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A WHITE PAPER
The Top Challenges Facing Manufacturers in
Construction-driven Markets &
How to Meet Them Head On
Including Windows &
Door Manufacturers
© 2014 Edgewater Fullscope, Inc. All rights reserved.
The information in this document is subject to change without notice. No part of this document may be reproduced, stored or transmitted in any form or by
any means, electronic or mechanical, for any purpose, without the express written permission of Edgewater Fullscope, Inc.
Table of Contents
Abstract..........................................................................................................................................................3
Introduction....................................................................................................................................................4
Common Business Challenges.......................................................................................................................5
Demand tied to the construction/housing market
5
Volatile raw materials pricing6
Regulatory and environmental issues7
Emerging competition: low-cost offshore labor, alternative products
8
Commodity pricing pressures8
New technology adoption9
Consolidation of major customers10
Size of competitive producers 10
Microsoft Dynamics AX: A Means of Meeting Industry Challenges..........................................................11
Conclusion......................................................................................................................................................16
About Edgewater Fullscope..........................................................................................................................17
2
ABSTRACT
It is well understood that the construction market is a key driver of the economy, both global and domestic, as was
shown in the Great Recession that occurred just before the outset of this decade. While the financial industry collapse
was the trigger that set that precipitous decline in motion, the effect on construction activity put the brakes on a host
of economic sectors, not the least of which was manufacturing. It is only during the last few years that construction
has started to rebound and manufacturing in turn.
While long-term demand for construction is anticipated to rise over time, short-term dynamics pose particular
challenges for those manufacturers whose products are largely driven by the construction market. Both discrete and
process manufacturers face similar business and production challenges, despite their different manufacturing models.
This white paper looks at manufacturing market sectors particularly impacted by fluctuations in construction activity
and examines the challenges they share. It also presents how Microsoft Dynamics solutions can be effective tools for
manufacturers to meet those challenges head-on as they pursue their enterprise objectives.
3
I. INTRODUCTION
Analysts and economists look to 2014 with higher hopes for construction than what was realized in 2013. The past
year has shown painfully slow growth, which some industry experts have termed “barely acceptable.”1 Nonetheless,
there are some optimistic signs:
• Ken Simonson, chief economist with the Associated General Contractors (ACG) of America, suggests total
construction spending will increase 6 percent to 10 percent per year from 2014 through 2017.
• Robert Murray, vice president of economic affairs with McGraw Hill Construction, forecasts that total
construction starts could rise by 9 percent next year to $555 billion.
• FMI predicts moderate growth of 7 percent for 2014 construction-put-in-place, reaching an estimated $977
billion from the anticipated $909.6 billion predicted through 2013.2
While the general consensus from analysts is more positive than negative and it appears the next year is likely to see
consistent, but slow, growth in construction, among construction-driven manufacturers, optimism is tempered by a
range of issues and challenges that must be addressed to run their businesses effectively in these times. These include
difficult demand planning, volatile raw material markets, regulatory and environmental issues, low-cost competition
from emerging economies, pricing pressures, new technology needs and cost disadvantages related to size of
customers or scale of competitive producers.
The construction-driven manufacturing markets bearing the brunt of these pressures include:
• Architectural and structural metals: Manufacturers of metal-framed windows and doors, sheet metal work,
ornamental or architectural metal products, prefabricated metal buildings and structural metal and metal plate
work products.
• Plastic resin and synthetic fibers: The construction industry has become one of the largest users of plastics in the United States. Plastics are used to make decking, roofing materials, piping, structural insulated panels (SIPs) and windows. Construction material manufacturers continue to find new applications for plastics.
• Cement and concrete: Cement, ready-mix concrete and concrete products such as blocks, pipes, bricks, walls,
and girders.
• Wood products: Dimensional lumber; veneers, plywood, engineered wood members, or reconstituted wood
products; wood window units and interior and exterior doors, garage doors, wood flooring and other millwork;
wood containers; pallets; prefabricated wood buildings; and manufactured homes.
