The just completed MSCI survey of the use of new digital technology among members shows an industry that is adopting the most useful data collection and analytics tools very slowly so far. At the same time, this research that is free to participating members, also points to tremendous opportunities for service centers and mills to dramatically improve operations from sales to the factory floor.
At the moment, MSCI members report spending at low levels, between .3% and 1.5% of annual sales on Information Technology related expenses. Gartner Research has estimated across other industries IT spending is generally reaching from 3% to 5% of annual sales and growing.
As in other industries, the larger players in ours are spending in the higher ranges. A recent McKinsey Global Institute study, for example concluded, “In manufacturing many smaller firms use only basic enterprise software for administration and they are years behind the largest aerospace or machinery manufacturers in their use of analytics.”
Those who responded to our survey were nearly 87% service centers and the rest mills and producers. Their spending at the moment is generally on upgrading older systems, created in house and used for basic functions such as accounting, mobile access to pricing, inventory and shipment data for sales, measuring some key performance indicators, and tracking shop floor inventory.
Even spending on cyber security, a growing problem for small businesses, particularly those digitally connected to larger enterprises, is fairly basic. Members are mainly using out of the box anti-virus and malware detection software, for instance, and firewalls to deal with security challenges that are only becoming more and more sophisticated. Cyber security training for employees, according to the survey, is more than 90% confined to email alerts and reminders. Less than 7% of the survey respondents said they use classroom instruction to help sensitize employees to cyber security problems and solutions.
The MSCI survey was designed as an analytical tool for members to evaluate their IT programs, compare them with their colleagues’ and competitors’ programs, and identify their own strengths and weaknesses. The idea is to get industry members thinking about the increasing potential for IT to keep them competitive, and improve operational efficiencies.
As the McKinsey Global Institute put it, “going digital is an opportunity to reinvent core processes, create new business models and put the customer at the center of everything.” McKinsey’s description of the most vulnerable businesses in this age of exploding digitization sounds eerily like many sectors of our industry: “Businesses that rely too heavily on a single revenue stream,” the international consultant said, “or are playing an intermediary role in a given market are particularly vulnerable.”
At the same time, the consultant’s report paints a vivid picture of opportunity and growth. “Digitization could add up to $2.2 trillion to GDP by 2025,” it concluded, and the Internet of Things—connecting the physical elements of our businesses to one another—could “improve asset efficiency and alone add $250 billion to $400 billion to GDP” in the same period.
Cleary it is time to begin thinking more seriously about big data, advanced analytics, the Internet of Things and the digital revolution coming at us. MSCI’s complete 41-page survey is free to participating members. Call Chris Marti for details at 847-485-3009.