Managing information effectively: A necessity for discrete manufacturers

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Managing information effectively is a series of four reports focused on strategies for managing information flow and security across and within sectors. Each report focuses on one of four sectors: healthcare, government and public sector; retail banking and discrete manufacturing.

The reports are based on the findings of research that HP conducted in cooperation with the Economist Intelligence Unit in June 2010, which included a survey of 332 executives in healthcare (23% of respondents), retail banking (24%), discrete manufacturing (27%), and government/public sector (26%). The respondents are heads of their departments or higher; 29% are C-level or board-level executives. Geographically, 34% hail from North America, 31% from Western Europe, and 28% from Asia Pacific. All respondents from the retail banking sector work at firms with a minimum of US$25bn in assets; respondents from the healthcare and discrete manufacturing sectors work for organizations with annual revenues of US$500m or more; and public sector officials are from government entities with budgets of at least US$500m per year.

This HP white paper is designed to share insight and stimulate dialog about the management of information flow and security within the discrete manufacturing sector.

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Managing information effectively: A necessity for discrete manufacturers

  1. 1. Managing information effectively:a necessity for discrete manufacturersBusiness white paper This HP white paper is designed to share insight and stimulate dialog about the management of information flow and security within the discrete manufacturing sector. It is based on the findings of research that HP conducted in cooperation with the Economist Intelligence Unit in June 2010, which included a survey of 332 executives in discrete manufacturing (27 percent of respondents), retail banking (24 percent), healthcare (23 percent), and government/public sector (26 percent). The respondents are heads of their departments or more senior; 29 percent are C-suite or board-level executives. Geographically, 34 percent hail from North America, 31 percent from Western Europe, and 28 percent from Asia Pacific. All respondents from the retail banking sector work at firms with a minimum of $25 billion USD in assets; all other respondents work for organizations with annual revenues or budgets of $500 million USD or more. HP foreword..................................................................................... 2 Managing information effectively: a cross-industry perspective.............. 2 Managing information effectively: the discrete manufacturers’ perspective..................................................................................... 5 HP conclusion................................................................................... 8In cooperation with the Economist Intelligence Unit
  2. 2. HP foreword It’s not news that manufacturing is among the most challenging types of business to operate profitably. The relentless increases in core energy and raw materials costs, the demands of moving manufacturing hubs to locations that cost the least to serve, the imperative to keep intellectual property secure, and the need to avoid the latest geopolitical crisis are just a few of the many real-life problems facing today’s manufacturers. Given the complexity of this environment, we set out with the Economist Intelligence Unit to understand the impact of information flow and security on business drivers and priorities within discrete manufacturing, as compared with other industry sectors. The research spotlights the following business drivers for discrete manufacturers: • Improve efficiency • Comply with regulations and improve security • Drive growth through innovation and collaboration Over the next three years, there will certainly be changes in the business drivers affecting manufacturers. Still, controlling costs, making business processes more efficient, and keeping employees productive are expected to remain important. In this research, the Economist Intelligence Unit examines the effective management of information flow and security from a cross-industry perspective, as well as from the unique perspective of the discrete manufacturing industry. The findings show that discrete manufacturers acknowledge the need to adapt their strategies to an evolving environment—a necessary first step in addressing the challenges they face. Marie-Amélie Masnou Market Development Consultant HP Enterprise Discrete Manufacturing, Imaging and Printing Group Managing information effectively: a cross-industry perspective Information, an essential asset for organizations, is always difficult to manage effectively—and it is even more so in periods of economic turmoil and transition, when complexity increases and the stakes are higher. For the past decade or more, organizations have been striving to build more open and collaborative relationships with their customers, partners, suppliers, and other stakeholders. When the recession took hold, many such initiatives took a back seat as cost-cutting became first priority. Now, with the effects of the recession waning, many organizations in developed markets are moving from a focus on costs towards new growth strategies, while some firms in emerging markets are experiencing rapid expansion, at home and abroad. Companies in heavily regulated industries such as financial services and healthcare are adapting to constantly changing regulations that affect how their businesses operate. In contrast, the public sector is still feeling the impact of the recession, with governments facing shrunken receipts and greater demands for social services. And nearly every organization, regardless of sector or geography, is adapting to new technologies—such as advanced collaboration tools, mobile communications, and social media—that are changing how people interact and how business is done. Whether they are renewing growth plans or still dealing with the aftermath of the crisis, organizations can benefit from more efficient and secure use of information, which can help them identify and deal with both opportunities and risks. Our survey results show that executives in retail banking, healthcare, discrete manufacturing, and the public sector are addressing a host of challenges—from organizational to technological, and from regulatory to budgetary—as they assess the long-term impact of the recession on2