• HVAC equipment: Residential and commercial heating, ventilation, air-conditioning (HVAC) and air-purification
equipment, as well as commercial refrigeration equipment.
• Switch, connector and other wiring devices: Current-carrying electrical wiring devices, including bus bars,
switches, connectors and electrical receptacles (outlets) and plugs.
•Paint and coatings: Paints, varnishes, lacquers, enamels and other coatings.
• Lighting equipment: Electric light bulbs and tubes, as well as lighting fixtures, lamp shades and other
components and parts.
While these markets encompass both discrete and process manufacturers, the challenges resulting from the dynamics
of today’s construction market impact them equally.
4
COMMON BUSINESS CHALLENGES
Eight principal challenges face virtually all construction-driven manufacturers:
• Demand tied to the construction/housing market
• Volatile raw materials pricing
• Regulatory and environmental issues
• Emerging competition: low-cost offshore labor, alternative products
• Commodity pricing pressures
• New technology adoption
• Consolidation of major customers
• Size of competitive producers
Demand Tied to the Construction/Housing Market
For manufacturers in the sectors cited in the introduction, demand is directly related to the performance of the
construction and housing markets. This makes them vulnerable to fluctuations in those markets and also presents
certain difficulties relating to demand planning.
While new housing and commercial construction responds to growth in anticipated demand, that response occurs
with a lag that reflects both the time it takes to secure permission for new construction and the time involved in
construction itself. Construction activity must therefore be forward-looking. Further, because building costs tend to be
front-loaded (i.e., with returns achieved only after the costs have been sunk), fluctuations in construction output can
exacerbate the business cycle.3
Demand for architectural and structural metals depends on the level of construction activity, particularly nonresidential
construction. Construction activity, in turn, is driven by interest rates and overall economic conditions. As recent times
have evidenced, nonresidential construction can rise or fall more than 10 percent annually. Due to slowing
construction activity in the winter months, demand for structural metals is typically weak during this season. Prolonged
winter weather can further impact sales, extending in many cases through the first half of the year. This seasonal
demand fluctuation challenges manufacturers in managing cash flows and maintaining high asset utilization.
In the cement and concrete products sector, demand is highly cyclical, tied to the level of new construction. Weather,
interest rates, population migration, business spending and government funding affect local construction markets
directly and in combination, making them subject to volatile swings of demand.
The wood products sector is strongly influenced by rates of residential construction. Demand for lumber, plywood,
engineered wood products, millwork and manufactured housing depends on residential construction; the level of
investment in new housing can change rapidly, depending largely on the public’s perception of the economy and
interest rate fluctuation. Residential construction accounts for more than half of all lumber used in the United States.
Additionally, wood is predominantly used for windows and doors in new residential construction and remodeling, both of
which are cyclical and strongly linked to the overall health of the economy. When it declines, so does demand in the sector.
The same circumstance holds for the HVAC and current carrying electrical wire sectors as for wood products, with the
caveat that they are strongly impacted by commercial construction as well as residential. While plastic resins and
synthetic fibers, paints and coatings and lighting are all significantly impacted by construction, they are less dominantly
driven by construction and housing levels than the other sectors referenced here, due to a more diversified customer
(i.e., industrial sector) base.
5
Regardless of individual variations in construction’s impact on manufacturing sectors, the vitality of the construction
market has an immense effect across all economic sectors. During the recession that began in the last decade, United
States construction spending declined 30 percent, declining annually from 2007 through 2011. It’s only since that annual decline has resolved into a growth pattern that the economy has begun to recover and the manufacturing sector
in particular has shown good growth since that turn.
