Get Customers Inspired A Call to

Action for Metal Fabrication

Manufacturers

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EXECUTIVE SUMMARY
IDC Manufacturing Insights recently ran a worldwide survey of 465
enterprises from multiple manufacturing sectors including
industrial machinery and equipment, high-tech and metal fabrication
across 13 countries. The resulting white paper Get Customers
Inspired: How Modern ERP Can Support Greater Customer
Experience (IDC #IDCWP13V) summarises the key findings from
this survey and provides essential guidance for manufacturers
developing their own business strategies.
In this paper, IDC Manufacturing Insights provides essential guidance
and a call to action for metal fabrication manufacturers to get their
customers inspired and achieve greater customer experience through
the use of modern ERP.
SITUATION OVERVIEW
Metal fabrication manufacturers are under pressure due to fluctuating
raw material costs and continued declines in prices for metal products,
resulting in a dramatic squeeze on profit margins.
The industry's performance over the past 10 years is shown in Figure
1, which presents IDC Manufacturing Insights' benchmarking database
GPI (Global Performance Index). Data shows that the industry
recovered after the slump in revenue caused by the crisis of 2008
2009, but over the past couple of years net profit margins have started
to decline again and revenues are not growing.
It comes as no surprise that, according to our recent survey, the most
critical concerns for metal fabrication manufacturers are related to
keeping operational costs under control and increasing profitability.
Changes in the market, aggressive competition from lower cost
countries, rapid commoditisation of metal fabricated products, the
difficulty in retaining existing clients, and the struggle to expand into
new, emerging markets are also considered significant threats in the
metal fabrication industry.

September 2013, IDC Manufacturing Insights #IDCWP23V

FIGURE 1
Worldwide Metal Fabrication Revenue and Net Profits Trends,
1Q024Q12

13

160

140
120

100

-2

80
-7

60

-12

40
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13

(Index, base year 2002 = 100)

180

Revenue

Net prof its

Note:
The Manufacturing Insights Global Performance Index (GPI) tracks growth metrics from 800+
publicly traded global firms in the manufacturing and retail industries. The GPI tracks general
trends in manufacturing and retail subindustries based on the performance of a sample of
companies from those subindustries, and historical data in the index may be adjusted between
quarters based on the addition or subtraction of companies in the index or company
restatements of historical filings. Estimates by Reuters.
Source: Manufacturing Insights' Global Performance Index, 2013

Metal Fabrication Manufacturing

Initiatives

To respond to their most critical business challenges, over the next

three years metal fabricants will prioritise initiatives that enable more
profitable growth. They will launch initiatives aimed at increasing
productivity on the plant floor, optimising the supply chain and
leveraging global sourcing opportunities.
At the same time, manufacturers will prioritise initiatives aimed at
achieving greater customer loyalty, retaining existing customers and
expanding into new markets. To do so, they will be busy expanding
their portfolio of value-added services on top of physical products and
working hard to improve the customer experience. The shift toward
value-added services has been evident for a while, but the importance
of improving customer experience is now appearing as significant.
As a result we can now identify the most critical initiatives metal
fabrication companies will be putting in place over the next three
years:

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 Selling value-added services on products Metal fabricated

products are often commodities that have traditionally been based
on simple technologies and are therefore prone to aggressive
competition on both price and the ability to copy and reproduce
standard products to quickly gain market share. A strategy focused
on competing on these two fronts alone will not offer enough
assurance of lasting competitive advantage if not accompanied by
investments in innovation from new materials to mecatronics
and value-added service capabilities. It is therefore encouraging
that our survey results show a growing share of approximately
20% of metal fabrication manufacturers that are aware that the
single most critical factor driving new product purchases is how
value-added services are delivered and supported, including R&D
services and configurable, customised, or engineering-to-order
products.
Optimise supply chain and production processes Fluctuating
raw material prices in conjunction with aggressive competition
from emerging economies continue to place pressure on profit
margins, leaving little breathing space for players in this industry.
As raw material price developments are out of manufacturers'
control, they will primarily focus on operational cost containment
and productivity improvements. Our recent survey results suggest
that a lot still needs to be done on the plant floor to achieve
operational excellence, and metal fabrication manufacturers will
continue to enforce policies aimed at making processes leaner. At
the same time, the need to improve customer fulfilment is also
requiring metal fabrication manufacturers to improve those
manufacturing and supply chain processes that play an essential
role in customer satisfaction and fulfilment.
Improve customer experience. Metal fabrication manufacturers
are still showing an immature attitude towards improving their
customer experience. However, according to our survey, they are
progressively recognising the importance of creating an enhanced
customer experience looking at a number of combined initiatives
as a way to retain existing clients, differentiate from competitors,
improve sales force effectiveness, and reduce costs.
Why Customer Experience is So Important

