Why data should be seen as the fourth production factor

23 April 2018, Manufacturing, 4 min leestijd

The three traditional factors concerning production are land, labor, and capital. But it is fair to say that data has now become the fourth factor of production. In this blog, Jan Bakker will examine the impact of data on production companies.

Can you still remember the factors that affect production? Well, let me take you on a trip down memory lane, all the way back to high school. The factors are those that determine production, such as land and natural resources. If you want to produce something, you will clearly need the right raw materials. Labor is another one of the factors. Your ability to produce will depend on whether you have the right people at your disposal and at the right time. And, finally, capital. After all, you have to invest to make money.

But data has now become just as important for production as raw materials, human capital, and money. In fact, in a growing number of scenarios, having the right data at your disposal can make the difference between taking the lead or falling behind. Let me explain.

  • No more fighting fires
    Once you have the right data, there is no longer a need for constantly putting out smaller fires. You will know exactly where a possible fire could occur and it will allow you to take the appropriate measures. Whether there is a natural disaster, a plane crash, or the American import taxes change, in each case you will directly be able to see what the possible logistic and financial consequences might be.

  • New business models
    Data will enable new business models. For example, think of a scenario in which a product is equipped with a IoT connection which allows the creator to roll out new service models. You could also turn it around and provide data to customers, enabling them to work more efficiently. Take tractor building company John Deere as an example: they are helping customers with infinite amounts of data in order to let them farm smarter and more precisely.

  • Continuous improvements
    For those who have the right data, it is also much easier to make improvement a continuous process and to work on a daily basis with more speed, less waste, higher quality, higher availability and consistent quality. Continuous improvement requires an equally constant data flow.

You already have a lot in-house
The step towards a smarter, more focused use of data for production companies is not really all that challenging. That is because, if there is one place in which data is being continuously produced, it is most definitely in production companies. The manufacturing industry is a paradise of data ranging from R&D information, supply chain data and production data, to sales and customer data. But in order for this information to work in your advantage, and to be truly data-driven, you must pay attention to two important issues.

Focus area 1: coordinating your data in a smart way
As a consultant, I am lucky enough to observe many companies from the inside. What I often see is that all this data is indeed present, but that it hasn’t been properly organised. It is almost as if it was locked up in many separate systems that are connected with each other like a large pile of spaghetti would be. In order to have your data work for you, you must be easily able to retrieve, and bring together, all the data from these separate systems. Only then will you be able to use it in a smart way. Optimize. Predict. Develop new models… you name it.

Modern ERP solutions can bring an end to that confused, spaghetti situation. Instead of using a plethora of loose solutions, you will use one single, user-friendly ERP system for the bulk of your processes. Such a system is equipped as standard with all types of proven successful processes from a large number of different sectors. You simply select the best practices (logistics, warehouse, production, personnel, procurement, sales) that you need. Gone are the loose and sloppy systems, gone is the spaghetti. And because all of the data is in that system, you will have easy access to it. And then it starts to get interesting because now the scenarios I’ve mentioned earlier on will be within reach.

Focus area 2: optimally unlocking your data
The interface also deserves some attention because having a smart, data-driven system which no one wants to operate will prove to be futile. For example, that means that the software with which you analyze your data must be ready for the new generation; not a generation that learns, but one that searches. But as a priority, the system should be mobile and as close as possible to the practical situation and the requirements of the modern user. Even in the production environment, you can no longer expect people to accept computer screens that look like they are 15 years old.
Cloud-ERP for production companies
A smart, standard ERP solution in the cloud and an abundance of best-practices is the perfect basis for manufacturing companies that would like to work in a smarter way and that are eager to distinguish themselves from their competition through new and data-driven ways. With a better product. With a more efficient process. With a smarter sales model. In fact, whatever you want.

Would you like to have your data work to your advantage? Then I invite you to join the webinar that I’m organizing on May 29th. During this webinar, I will delve deeper into the ways that ERP in the cloud can help you to maximize your return from your data.