Volatile Raw Materials Pricing
A recent report by A.T. Kearney speaks to the importance of raw material prices:
Raw material prices are experiencing unprecedented volatility. Driven by growth in places such as Asia, uncertainty
about growth in Western Europe and North America and raw material supply markets that are gradually tightening,
prices will continue to be volatile well into the future. For companies with significant raw material exposure—
particularly manufacturers and those in the process industries—mastering raw material volatility has become
essential to short-term growth and long-term competitive advantage. 4
In early 2008, raw material prices reached unprecedented levels. Just three years earlier, prices were one-half to one-third
of the 2008 level. Not only were prices rising, but volatility was increasing. In 2005, the average spread between
minimum and maximum price within the year was 40 percent; in 2008, the spread was 163 percent.5
Raw materials used by architectural and structural metal products
manufacturers consist primarily of various forms of steel and aluminum,
prices for which can vary widely from year to year. The United States
imposes tariffs on imported steel occasionally to protect jobs in the
domestic steel industry. Prices for iron, steel and aluminum can rise more
than 20 percent within 12 months.
For companies with significant raw material
exposure—particularly manufacturers and
those in the process industries—mastering raw
material volatility has become essential to
short-term growth and long-term competitive
advantage.
Resin and synthetics manufacturers can be exposed to rapid changes in
A.T. Kearney
raw material inventory values and may be unable to pass cost increases to
customers. The major raw materials for resin manufacture are derived
from oil and natural gas and these costs can swing sharply with the price of crude oil. United States’ production of
products made from plastic resins can vary sharply from year to year, making demand difficult to predict in the plastic
resins and synthetic fibers manufacturing industry. Resin production can change more than 10 percent a year for the
industry as a whole and much more for individual companies. During the late 2000s recession, U.S. resin production
dropped 15 percent annually for consecutive years as demand for plastics fell. The cost of plastics is also directly tied to oil
prices, so it is highly volatile and subject to global influence.
Naturally, wood products manufacturers are sensitive to fluctuations in lumber prices. When lumber prices are low, these
manufacturers may see margins squeezed due to cost-cutting competition. When lumber prices rise, millwork
manufacturers (including wood door, window and flooring makers), wood pallet and container makers and
manufactured housing companies may experience tighter margins amid higher materials costs. United States’ lumber
prices can fluctuate by double digits annually. Prices for hardwood and softwood can shift suddenly. Increased raw
material prices can’t always be passed on to customers due to competition from alternative products (e.g., vinyl windows,
steel doors). Historically, hardwood prices can swing more than 20 percent in a single year; softwoods can experience
annual price changes of greater than 30 percent.
Companies in the HVAC equipment and current carrying electrical wiring industries are vulnerable to fluctuations in prices
of various raw materials. In the former, it is chiefly steel, copper and aluminum; the latter includes copper, aluminum,
plastics and computer chips. Companies are also sensitive to price increases for components and subassemblies purchased
from suppliers. Often manufacturers in these markets are caught in a whipsaw: passing higher costs on to customers can
undermine a company’s price competitiveness, but refraining from raising customer prices erodes profit margin. Many
HVAC and electric wiring companies attempt to hedge against raw materials price increases by contracting in advance to
buy some materials at fixed prices.
6
Prices can vary widely for metals, glass and petroleum-based materials used to make lighting equipment. Companies
commonly obtain raw materials from outside the United States, increasing their exposure to variables such as rising
transportation costs and other global factors beyond their control. The highly competitive nature of the market makes
recovering higher material costs by passing them to customers very difficult.
Regulatory and Environmental Issues
The Small Business Administration’s Office of Advocacy recently estimated federal regulation to cost more than $1
trillion annually. The study found that United States manufacturing comprised $162 billion of the $648 billion burden
of environmental, economic, workplace and tax-compliance regulation. Dollars spent by manufacturers on regulatory
compliance with cumbersome or duplicative regulations are dollars not spent on capital investment or incorporating
new capabilities into their organizations to address enterprise needs.6
Architectural and structural metals manufacturers must maintain compliance with increasingly stringent air, water and
hazardous waste regulations. The costs of compliance and potential liability from accidental spills can be especially
difficult for small companies. As larger companies acquire regional suppliers, they may inherit Superfund liabilities for
cleanup of hazardous wastes improperly disposed of in the past. The issue persists across increasingly extended
organizations.