There are several possible definitions of customer experience. One that

is common and well accepted is that customer experience is defined as
"the sum of all experiences a customer has with a supplier of goods
and services over the duration of the relationship with that supplier".
In the modern metal fabrication industry, providing greater customer
experience is considered increasingly important as a way to generate
growth and higher profit.
Metal fabricants are rapidly being driven by their customers to
manufacture more complex and often bespoke products rather than
standard catalogue metal fabricated items. Their industrial clients are

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in fact progressively moving product complexity upstream in the

supply chain as they tend to purchase entire systems rather than simple
catalogue items. No customer request is the same, so manufacturers of
fabricated metals must serve their clients individually. They are
constantly asked for more product configurations and high levels of
customisation, while customer requirements are rapidly changing as
they follow end-market needs. Servicing clients and prospects
optimally from product design and configuration to services is
essential to differentiate and outstrip aggressive competition.
In this industry, customer experience no longer refers only to meeting
needs for product features and functions. It extends to value-added
services including meeting product customisation and speeding up
time-to-market, and how product and services are delivered and
supported and the service levels provided. Customer experience also
encompasses a number of critical capabilities including how easy it is
to do business with an organisation, supplier reliability, speed of
interaction, and willingness to help or serve.
Our survey reveals that the majority of companies in the metal
fabrication industry, however, have not yet fully understood the range
of elements that come to define the customer experience and what
critical business benefits it can deliver.
The situation today According to our survey, nearly 16% of
metal fabrication manufacturers nearly the double the rate in
other industries still believe that the single most critical factor
for their customers to continue purchasing from them is merely
related to meeting their price expectations. Similarly as buyers
themselves, nearly 70% said they will purchase from their
suppliers also predominantly on price. Leading companies,
however, understand there are other factors that can negatively
impact customer experience, including concerns around supply
reliability, poor product quality and wait time. These companies
are working on improving their capability of analysing past
customer interaction and gaining better insights into the
marketplace.
Strategy in the coming years Metal fabrication manufacturers
will invest in adapting their IT to react to and serve the customer
better (46.4%). With improved IT, they want to speed up decisionmaking capabilities and improve visibility along the value chain,
which is considered among the most appropriate strategies to
improve customer experience. Nurturing a customer-centric culture
among all employees across a number of business functions is also
considered a critical strategy to be implemented in the coming
years to improve customer experience. This shows how companies
in the sector are taking customer experience very seriously,
although starting from a very basic understanding today.
The main barrier that metal fabrication manufacturers meet on their
way to creating greater customer experience is essentially related to a
lack of funds to implement the required changes, as selected by more
than 47% of respondents to our survey. Organisational issues, such as
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inability to rapidly adapt business processes to change, lack of backoffice/front-office integration, and poor decision making capabilities
all point to an inability to access and utilise data and ineffective,
inadequate or rigid IT systems. Both are identified as critical barriers
to creating a greater customer experience.
How Modern ERP Can Support Greater
Customer Experience

For most if not all metal fabrication manufacturers, ERP is the

essential system of record to run their business, and our respondents
indicate that they won't be able to operate without an ERP system in
place.
When it comes to how ERP contributes to delivering superior
customer experience, nearly 28% of metal fabrication manufacturers
believe that ERP is vital as the platform that connects the back office
and front office and streamlines business interaction with suppliers and
customers. If we exclude responses from small to midsize metal
fabrication manufacturing enterprises, 50% of large metal fabrication
organisations with 5,000 employees or more indicated that their ERP
is a vital platform for delivering a good customer experience.
However, unlike other industries, a high percentage of respondents
(nearly 35%) believe the impact on customer experience of their
current ERP is still limited. Moreover, survey results also show that
most metal fabrication companies find that traditional ERP systems
don't support the provision of service to clients or the need to further
improve collaboration across business functions well.

