How Small And Midsize Industrial Manufacturers Can Strengthen Industry Competitiveness

Georg Kube

Part 2 of the “Digitally Transforming Industries” series

Small and midsize industrial manufacturers are part of a vibrant global market that is powering entire economies. Whether these firms produce goods, equipment, parts, machinery, or chemicals, nearly every large original equipment manufacturer (OEM) in a variety of industries relies on them to function effectively and deliver the high quality that consumers expect. Many have risen to the challenge by igniting tremendous growth with lean operations and attention to value delivery.

Although small and midsize businesses (SMB) in the industrial machinery and components (IM&C) industry are highly influential in most markets, they are not a small version of large manufacturers. Because SMBs are, for the most part, OEM suppliers, they must comply with processes imposed by the manufacturing client and ensure that their offering fits within the design requirement of the final product.

To add value to their contribution in their relationship with OEMs, according to IDC’s industry brief sponsored by SAP, “Manufacturing: Small and Midsize Industrial Machinery and Components Manufacturers Are Using Technology to Make a Difference,” IM&C firms understand and accept the importance of advanced technology. Roughly one-third of SMBs agreed that digital technology can help grow revenue, improve efficiency, and manage costs. In addition, the majority believe that adopting such innovations can lead to competitive differentiation.

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Digital transformation challenges the box that defines IM&C firms

Given the availability and affordability of digital technology of all kinds, it’s reasonable for even the smallest firms to envision and prepare for data-driven operations. By connecting internal and external activities on the same technology platform, operators, designers, customers, and adjacent partners can share information and analyze the progress of the entire product development and manufacturing lifecycle – from concept and design to production, installation, and performance feedback.

The value of digital technology in IM&C goes beyond real-time monitoring, collaboration, and advanced analytics to deliver high-quality products. It can also serve as a springboard for calculated actions that enable further monetization, business model innovation, and value.

  • Add to the customers’ cash flow. Embedding sensors into product parts can help OEMs monitor the production process. Going a step further, firms can empower OEMs to decipher opportunities that are hiding in the data, giving IM&C firms a chance to seize new competitive advantages. According to the IDC report, “tools to manage receivables, monitor expenses, and even optimize team composition can dramatically improve both cash position and service delivery effectiveness.”
  • Expand product and service scope to contribute more value to OEMs. While incorporating new technology into processes and products may be regarded as revolutionary, it can take existing capabilities to improve value contribution in the OEM relationship and introduce new revenue streams. For example, small and midsize IM&C businesses can move quality management and service execution to the cloud so they can seek opportunities to increase their product scope from component to assembly or from small assembly to larger assembly.
  • Contribute more to the OEM business network. Small and midsize companies can partner with the rest of their clients’ networks to offer more comprehensive products and services. The resulting higher-value solution can bring higher margins and help the OEM digitally transform itself without disrupting the value chain and its profitability.

IM&C SMBs can redefine products and revenue sources for the entire value chain

Better customer experiences, products, and competitive positioning are always a compelling formula for OEMs when choosing an IM&C firm as a partner. But at the same time, these capabilities can create a foundation for revenue growth, which is a top priority for SMBs cited in the IM&C-focused IDC study.

Cloud-based services are making it easier for SMBs to invest in digitization. This subscription-based, affordable approach to digital transformation provides an opportunity to build out additional offerings and move significant investment away from technology and toward intellectual property and innovation. Not only will this approach empower IM&C SMBs to work the OEM sector, but it will also open the door to new opportunities for monetization and in adjacent industries never before considered by their clients nor themselves.

To learn how your business can better prepare for the digital economy, check out IDC’s Industry Brief, “Manufacturing: Small and Midsize Industrial Machinery and Components Manufacturers Are Using Technology to Make a Difference.” Be sure to check every Tuesday for new installments to our blog series “Digitally Transforming Industries” to explore the various leadership roles in today’s growing small and midsize companies.


Georg Kube

About Georg Kube

Georg Kube is the global head of SAP’s industry business unit for the Industrial Machinery & Components industry. He is responsible for defining industry-relevant solutions based on SAP’s complete portfolio of products and technologies, bringing them to market, and driving business in the regional units.