Growing public awareness of health and safety issues has increased scrutiny of plastic resin and synthetic fiber
manufacturers. These manufacturers are already subject to numerous regulations governing the production, disposal
and cleanup of hazardous chemicals. Companies may be held civilly or criminally liable if their products are found to
cause harm to human health or damage the environment.
Cement and concrete manufacturers must be aware that quarrying and manufacturing construction materials can
produce significant environmental pollution. Increasingly of concern, the cement industry produces 5 percent of global
man-made carbon dioxide emissions. In addition, dust of various sorts (some hazardous), emissions from burning fuels
and various solid waste products are subject to increasing government regulations.
Manufacturers of HVAC and commercial refrigeration equipment are subject to regulations regarding pollution, energy
efficiency and the use of refrigerants, both in the U.S. and in various foreign markets. Changes in energy efficiency
standards or regulations governing the use of refrigerants can greatly impact what kinds of products companies can
develop and sell. New Department of Energy efficiency standards for some HVAC products are scheduled to take
effect in 2013 and 2015. The U.S. Congress and the Environmental Protection Agency (EPA) are also reviewing ways to
limit the future use of hydrochlorofluorocarbon (HCFC) and hydrofluorocarbon (HFC) refrigerants.
Paint and other coatings manufacturers may have difficulty meeting air quality, water and waste disposal regulations
due to the inherent nature of their products. In some cases, paint manufacturers may have liability for Superfund sites.
Many older paint production facilities are also contaminated and workplace air quality standards are also an issue for
this sector.
The Small Business Administration’s Office of
Advocacy recently estimated federal regulation
to cost more than $1 trillion annually. The
study found that United States manufacturing
comprised $162 billion of the $648 billion
burden of environmental, economic,
workplace and tax-compliance regulation.
7
Emerging Competition: Low-Cost Offshore Labor, Alternative Products
Most economists agree that the surge of foreign imports into the United States has taken a toll on American workers.
But a new study reported in the Wall Street Journal suggests that the brunt of the blow of competition from cheap
Chinese imports is borne by low-income U.S. workers: “American factory workers with high wages generally took an
initial sharp financial hit when the ‘trade shock’ of Chinese goods hit their industry between 1992 and the beginning
of the recent financial crisis, according to a paper published by the National Bureau of Economic Research.” 7 This has
not only affected domestic workers, but also domestic manufacturers whose workforce is not “high pay or high tech.”
Lower labor costs and economies of scale in certain developing economies, primarily China, have resulted in increased
competition for U.S. manufacturers of HVAC and commercial refrigeration equipment. Imports, which account for
about 25 percent of the U.S. market, come both from foreign companies and U.S. manufacturers with foreign plants.
Between 2002 and 2012, U.S. imports of HVAC and commercial refrigeration equipment increased nearly 150 percent.
During the same period, imports from China increased more than 285 percent; imports from Mexico rose more than
300 percent.
These lower cost structures are affecting many manufacturing sectors. U.S. imports of current carrying electrical wiring
devices increased 25 percent between 2008 and 2012. Imports from China rose more than 20 percent; imports from
Mexico, the largest exporter to the U.S. market, increased 15 percent. To remain competitive, U.S. manufacturers may
establish manufacturing operations in low-cost regions.
Some recent research indicates that this move depends on where manufacturing is based in the U.S. “Made in
America, Again: Why Manufacturing Will Return to the U.S.,” published by the Boston Consulting Group, noted that
the southern states have lower labor costs that are somewhat competitive to those in China.8
Commodity Pricing Pressures
According to professional services consultant EY, pricing pressure is the biggest risk highlighted by companies in 2013,
with the C-suite now accepting that they must find new ways to be profitable in response to shrinking developed
markets. “This is reflected in companies turning to innovation and rapid-growth markets in order to create new
opportunities. This contrasts with 2011, when companies were focused on the risks associated with regulation and
compliance and the most significant opportunity came from the execution of operational strategy.”9
Pricing pressure is the biggest risk highlighted
by companies in 2013, with the C-suite now
accepting that they must find new ways to be
profitable in response to shrinking developed
markets.
