A Better Way to Measure Shop Floor Costs

Disparities between financial and factory-level productivity measures exist at many manufacturing facilities. Better alignment can improve efficiency, pricing, and product strategies.

October 2015 | by Robert Harris

Since the late 1990s, many production and manufacturing companies have replaced their proprietary data-management and control systems with standardized, packaged software, such as enterprise-resource-planning (ERP) systems and customer-relationship-management (CRM) databases. The switch has allowed them to automate important business functions—for instance, implementing one-touch customer billing or automated supply-chain planning—and reap significant cost advantages from shared services.

In banking and insurance, however, the use of proprietary software systems is still the norm. For companies in these sectors, upgrades to core systems are particularly lengthy and risky—because they typically involve many complex, heterogeneous products and decades-old IT systems, and they require input not just from multiple internal stakeholders but also from external parties, including regulators, before anything can change. Moreover, the market for software products that are specific to these industries is still emerging.

A confluence of technology and business trends, however, may finally prompt insurance and financial-services companies to make the leap, not the least of which is increasing customer demand for online products and services. Companies in all industries are experimenting with two-speed technology platforms—rapidly developing innovative website and mobile applications on the front end that facilitate better interactions with customers while continuing to run standardized legacy systems on the back end to ensure data security and reliability.

Banks and insurance firms would like to do the same, but their proprietary platforms are proving too inflexible for creating new digital channels or user interfaces. Because such systems are generally built piecemeal and patched together over time, they typically cannot enable the end-to-end data and process f lows and automation that companies need to provide fast, reliable online services to customers.

Through our work with companies in a range of industries, we have identified five success factors for switching from proprietary to standard software systems. Specifically, executives leading the change effort will need to pay attention to the technologies required, the impact of transformation, the composition of teams, the timing of system implementation and rollout, and the organizational transparency required to successfully shed homegrown systems in favor of standard systems.

 

Executive Editor

 Ms Anna Sullivan

Ms Anna Sullivan