chain bottlenecks. However, though this technology has been around for well over a decade, only 10% of manufacturers currently use predictive analytics.

A new study of 682 manufacturers, just released by Ventana Research confirms that analytics are making a difference, but only about a third of manufacturers are effectively deploying data analytics -- but these companies are seeing positive results. “This research found that the manufacturing organizations that have invested in the right business analytics are most likely to be innovative and achieve increased operational efficiencies,” Robert Kugel, SVP of research at Ventana Research, explained in a recent Webcast discussing the results.

The most important categories of metrics are financial (identified by 68% of participants), cost (67%) and operational (57%). However, priorities varied by line of business: Financial metrics rank first among those in Finance or Business, but sales metrics rank highest among those in marketing, sales and product areas. Cost metrics rank the highest across lines of business, while executives are more likely to favor financial and profitability as well as cost metrics.

This new research also shows that more than half of these organizations (63%) use as their only tool to generate analytics spreadsheets, which are time-consuming to use, error-prone and unreliable. In addition, 41% of respondents say it takes six or more days to deliver important metrics and key performance indicators. In part for this reason, Ventana concludes that only 12% of all manufacturing companies are functioning at the highest Innovative level of maturity in their use of analytics.

"The research shows that most companies are only skimming the surface," says Kugel. "In the use of analytics, organizations need to expand the scope of the analysis they perform  to add value. Executives and managers need to think outside the box when ot comes to analytics generally. They need to take better advantage of better processes and training."

Manufacturing companies have not yet automated many of the underlying data integration and analytics operations needed to generate metrics. Ventana's research also shows that usability and flexible functionality are important criteria in organizations’ search for the right analytics, that failing to examine timely availability, broad access and efficient handling can obstruct analytics use, and that to improve the maturity of applications usage, spreadsheets should be replaced with more appropriate tools.

"The key takeaway from this research is for a majority of companies now is the time for change," says Kugel. "Change how you think about analytics in the organization. It's not just he usual operational and financial data. A majority of those who participated in this research believe their company can use analytics to boost performance. Analytics are fundamental to performance management."

This post was originally published on Smartplanet.com

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