Pricingleadership.com further notes that many manufacturers have
implemented plans to make their operations more lean and efficient, with
barely any near-term influence on margins. “Recognizing that price is the
number one lever to improve margin, companies must look to evolve their
pricing strategies in light of these new economic realities. Pricing pressure
and increased competition are a nightmarish combination when companies
attempt to achieve a sustainable, strategic, optimal pricing strategy.”10
EY
Leanlaborstrategies.com adds that getting the pricing right is challenging.
“Should they value their products based on the current market value of the raw materials or at the price they
purchased those raw materials? It may seem tempting to delay re-valuing the inventory, but this sword is doubleedged and cuts hard the other way when prices start falling. Secondly, exactly what part of the product cost is
comprised of material?”11
8
The manufacturing of construction materials is dependent on the supply of energy sources such as diesel fuel, natural
gas and coal. The continual fluctuation of fuel supply and costs creates uncertainty regarding inputs, affecting margins
for construction material manufacturers. Some firms may hedge fuel costs given the energy-intensive nature of cement
operations.
The high raw material content of resins and synthetic fibers makes manufacturers especially vulnerable to other cost
changes. Because materials account for two-thirds of the value of the finished product, even small cost changes can
have a large impact on profits. Because basic construction materials are commodity products, manufacturers compete
largely based on price. With excess capacity in the U.S., industry returns have been low in the past decade, a big
reason why much capacity has passed into foreign ownership.
Technological improvements can reduce energy costs for cement and concrete manufacturers that can afford to invest
in new production plants; however, generally only high-volume producers can afford or justify the investment. Because
cement and similar products are commodities that are often unbranded, cost cutting is the primary avenue to higher
profitability.
Many current carrying electrical wiring devices, such as connectors, switches and outlets, are often viewed by
customers as commodities and compete chiefly on price. With net margins that are often 1 percent or less, companies
must strive to keep prices low in order to compete. To reduce labor costs, many U.S. companies have established or
are establishing manufacturing facilities in low-cost regions.
New Technology Adoption
Many companies are investing in research and development of new technologies that reduce energy consumption,
provide better lighting distribution and reduce greenhouse emissions. However, the market has been slow to adopt
these new technologies, due to incompatibilities with existing lighting systems or high initial unit costs. For example,
light-emitting diode (LED) bulbs can be used to replace incandescent and compact fluorescent lamp (CFL) bulbs in
many applications, but the initial cost of the bulb can be 8 to 10 times higher. Although energy savings and extended
life make LEDs an economical option, consumers have yet to adopt them in mass volume.
It is likely that every organization will take a different approach to adopting new technology tools. While one business
may stay with their legacy assets and build around them, others may decide to scrap everything and go for an all-new
approach. Manufacturing.net’s Mark Davidson says the approach companies take may be dictated by the different
processes the organization performs and in many cases, adding onto manufacturing operations management can be
the way to go.12
9
Consolidation of Major Customers
Nationwide home improvement centers, lighting distributors and general contractors assert significant price pressure
on manufacturers. The tremendous volume of products sold through these channels creates highly competitive pricing.
Large buyers such as Home Depot can account for a substantial portion of a lighting manufacturer’s revenue.
Due to consolidation in the building materials industry in recent years, some manufacturers of wood windows and
doors have a smaller pool of potential customers. For some manufacturers, Lowe’s and Home Depot can account for
more than 25 percent of revenue. In some cases, 10 customers can account for about 40 percent of revenue. When
customer concentrations are high, the loss of a single customer can significantly affect revenue and margins.
Although most resin and synthetic fiber producers sell to a large number of customers, specialization in particular types
of applications often results in sales to customers in the same industry. Major end-use industries are auto parts,
computers, packaging, building materials, aircraft parts, textiles and telecommunication equipment. Lower demand
from a single end-use market can strongly affect individual producers.