  3. 3. their markets and businesses. At the same time, they are striving to bridge an apparent gap between thegoals of their information strategies and their ability to act on those goals. The survey also shows that whilemost decision-makers are uncertain about the effectiveness of their information strategies today, they expect toimprove how they manage and secure information in the next three years. This report presents the overall keyfindings, followed by the results of the discrete manufacturing sector.Complex information flows require reviewSurvey results show that the flow of information across global organizations with geographically dispersedbusiness units, departments, and functions is growing increasingly complex, incorporating both formal andinformal channels. Often, even when senior management mandates formal strategies and policies and effectiveprocesses and technologies support formal flows, it is the personal relationships between employees or thepreferences and styles of individual managers and supervisors that still determine what is shared with whom.Information flows within organizations are complex(% of respondents who agree with the following statements about the flow of information across their organization)Information flow is electronic and 57%supported by effective processes 62%and technology 51% 65%Senior management has mandated 43%a strategy and policies for the flow 71%of information that are practiced 45%widely throughout the organization 48%Information flows based on the 53% 41%preferences and styles of individual 56%managers and supervisors 47%Information flows informally based 48% 41%on personal relationships between 55%employees 48% Discrete manufacturing Government Retail banking HealthcareSource: Economist Intelligence Unit, June 2010This finding is not in itself surprising. However, it raises questions about the effectiveness of existing formalstrategies and policies, and suggests that organizations should continuously review how they manageinformation to extract maximum benefit. The growing flood of unstructured information, which is by its naturemore difficult to manage formally, also makes periodic reviews and strategic adjustments essential. (In thisanalysis, unstructured information is defined as information that does not exist inside a data model that can beread and understood by a computer, and that therefore requires human intervention. Examples include email,instant messages, audio files, and paper documents and forms.)Lack of an information strategy increases riskA large majority—80 percent—of respondents say their organization has a strategy for improving the flowof information. Although most are satisfied with their strategies, about 25 percent of organizations that havestrategies are changing how they deal with information. These organizations seem especially aware of theneed to adapt in response to the improving economic climate and emerging trends in their sectors.A small but significant minority (13 percent) of respondents have no strategy for improving information flows.There are several possible explanations. These organizations may still be in the grip of the recession, worriedmore about survival than growth. They may be slow to respond to the opportunities that an improving economycreates. Or they may be latecomers to the now widely accepted notion that more open dissemination anduse of information throughout an organization leads to better business outcomes. Regardless of why they lacksuch a strategy, however, these organizations are at an extreme disadvantage in today’s dynamic environmentcompared with their more information-savvy competitors. 3
  4. 4. Information strategies shift focus from efficiency to effectiveness Organizations that have strategies for improving the flow of information throughout the enterprise today are pursuing greater operational efficiencies, seeking to increase the speed and lower the cost of critical business processes, and improve employee productivity and effectiveness. They can do so through better collaboration and/or the ability to provide employees with the right information at the right time to do their jobs. These organizations are also responding to the need to comply with legal, regulatory, or internal governance standards. In three years, however, collaboration is expected to be the most important driver of information strategies, suggesting a stronger focus on employee effectiveness. DRIVERS OF INFORMATION FLOW STRATEGIES CHANGE IN THREE YEARS RANK (Based on % of respondents who chose up to 3 among 12 drivers) Today In 3 years Need to facilitate collaboration across departments, functions, and geographies 4 1 Employees need the right information at the right time to do their jobs 1 2 Need to increase efficiency and speed of business processes 3 3 Compliance with legal, regulatory, or internal information governance standards 2 4 Source: Economist Intelligence Unit, June 2010 Collaboration becomes even more important as organizations grow and become more geographically dispersed. The adoption of flexible work arrangements—such as telecommuting—creates other challenges, making it more difficult for people to connect informally in the workplace. Yet sharing information across business units, departments, functional areas, and geographies is never straightforward. Survey respondents cite organizational silos as one of the three main barriers to effective information strategies—the others being the perennial challenges of cost and aligning technology systems (each chosen by 37 percent of respondents). Organizations have more confidence in information security Respondents generally have more confidence in their information security strategies than in their strategies for improving information flows. Just 13 percent of organizations are changing how they deal with security; 27 percent report that they have no need to do so. The 11 percent that have no information security strategy are exposed to greater risk. Organizations confident in their information security strategies (% of respondents) No strategy 11% Implementing now 37% No need to change 27% Planning to implement 8% Currently Don’t changing 13% know 4% Source: Economist Intelligence Unit, June 20104
