Using Digital Deflation to Prepare Manufacturers for Change

Inflation is raging at an annualized rate of well over 8% and worker shortages and wage increases — at over 5% — are also increasing corporate costs and negatively impacting profitability. Many CFOs will want to scale back spending in such an environment but should resist the temptation to reduce IT spending.

Manual processes, including those facilitated by Excel spreadsheets, still in widespread use in many companies, do not operate at the speed of today’s businesses and do not provide the data visibility that companies require in today’s environment. Increasing technology spending allows companies to take advantage of opportunities that digitalization brings to businesses in the form of reduced costs and increased competitiveness — a phenomenon being called “digital deflation.” Manual procurement processes consume high levels of human resources, which are in short supply and are costing more every day. Companies can achieve dramatic results by digitizing business processes to reduce personnel costs and improve business performance. Digitalization can help companies achieve lower costs and greater speed and efficiency in procurement, manufacturing, logistics and other areas. Digitalization enables every area of a company to access the same data to make better decisions. It also promotes customer and vendor self-service, which reduces costs and enhances service. On manufacturing floors, it can automate production tasking and equipment inspections, reducing the required personnel to perform those tasks. In the supply chain, digital technologies provide real-time visibility to the movements of inventory and raw materials, making supply chain management more efficient. Key elements to pursuing a digital deflation strategy include choosing a limited number of corporate goals, taking a long-term view, implementing adoption reviews and working with a compatible implementation partner. Digital implementations help beat inflation by promoting lower labor, material and manufacturing costs, and can also result in higher customer and vendor satisfaction, better control over the supply chain and increased speed and agility.