Size of Competitive Producers
Economies of scale are the cost advantages that enterprises obtain due to size, throughput, or scale of operation, with
cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of
output. Often operational efficiency is also greater with increasing scale, leading to lower variable cost as well.
Technological improvements can reduce energy costs for cement and concrete manufacturers that can afford to invest
in new production plants; however, generally only high-volume producers can afford or justify the investment. Because
cement and similar products are commodities that are often unbranded, cost cutting is the primary avenue to higher
profitability.
The combination of relatively low gross margins and high investment in production facilities makes resin and synthetic
fiber manufacturers very sensitive to decreases in demand. To produce adequate financial returns, companies must
produce and sell large volumes of product.
10
MICROSOFT DYNAMICS AX: A MEANS OF MEETING INDUSTRY CHALLENGES
For construction-driven manufacturers, Microsoft Dynamics AX enterprise resource planning (ERP) has a role-tailored
user interface that helps drive productivity and business insight through its familiar user experience and connection
with business processes. Microsoft Word and Microsoft Excel, familiar and powerful tools that workers already know
and use, allow easy access to business data in Microsoft Dynamics AX 2012 to enhance worker productivity and a
more flexible Help system provides added support when needed. The solution has powerful functionality for both
discrete and process manufacturers. Additionally, for manufacturers who need an integrated customer relationship
management (CRM) system, Microsoft offers Dynamics CRM 2013, which runs on the most popular smart phones and
tablets, features built in social media capabilities and sports a new, intuitive user interface for easy navigation.
Microsoft Dynamics AX for Discrete & Process Manufacturing
Success in the manufacturing industry requires that companies produce the right products, in the right quantities, at
the right time, with good quality and at a price the customer is willing to pay. The flexibility to respond to compliance
standards and the ever-changing needs of customers, such as providing real-time visibility into global operations, is
also imperative for success. Meeting these demands requires the ability to make quick decisions based on accurate
data. Microsoft Dynamics AX can help streamline processes and minimize the costs of carrying inventory for firms that
produce goods from raw materials.
Lean manufacturing functionality in Dynamics AX can help manufacturing organizations implement, energize and
sustain lean manufacturing initiatives by delivering the tools and information support needed to streamline processes,
reduce waste, enable demand-pull operations and promote continuous improvement. As part of Dynamics AX, robust
lean manufacturing functionality complements the solution’s comprehensive customer relationship, financial,
collaboration and supply chain management capabilities. This integration helps manufacturers increase efficiency and
profitability and gain a competitive advantage. The functionality is delivered as an integral part of a flexible and familiar
end-to-end business management solution, complete with the business insight and collaboration tools organizations
need to sustain lean manufacturing and gain a competitive advantage.
Customer demands for fast deliveries and lower costs, together with increasingly stringent government regulations,
create many challenges for manufacturers in process industries, particularly those driven by construction activity.
Microsoft builds and through its partners delivers, systems that can help companies shrink development cycles,
respond quickly to customer trends and comply with changing regulations. With the right system in place, enterprises
can improve operations, get better visibility into the supply chain and increase competitiveness. Specifically to address
the above challenges, Dynamics AX includes a tight integration of business processes across distribution, discrete and
process manufacturing to help increase efficiency and cut operational costs.
11
One Solution for Process and Discrete Operations
Microsoft Dynamics AX 2012 uniquely combines lean, process and discrete industry-specific capabilities in one solution.
For construction-driven product manufacturers, Dynamics AX enables a range of powerful actions in support of
enterprise goals:
• Use the flexibility of Microsoft Dynamics AX to support a mix of process, discrete and lean manufacturing models
in a single solution. This includes the ability to handle BOMs as well as formulas or recipes, as well as other
nuances related to different operational processes. The mixed-mode capability also allows implementation of lean
manufacturing practices in the way best suited for your company.
• Take advantage of an operations resource model to efficiently use resources at multiple locations. Schedule
resources (vendors, people, machines, tools, or locations) to jobs and operations based on their capabilities (ability
to perform a specific, production-related activity). A scheduling engine handles resources selection.
