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Manufacturing Industry Emphasizes Process Re-Engineering and Centralization

According to a survey, manufacturing companies place a greater emphasis on increasing centralization and collaboration compared to other industries. The survey conducted by the Everest Group and the Shared Services and Outsourcing Network (SSON) focused on identifying the various operating model strategies among differing industries such as banking, insurance, healthcare, retail and manufacturing.

The importance of centralization and collaboration in the manufacturing industry comes as no surprise. Given its focus on emerging markets, increasingly global supply chains and margins, consolidation as well as re-engineering processes are critical to a manufacturer’s success.

Historically, early efforts to commoditize, standardize and outsource business processes in manufacturing companies focused on horizontal functions or transactional repetitive back-office services, such as payroll processing, general ledger and accounts payable. Later, routine but judgment-based tasks like budgeting, reporting, sourcing, contracting and information technology front-office services were also added to the mix.

Today, while the manufacturing industry was a late starter in the adoption of advanced operating models, like shared services and outsourcing, the industry worked hard to make up for lost time—evolving significantly over the past few years.

According to primary research conducted by Genpact in its Impact Report, manufacturers are being challenged with cost and margin pressures, increasing competition and changing regulations. Leadership changes, merger and acquisition (M&A) activity, geographic expansion and company restructuring were all cited as drivers of change and volatility in manufacturing environments. As a result, manufacturers are evaluating and redesigning their current operating models.

The joint survey was based on 650 responses across 28 vertical industries and covered a wide range of topics, including sourcing models and technology strategies. In addition to increasing consolidation and centralization and re-engineering processes, surveyed manufacturers also said that they were focused on implementing new tools and technologies. Manufacturers no doubt recognize that product innovation that uses advanced engineering presents significant opportunities for businesses. And yet despite the industry’s emphasis on technology overall, manufacturers are not interested in all technologies. For example, the survey found that, compared to other industries, manufacturers were less interested in business intelligence and analytics.

The survey also found that industrial manufacturing lags behind other industries in the inclusion of industry-specific functions, but activities like engineering support in fundamental research, new product development support, and direct procurement and supply chain services are being increasingly industrialized. The most commonly industrialized services are data management and inbound, outbound and reverse logistics support.

And while manufacturers are ahead of other industries with regard to transactional and judgment-driven finance and accounting activities, such as internal audit, treasury and risk management, and tax computing, they trail slightly behind in consolidating areas like budgeting and forecasting, strategic sourcing, category management and requisitions management.

Anil Nanduru is the senior vice president of manufacturing and services at Genpact.

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