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FIGURE 2
The Role of ERP in Customer Experience Generation Metal
Fabrication
Q.

In your organisation, what role does your ERP play in contributing to or delivering a good
customer experience?

The ERP is vital for our customer experience as it is the

platform that connects back-office and front-office

We are dependent on ERP for everyday support of business

operations, but the impact on customer experience is still
limited

Limited to financial accounting, sales, inventory and

purchasing, so little impact on customer experience

Little or no role whatsoever

10

15

20
(%)

25

30

35

40

Number of valid respondents: 155

Base: All Sample
Source: IDC Manufacturing Insights, 2013

Beyond Traditional ERP

When thinking about the future requirements of ERP, metal

fabrication manufacturers think that these applications should be able
to:
Improve access to accurate, real-time customer data 24 x 7,
including mobile formats.
Improve collaboration across the organisation, in particular by
enabling employees to share information and streamline business
processes.
Streamline business interaction with suppliers and customers.
Standardise manufacturing processes to achieve operational
excellence.
Respondents to our survey revealed a range of additional customerfacing functions that are needed beyond traditional operational or
financial-focused ERP systems to deliver superior customer
experience. These include warranty management, aftermarket and field
service management, and customer relationship management (CRM).
Over the next three years, leading metal fabrication manufacturers will
be looking for a flexible ERP system that includes or easily integrates
more customer-facing functions able to provide more timely

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information and that enable more collaboration. Such modern ERP

solutions can support the most immediate business needs of leading
manufacturers and will be central to creating a better customer
experience.
ESSENTIAL GUIDANCE
Metal fabrication manufacturers have come to realise that providing
superior customer experience has to be one of their top initiatives.
They acknowledge that engaging on deeper levels with their customer
base maintaining product quality and value added services but also
focusing on improving operational processes and accessibility to
information is the only way to get out of the dead end of poor
economic growth and declining profit margins. Understanding the
impact the next-generation ERP systems can have on these key areas
will see manufacturing companies broaden their use of today's more
operational ERP solutions.
Advice for Metal Fabrication
Manufacturers

Consider improving customer experience among your key

initiatives. Leading companies have well understood the
importance of customer experience to build business opportunities.
It is not enough to have a strategy in place that dictates your
company needs to improve customer experience. You also need to
make sure the whole company is committed to implementing it.
This requires nurturing a customer-centric culture. Evidence shows
that leading manufacturers have created a successful customer
experience enforced by a customer-driven culture within their
enterprise.
Invest in an open and modern ERP system as your customer
experience backbone. Not all ERP systems are able to deliver or
support higher levels of customer experience, if not properly
integrated with other customer-facing IT applications. This
includes warranty management applications, aftermarket, field
service applications, and CRM. Flexible ERP systems that include
or easily integrate those applications will add the most value to
manufacturers in relation to creating a superior customer
experience.
Call to Action

By considering the following questions you will be able to identify

areas of improvement in the drive to improve customer experience:
Ensure profitable growth by meeting customer expectations:
Are you focusing on value-added services to differentiate from
competitors and drive business growth?

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 Do you have a strategy in place to optimise the supply chain

and increase productivity on the plant floor?
Are you aware of the importance of creating superior customer
experience?
Create superior customer experience:
Is your company able to offer fully configurable, customised or
engineered-to-order products to fulfil specific customer needs?
Are you actively nurturing a customer-centric culture among
all your employees?
Do you acknowledge that customer experience also
encompasses capabilities such as how easy an organisation is
to do business with, supplier reliability, speed of interaction
and willingness to help or serve?

The role of ERP:

Do you think that the ERP system you have in place is enough
to deliver superior customer experience?
Does your existing ERP system support collaboration among
business functions and provide timely information when
needed?
Does your current ERP system provide integrated customerfacing functionalities such as CRM, warranty management, and
aftermarket and field service management?

Copyright Notice

Copyright 2013 IDC Manufacturing Insights. Reproduction without

written permission is completely forbidden. External Publication of
IDC Manufacturing Insights Information and Data: Any IDC
Manufacturing Insights information that is to be used in advertising,
press releases, or promotional materials requires prior written approval
from the appropriate IDC Manufacturing Insights Vice President. A
draft of the proposed document should accompany any such request.
IDC Manufacturing Insights reserves the right to deny approval of
external usage for any reason.

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