• Model and execute lean manufacturing on production flows to reduce delivery lead times, trim excess inventory
between work centers, treat contractor labor as a service (not a BOM component) and support continuous
improvement by using kanban boards, event kanbans and kanban rules to view, plan and run kanban jobs.
• Use the new constraint-based Product Configurator to efficiently create, maintain and reuse product models,
components and attributes.
Dynamics AX tackles the industry-specific challenges construction-driven manufacturers face, without the need for
customization. The chart below provides a high-level look at the business challenges faced by manufacturers and ties
them to specific ways that Microsoft Dynamics AX helps solve them.
Demand
Tied to
Construction
Volatility of Regulatory &
Raw
Environmental
Materials
Issues
Emerging
Competition:
Low-Cost
Competition
and Price
Pressures
Respond to
changing
marketing
conditions
Have more
flexibility with
vendors
Help meet
quality, safety
and compliance
requirements
Gain insight into See what’s
costs and be
going on across
more efficient
the business
and competitive
Plan production
and manage
inventory better
Co- and
by-product
management
Scheduling
improvements
Robust
planning
options
Exceptions
management
Custom formula
and packaging
capabilities
Dashboards
Lean initiative
support
Best before
dating
Robust planning
options
Approved
vendor
capability
Robust planning
options
Fast RFQ
development
time
RFID compliance
Detailed
production cost
analysis
Catch weight
and units of
measure
Social media
Flexible planning EDI capabilities
and scheduling
tools
Demand-driven
supply network
Integrated quality Multiple
control capabilities discount
and validation
structures
Batch attributes,
inheritance and
disposition
Robust planning
options
Centralized quality Lean initiatives
control and
support
regulatory support
Detailed
production cost
analysis
Lack of
Lack of
Visibility into Production
Operations
Optimization
Other Issues
of Concern
Routings
Batch balancing
and disposition
Work in process
tracking
Bulk and pack
planning
12
Consider these specific examples of Dynamics AX functionality:
Managing Seasonal Demand
This example shows a demand forecast for drywall, with seasonality consideration for construction materials.
Personalizing Each User’s View
Dynamics AX offers a flexible, role-based interface where users can personalize their environment by including all
critical KPIs, reports and exceptions in a single, easy-to-access screen.
13
Managing Pricing Pressures
This example shows Dynamic AX’s ability to support commodity pricing, in this case for gypsum used in drywall. It
shows how volatility with price fluctuations in gypsum prices can be used to simulate higher sales prices for drywall
without changing the price of existing gypsum inventories.
Addressing Regulatory and Environmental Requirements
This screen shows how product, HCFC-22, can be set up with reporting country requirements, restricted from the state
of New Jersey in the U.S.; it also has a Material Safety Data Sheet associated with the product to ensure compliance in
communicating hazards to customers.
14
Optimizing Production
This example shows how Dynamics AX handles products where there may be yield issues or processes that may have
more than just a primary output (production of co-products, such as slurry).
Enabling Visibility and Communications between Departments
Companies that need to configure products to order must have excellent communication to prevent and resolve
conflicts. When ERP and CRM are tightly integrated, it’s possible to improve communication gaps between sales,
services and engineering. This allows better visibility into data and improves the overall customer experience.
Additionally, companies that sell through distributors as well as direct must be prepared to provide visibility into quotes
and sales, manage sales prospects from any channel, improve sales efficiencies by having the right product at the right
place at the right time, manage sales projects, manage contracts and RMAs and control price exceptions (e.g.,
giveaways, discounts).
15
CONCLUSION
While manufacturing has been undergoing a well-publicized revival since the start of the decade, much of that recent
growth can be attributed to the steady albeit slow recovery of the construction market. Nonetheless, manufacturers
whose sales are largely driven by construction must face a host of challenges. We’ve detailed them above and provided
a solution to help meet them.
