Preface from Greg Mills,
Cincom ANZ Country Manager
Cincom Systems of Australia is pleased to release its second survey of Australian complex
manufacturers. This segment of the Australian market is comprised of highly innovative
industries that produce and distribute products in the defence, heavy/industrial
equipment and medical spaces. The purpose of the survey is to monitor ongoing trends
in the industry so that decision-makers can compare their positions in respect to the
challenges facing the broader industry group.
The report also reveals certain trends in how
manufacturers see the Australian market and the
problems that they face. Of particular interest are the
expectations of business growth and the top priorities
Compared to the results of the previous survey, it appears
that the business outlook for manufacturers is not
improving with a decline in the expectations for growth
and increasing challenges in keeping costs under control.
As reflected in the responses, more businesses are now
focusing on the issues of business execution in improving
the sales and supply-chain process and less on planning.
On the information-technology front, the majority of
businesses are running Enterprise Resource Planning (ERP)
back-office systems. However, some of the newer IT
technologies such as business process management and
mobile solutions are in use at less than a quarter of
manufacturing businesses. The pace of IT innovation in
manufacturing appears to be lagging behind other sectors
since there is a reasonable level of satisfaction with current
systems, and the majority has no plans for improvement.
Cincom intends to conduct future surveys that will
provide a longer-term view of the trends for complex
manufacturers. I would like to thank all of the
participants who contributed to these survey results.
A more detailed analysis is provided on the following pages.
The Australian economy has experienced some
enormous changes over the past year. The high Aussie
dollar has been the final blow for many manufacturers,
and along with regulatory concerns, has increased the
challenges in keeping costs under control. Additionally,
in September, the Australian Labor Party suffered a
historic defeat when the country elected a coalition
government. Currently, the political climate is in flux
whilst waiting to see what this will mean to all areas of
However, we do know that despite the above factors:
• Consumer confidence, an indicator designed to
measure the degree of optimism consumers have about
the overall state of the economy, is rising, increasing to
110.35 in November (up from 102.2 in June).
• Interest rates have come down from 3.5 per cent last
June to 2.75 per cent with expectations of further cuts
before the end of the financial year.
• The Australian dollar has fallen to around US90 cents,
which will relieve pressure on struggling industries
such as manufacturing, education services and
tourism, all of which are significant employers.
So the logical question here is: Why do businesses have
a general lack of confidence? Lack of confidence is
typically consistent with firms being uncertain about the
future and therefore avoiding risks in their decisionmaking. Structural changes in the economy, the
previously high exchange rate, the political environment
and increased regulatory burden are all likely causes that
have affected the willingness of some firms to expand.
The Outlook for Complex Manufacturers
Where does complex manufacturing fit within this
changing economy – and what’s the outlook for business
growth in 2014 and beyond? Complex manufacturers’
products are highly engineered to custom order
requirements, such as those in the following industries:
• Industrial equipment and machinery
• High technology, electronics and medical devices
• Transportation equipment and vehicles
• Aerospace and defence equipment and systems
Common to these businesses is that their products are
based on customer-specific proposals, contracts or
projects that require deeper functionality than massproduction manufacturing. Strict regulatory compliance
and quality control issues, higher costs and demanding
worldwide distribution requirements are just a few of the
challenges facing highly engineered manufacturers and
contributing to the often razor-thin margins of this
Process improvement, automation and business-issue
simplification can greatly improve the complex
manufacturer’s entire enterprise. As business complexity
increases, the need for an effective ERP system to tie it
all together also increases. According to industry
experts, ERP and related systems will continue to evolve
to suit business needs and will remain highly relevant
How Is the Role of IT Changing in
IT is responsible for the leadership, coordination and
implementation of technologies, systems and related
activities, often for a global multi-organisational
structure. As economies, markets and customer
demands change, it’s no easy feat to stay on top of the
technologies needed to ensure business growth.
Technologies such as:
• 3D printing – This is not a new technology, but over
the past few years, 3D printing has developed into a
real alternative to the traditional casting or machining
of parts and now has a real potential to disrupt many
of the notions we have about manufacturing and plant
operation. Some high-growth industries for 3D are:
medical devices, automotive, maintenance, repair and
overhaul (MRO) and aerospace markets – all part of
the complex manufacturing landscape.
• Incorporation of Configure, Price, Quote (CPQ) sales
functionality into traditional ERP systems – Advanced
configuration guides designed specifically for complex,
customised products – coupled with dynamic, real-time
pricing calculations tied directly into company financial
systems extend traditional core ERP functionality and
ensure fast, accurate quotes. CPQ capabilities integrated
with ERP functionality provide customers with exactly
what they ordered in a much more timely manner than
with traditional, siloed systems.
• Mobile device use for operations and warehouse
functions – According to a survey undertaken by
Cincom Australia in 2012, mobile is already in ERP.