  5. 5. While most respondents report having formal strategies, just half say their organization has a single personor department with primary responsibility for information security. This suggests that in most organizations,keeping information secure is the job of individual business units or departments—not a top-down mandate.A fragmented approach to information security is to be expected in organizations that are subject to regulatoryrequirements from several different authorities. In other organizations, though, this approach likely inhibitsefforts to protect information from security breaches.An analysis of survey results by sector provides a more detailed view of how organizations manage informationflow and security. The discrete manufacturing sector stands out as an early adopter of strategies for managinginformation flow. Globalization, the burgeoning economic force of the Asia Pacific region, and increasinglycomplex business networks have made these strategies even more important for the sector today.Managing information effectively:the discrete manufacturers’ perspectiveEffective information management is an essential element in the strategies of discrete manufacturers, whichin this report include aerospace, automotive, consumer packaged goods, and high-tech manufacturingcompanies. Historically, these organizations have gained competitive advantage through careful control of theirsupply chains, from raw materials to finished goods. As a result, they have been early and major adopters ofstrategies, processes, and technologies to maintain the efficient flow of information within their organizationsand with their suppliers and customers.The modern supply chain is becoming increasingly global and complex. Manufacturing now routinely takesplace in multiple dispersed locations, including in developing countries. This creates both new opportunitiesand greater risk. As their economies grow, developing countries become attractive markets. Risk arises fromthe possibility of supply-chain disruptions and from instability due to supply-chain complexity, as well as fromthe varied regulatory environments, geopolitical uncertainty, and weak disaster-response systems in some ofthe countries where companies operate.The survey shows that the sector is trying to keep pace with the challenges that accompany globalizationand increased complexity. It also shows the growing economic power and influence of the Asia Pacific regionin this sector.Support structures handle formal and informal information flowsRespondents in the discrete manufacturing sector recognize that information flows both formally andinformally. But they are more confident than their peers in other sectors that their organizations supportformal information flows.Discrete manufacturers are the most likely of the sectors surveyed to say that information flows electronicallyand is supported by effective business processes and technologies (65 percent). This sector is also the leastlikely to have manual and paper-based information flows (6 percent).Discrete manufacturers lead the way in automation(% of respondents who agree with the following statements about the flowof information across their organization) 6% 14%Information flow ismanual and paper-based 14% 14%Information flow is 65%electronic and supported 62%by effective processes 57%and technology 51% Discrete manufacturing Government Retail banking HealthcareSource: Economist Intelligence Unit, June 2010 5
  6. 6. Respondents from Asia Pacific are more confident than those from other regions that they have procedures and technologies in place to support formal information flows. Of respondents in Asia Pacific, 68 percent say that information flows electronically (compared with 62 percent in other regions), and 85 percent say that information flows are not manual and paper-based (compared with 69 percent in other regions). Drivers of information flow strategies are evolving Discrete manufacturing information flow strategies currently target operational efficiency and collaboration within the organization, and will continue to do so in three years. This confirms the central role of information in supply-chain management. What is most interesting, however, is the growing importance of two drivers: the need for mobile access to information anytime and anywhere, and the role of information in business continuity and disaster recovery. The discrete manufacturing sector stands out from the others in acknowledging that information will be increasingly relevant for business continuity. DRIVERS OF INFORMATION FLOWS IN THE DISCRETE MANUFACTURING SECTOR RANK (Based on % of respondents who chose up to 3 among 12 drivers) Today In 3 years Need to facilitate collaboration across departments, functions, and geographies 2 1 Need to increase efficiency and speed of business processes 1 2 Employees require access to information anytime and anywhere 6 3 Information is a key component of business continuity and disaster recovery 9 4 Employees need the right information at the right time to do their jobs 3 5 Compliance with legal, regulatory, or internal information governance standards 4 6 Need to improve records management policies and processes 10 7 Need to more effectively manage unstructured information (e.g., email, instant 5 8 messages, audio files, and paper documents and forms Source: Economist Intelligence Unit, June 2010 The especially steep rise in the rank of business continuity as a driver of information flow strategies—from ninth position to fourth in three years—reflects regional differences. Overall, 26 percent of respondents cite it as a prime driver. But in Asia Pacific, 33 percent rate it as one of three top drivers compared with just 17 percent in other regions. Respondents recognize the greater risk of manufacturing in developing countries.6