In today’s increasingly global, construction-driven markets, manufacturers must rely on technology for product design,
inventory management, resource utilization, production scheduling, process optimization and much more. They
employ a mix of discrete, process and lean manufacturing methods that are frequently managed through separate
systems. This limitation makes it challenging to cost effectively satisfy customer demands, particularly across multiple
sites and geographies. A number of developing market factors accentuate the shortcomings of many of today’s
enterprise solutions.
To overcome these challenges successfully, manufacturing workers need real-time access to role-specific information
and tools that help them perform their individual responsibilities—anywhere in the enterprise, anywhere in the world.
Microsoft Dynamics AX provides these capabilities while managing discrete, process and lean manufacturing models
with a single solution—one that schedules resources to jobs and operations across multiple locations.
The bottom line is that Dynamics AX meets the three tests that construction-driven manufacturers ask of effective
enterprise solutions:
• Power. The solution must be powerful to meet the specific needs of the manufacturer, easily scalable and deliver
insight to boost productivity and assure that work is done as and when expected.
• Agility. The solution must respond to changing conditions, improve responsiveness to demand and enable a
sustainable and efficient enterprise.
• Simplicity. Implementation of solutions is one thing, utilization another. The solution must be simple to use and
adopt, provide a familiar user experience and empower collaboration within and outside the manufacturing
enterprise.
By meeting these tests with powerful, manufacturing-specific functionality, agile response, easy configuration and a
role-tailored user interface that helps drive productivity and business insight through familiar user experience and
connection with business processes, Dynamics AX can be invaluable for those manufacturers coping with the
challenges and turbulence of operating in a construction-driven environment.
16
NOTES
1. “2014 Construction Outlook: Industry Experts Sound Off,” Heibling & Associates, http://blog.helblingsearch.com/index.php/2013/11/04/2014construction-outlook-industry-experts-sound-off, November 4, 2013.
2. Ibid.
3. “Housing Market Dynamics with Delays in the Construction Sector,” Berrak Bahadir, University of Georgia; Olena Mykhaylova, University of
Richmond; working paper.
4. “Raw Material Strategy—Volatility Is Here to Stay,” AT Kearney, 2011.
5. Ibid.
6. “Regulatory Policy for Manufacturers,” National Association of Manufacturers, 2013.
7. “Study: China Imports Punish Low-Wage U.S. Workers Longer,” Real Time Economics, The Wall Street Journal, July 22, 2013.
8. “Market Report: Plastics Industry to Follow Manufacturing’s Growth Trend,” Area Development Online, http://www.areadevelopment.com/
Plastics/April2012/market-report-plastics-industry-2614177.shtml, December 12, 2013
9. “Pricing Pressure and Cost Cutting: Top Risks for Business in 2013,” EY, http://www.ey.com/GL/en/Newsroom/News-releases/Pricing-pressureand-cost-cutting--top-risks-for-business-in-2013, February 27, 2013.
10. “Competitive Pressures Strain Service Parts Manufacturers,” Sean Duclaux, http://www.pricingleadership.com/competitive-pressures-strainservice-parts-manufacturers/, April 12, 2012.
11. “Why Rising Commodity Prices Increase Pressure on Labor Costs,” http://leanlaborstrategies.com/2011/10/25/why-rising-commodity-pricesincrease-pressure-on-labor-costs/, October 25, 2011.
12. “Unique Ways to Look at Manufacturing Technology Adoption,” Dynamic Manufacturing Solutions, Microsoft, September 10, 2013.
About Edgewater Fullscope, Inc.
Edgewater Fullscope is an award-winning Microsoft partner and one of the largest resellers of Microsoft Dynamics AX
enterprise resource planning (ERP) software and services in the United States and Canada. Its customers include
discrete, mixed mode and process manufacturers. Fullscope also offers software and implementation services for
Microsoft Dynamics CRM, SharePoint and Business Intelligence.
For more information, contact Edgewater Fullscope at [email protected] or visit www.fullscope.com.
This document is for informational purposes only. Fullscope makes no warranties, express, implied or statutory, as to the information in this
document. Trademarks are properties of their respective companies and duly noted.
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