Smartphones are connecting field sales to back-office
apps, and tablets are being used in field service to
help with diagnostics, part inventory and schematics
for complex products. But what about on the shop
floor? Ray Wang, CEO of Constellation Research, cites
three specific areas where mobility delivers potential
advantage: 1) safety, quality or compliance, 2)
information delivery and 3) approvals and routings.
More and more, workers are being asked to perform
multiple duties that require multiple applications and
wide-ranging data access. Together with ERP, mobile
devices are maximising the effectiveness of the employee
and consequently the entire manufacturing operation.
What’s needed is the ability to manage technologies
and systems for various sites, organisations and
subsidiaries by rolling them all into one central location.
How close are complex manufacturers to doing this?
Cincom’s Survey of This Unique
Cincom has been working with the world’s
manufacturing community for 45 years. Recently we
conducted a survey that looks specifically at this market
segment and identified some key insights for 2014.
Insights such as:
• The majority of respondents are driven by growing their
revenue and the need to reduce manufacturing costs.
• The method they are using to accomplish the above is by
focusing on business execution (improving the sales and
supply-chain processes) and focusing less on planning.
• On the information-technology front, the majority of
businesses are running Enterprise Resource Planning
(ERP) back-office systems. However, some of the newer
IT technologies such as business process management
and mobile solutions are in use at less than a quarter of
manufacturing businesses (even though many of these
newer technologies have great potential to reduce
manufacturing costs and improve revenue).
• The pace of IT innovation in manufacturing appears to
be lagging behind other sectors since there is a
reasonable level of satisfaction with current systems,
and the majority has no plans for improvement.
A more in-depth analysis of the survey results can be
found on the following pages.
Industry Growth Analysis
There has been a significant shift in the respondents’
views on growth potential. It’s important to note that in
contrast to other reported business surveys, the growth
outlook for complex manufacturers has declined over
the past eight months rather than improved. More than
a quarter of businesses expect either no growth or
negative growth, and nearly half expect growth of only
around five per cent. The decline in growth expectations
of greater than 10 per cent is even more pronounced
with only 12 per cent of participants expecting growth of
greater than 12 per cent compared to nearly a third in
the previous survey.
The majority of respondents cited their top business
pressure as “growing revenue” closely followed by
“containing cost,” which was only 7 per cent behind.
These two answers were also recorded as the top
pressures earlier in the year. This outlook could be
attributed to the respondents’ declining growth
expectations. Since the opportunity for business has
declined, there is a shift in focus from external,
customer-facing improvements to improving the
productivity of existing resources and containing costs
within the organisation. Of concern is that the internal
focus of business to contain costs may mean that
opportunities for growth through improved customerengagement processes may be lost.
The remaining responses were spread broadly across
other areas of business operations. Interestingly, the
issue that was recorded the least changed from
“improving supply-chain efficiency” in February to
“retaining staff” in November. “Supply-chain efficiency”
actually more than doubled from the previous survey
suggesting that improving processes in this area is
growing in importance for many businesses over the last
year, whereas “Retaining Staff” remains as a low-pressure
issue as labour market conditions ease for employers.
Other pressures mentioned in the recent survey include
shrinking market, marketing, budget, competition from
Asia, manufacturing process and exports.
Strategic Improvement Focus
Current Systems Deployed
The majority of complex manufacturing and enterprises
today are focusing on strategies that will help their business
processes improve in the following areas: Sales, Supply
Chain, Planning and Product Design and Development.
Cincom’s benchmarking process measures the enabling
technologies and services that are currently deployed
within respondent companies.
In the February results, “Planning” clearly topped the list
of strategic priorities of businesses in the sample with
Sales and Product Design and Development well behind
in focus. The latest survey, however, indicates that
businesses have become broader in their strategic focus
areas. “Sales” processes topped the list for
improvement with 26 per cent followed by
“Warehousing and Supply Chain” at 20 per cent. This
complements the results above that saw Supply Chain
Efficiency increasingly becoming a key pressure.
Next to your responses, the following table shows the
percentage of composite industry benchmark that
currently has selected the technology in place.
The shift in focus to improved sales and warehousing and
supply chain is likely attributable to dealing with the
increasing competitive pressures that manufacturers are
facing. These pressures are coming from business
consumers demanding that businesses be easier to deal
with, the ability to source materials easily over the internet
and the ongoing competitiveness of overseas suppliers.
The majority of respondents have put in place the
standard “back office” and “front office” systems for
managing their organisations. Conversely it is still of
concern that over a third of companies surveyed have
not deployed these systems. In a follow-up question,
nearly 60 per cent of participants said that they have no
plans to deploy new IT technologies. This may be
attributable to a number of reasons including a lack of
knowledge of how business processes can be improved
by the deployment of new IT technologies or a cost
focus driving a lack of innovation in this area. As a call to
action in reviewing business processes, organisations
should consider how IT solutions can support businessprocess innovation and the demand of external
customers and employees to support the major trends
of BYOD (Bring your Own Device), customer portals and