  7. 7. Sector is an outlier in barriers and benefitsDiscrete manufacturers also differ from respondents in other sectors in ranking change management(38 percent) and accountability (33 percent) as barriers to information flow strategies. Cost, on the other hand,ranked quite low in this sector (29 percent) compared with the others. This is surprising in an industry wheremanaging costs is so important. CHANGE MANAGEMENT AND ACCOUNTABILITY CHALLENGE—DISCRETE MANUFACTURING SECTOR (% respondents) Manufacturing Public sector Retail banks Healthcare Business organization: departments, functions, and geographies 40% 37% 25% 46% work in silos Change management: employees resist changing how they work 38% 31% 20% 25% to use information more effectively Technology: information systems do not connect well 34% 37% 40% 37% Accountability: lack of ownership of the responsibility for 33% 23% 18% 23% developing, funding, and executing information Cost: implementing an effective information strategy is costly and 29% 39% 40% 44% complex Source: Economist Intelligence Unit, June 2010There are regional differences as well. Respondents in Asia Pacific cite cost—one of the region’s key competitiveadvantages—much more often than respondents in the rest of the world.Effective information strategies help discrete manufacturers remain competitive by improving their ability torespond in a timely way to changes in the market. This is especially important in Asia Pacific. As the region’smanufacturers climb the value chain, moving from commodity goods to higher-value products, they mustconstantly take the pulse of the market.Sector lags in information securityMore than 50 percent of respondents in the discrete manufacturing sector say that their organization hasimplemented, or is planning to implement, an information security strategy—yet the sector is less likely than theothers to have formal procedures to do so. This is not surprising: although discrete manufacturers understandthe importance of protecting intellectual property, they are regulated lightly and do not have to adhere to theprivacy rules imposed on retail banks, healthcare providers, and many government agencies.While overall the sector seems to regard information security as an option, not a necessity, regionalperspectives differ. Asia Pacific respondents are least likely to say that their organization has strong informationsecurity procedures in place. As the region’s manufacturers increase their share of intellectual property, suchprocedures may be more highly valued.SummaryDiscrete manufacturers recognize that effective information management is central to their operationalefficiency, and they have been leaders in adopting information flow strategies and technologies. To remaincompetitive, however, they must continue to adapt to an evolving and increasingly complex global market thatrequires information to flow smoothly—not only within the organization, but between the organization and itspartners and customers, as well. Information management strategies should help them take the pulse of themarket, identify risks that threaten business continuity, and get the right information to the right people. 7
  8. 8. HP conclusion Efficient information flow has long been strategic to supporting discrete manufacturing’s supply chain imperatives. But if new technologies have improved information flow over the past decades, they have also surely added complexity. Manufacturers have been forced to recognize that the only way to increase both operational efficiency and employee productivity is to implement new technologies and reengineer business processes. In response, HP has developed solutions specifically to help manufacturing companies improve efficiency and streamline business processes and IT operations in order to better manage costs. For example, the HP Automated Document Management Solution helps manufacturing companies increase the speed of core processes, improve compliance with myriad local and national laws, and eliminate a great many of the costs associated with managing document workflow. Compliance with security and regulatory mandates is a second key driver for manufacturers. But as the Economist Intelligence Unit discovered, manufacturers often lag behind in safeguarding information. As manufacturers go down the path of globalization, however, the increasing complexity of the supply chain presents serious threats to information security. Manufacturers must comply, as well, with regulations such as the Sarbanes-Oxley Act, the automotive industry’s TREAD Act, and environmental regulations; maintain required audit logs and production batch records; and adhere to many other such mandates. To address these requirements, manufacturing companies have to put solutions in place that will sustain both information flow and data security. With technologies such as HP Access Control software and card readers, HP is a leader in delivering security solutions that protect data in motion, data at rest, and data in use. While security is key, HP solutions also help companies do a better job of responding to environmental imperatives and contributing proactively to corporate social responsibility. An area of recent innovation and improvement for manufacturers of finished goods lies in the transformation of marketing publishing. The creation, editing, and publishing (especially printing and storage) of vast quantities of customer-facing documents is a huge expense. The process of creating these documents is generally very inefficient. Printing and storing millions of marketing documents is very costly—and that expense is magnified by the fact that a large number of these documents become obsolete while sitting on a shelf. The Dynamic Publishing approach from HP helps customers streamline the document creation process, and it provides print-on-demand services that help save on printing, shipping, and storage costs. As manufacturers work with shrinking budgets, they are discovering that collaboration among suppliers, manufacturers, retailers, and end customers can help them gain a competitive advantage, create and capture demand with more innovative products, and support market evolution faster than their competitors can. Creating a manufacturing ecosystem that delivers improved operations, lower costs, and drives growth and innovation can only be delivered through collaboration. From the cloud network infrastructure that links business applications together to a demand-driven mobile computing environment with innovations such as HP ePrint enterprise printing solutions, HP offers a complete, end-to-end solution portfolio for the discrete manufacturing industry. To learn more, contact Marie-Amélie Masnou at marie-amelie.masnou@hp.com.To learn more, visit www.hp.com© Copyright 2010 Hewlett-Packard Development Company, L.P. The information contained herein is subject tochange without notice. The only warranties for HP products and services are set forth in the express warrantystatements accompanying such products and services. Nothing herein should be construed as constituting anadditional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein.4AA3-1713ENW, Created October 2010

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