How Digital Transformation is Shaping Shared Services in Manufacturing

Innovation in Manufacturing Is Reshaping Operations

Today’s manufacturing shop floors are not what they used to be. Machines talk to each other. Inventories are monitored by IoT sensors. Machine learning detects a problem before it occurs.

This is the digital transformation of manufacturing and it is happening now. It is real, in smart factories, supply chains, and operations around the world.

But what manufacturers are still grappling with is this:

Investing in technology, ONLY, does not lead to efficiency. How you organize your operations and financial infrastructure does.

That is where shared services enter the picture.

As digital manufacturing technologies eliminate proximity and logistical constraints, mid-size and large manufacturers are finding they can centralize transactional processes – such as inventory control, accounting, compliance, and reporting – with remote teams while preserving decision-making at the point of production.

The result is leaner operations, lower costs, better data and faster growth.

Key Takeaways

• Manufacturing digital transformation is changing manufacturing’s model of operation, not just the factory floor.
• The low cost of cloud hosting has made shared service centers feasible for mid-size manufacturers for the first time.
• Today’s tools allow shared service teams anywhere in the world to manage inventory management, cost accounting, and other manufacturing operations in real time.
• The advantages include cost, scalability, expertise, data integrity, and accelerated digitization.
• Industry 4.0 technologies – IoT in manufacturing, artificial intelligence, robotics,s and cloud ERP systems – underpin the competitiveness of shared services in manufacturing.

The Digital Transformation in Manufacturing

What it means for business:

Digital transformation in manufacturing refers to the adoption of technologies in all stages of manufacturing: smart factories, automation and robotics, IoT-connected equipment, cloud ERP for manufacturing software, predictive analytics for manufacturing, and AI-powered decision support systems.

The talk is most often about the shop floor, downtime reduction, yield improvement, and robotics in assembly. That matters. But there’s another change afoot.

The business support and office functions of manufacturing companies are being digitized just as rapidly.

Traditionally low-end, local, and labor-intensive functions – inventory valuation, cost of goods, supply chain compliance, and financial reconciliations – are now digital, uniform, and transportable.

That mobility is enabling shared services for the first time for manufacturing companies. If a shared services team can access the same real-time data feeds from the enterprise resource planning (ERP) system, track the same Internet of Things (IoT) feeds of inventory, and process the same transactions as an on-site team, distance becomes irrelevant.

Shared Services for Manufacturing: 

The Rise of the Middle-Size Firm With Cloud-Based Systems

Traditionally, shared service teams have been the preserve of global conglomerates – companies with the resources to establish separate offshore facilities, and the infrastructure to manage cross-border complexities.

That calculus has fundamentally changed.

Manufacturer cloud systems have removed the need for duplicate on-premises infrastructure. A US, German, or Australian manufacturer no longer needs to construct a separate IT infrastructure for offshore shared services. They provide access to the same cloud.

This means:

• No duplicating server infrastructure – shared service teams access the manufacturer’s cloud.
• Consistent processes from the start – cloud platforms support standardized processes and eliminate errors from local variations.
• Pay-as-you-go subscriptions – no longer excessive capital outlays: manufacturers pay for what they use.
• Inherent security and compliance features – audit trails, security, and compliance capabilities provide security and transparency across multiple locations.

This is beneficial for a mid-size manufacturer with three to eight plants. Whereas previously it took millions to set up infrastructure, today it takes a fraction of that, in software licensing and change management costs.

The cloud has somewhat leveled the playing field for the shared services model, making it accessible to manufacturers who could not previously afford the investment.

How Digital Tools Enable Remote Teams to Manage Manufacturing Operations

The ultimate sign of digital transformation in manufacturing is when a team of experts, based in another country, can manage inventory stock, cost of goods, and deliver financial reports – all from a remote location.

Here is how this is done.

IoT in Manufacturing: Live Inventory Tracking

IoT-enabled manufacturing systems have moved well beyond production line monitoring. Sensors, RFID tags, and automated barcode scanning are now used in today’s warehouses and facilities to offer real-time visibility of:

• Stock levels and locations of raw materials
• Work-in-progress (WIP) inventory at each production stage
• Available goods inventory
• Scrap, waste, and yield information at the machine level

Shared service teams linked to these IoT data streams reconcile inventory, conduct cycle counts, and make valuation adjustments based on real-time data, not spreadsheets from the shop floor.

ERP Systems in Manufacturing: The Operational Backbone

Cloud enterprise resource planning (ERP) systems are the brain of manufacturing. When deployed on the cloud, they allow shared service teams anywhere in the world to:

• See the current stock level across multiple warehouse sites
• View the bill-of-materials (BOM) information to estimate production cost
• Manage purchase orders, goods received, and invoice matching
• Perform inventory valuations with FIFO, average costing, or standard costing
• Create cost-of-goods-sold reports integrated with production

AI in Manufacturing: Smarter Cost Accounting

Cost accounting has always been one of the most inaccurate areas in manufacturing. Machine learning in Production processes helps:

• Automatically allocating overhead costs to production runs based on actual IoT machine usage data
• Spotting abnormal material consumption that signals waste or inefficiencies
• Performing predictive analytics for manufacturing to project trends in raw material costs and calculate the impact on margin
• Automatically updating standard costs with purchasing trends

Cyber-Physical Systems and Collaboration Tools

A past concern with manufacturing shared services was latency – the potential for a remote team to be out of touch with the plant. Current cyber-physical systems and collaboration tools have solved this problem:

• Stampli allows shared service AP teams to manage manufacturing invoices, with visibility into the purchase orders and goods receipts, to communicate with plant-side approvers.
• FlowForma enables shared service teams to work with approvals and compliance documentation electronically, rather than paper-based and email-based processes.
• Skyvia provides a data integration layer for ERP, CRM, and operational databases, ensuring that shared service and plant side teams always have access to the same data in the same standard format.

Strategic Benefits for Manufacturing Firms

The use of shared services (made possible by digital adoption in manufacturing) offers more than cost reduction.

• Long-Term and Substantial Cost Reduction

Transactional manufacturing support activities are costly when delivered by on-site teams in high-cost locations. Shared service approaches enable manufacturers to:

• Lower cost per transaction for accounts payable, inventory reconciliation, and compliance reporting by 40-60% versus fully on-site operations
• Substitute fixed costs with variable costs
• Reinvest savings in more valuable areas: production, product development, or sales and marketing

• Specialized Manufacturing Expertise

An often-overlooked benefit of technology-centered manufacturing operating models is access to highly specialized expertise that is hard to find. Manufacturing accounting requires knowledge of:

• Cost-of-goods-sold and inventory accounting
• Bill-of-materials accounting and production variance analysis
• Trade promotion management and deduction handling
• Supply chain compliance and customs documentation

Shared service centers develop clusters of this expertise. The web means that a manufacturer anywhere can tap into that talent pool regardless of local labor markets.

•  Agile Operations Enabled by Technology

Manufacturing demand rarely grows in a linear fashion. A new contract, acquisition, or seasonal increase in demand can double the number of transactions. Existing on-site production models take time to hire and train staff.

Instead, manufacturing scalability with technology and shared services looks like this:

• Processing capacity increases quickly by reallocating existing shared service resources
• ERP and workflow software in the cloud expands without new hardware
• Finance scales up to meet seasonal demands, acquisitions, or system upgrades without restructuring the finance team

• Better Data and Better Decisions

When manufacturing operational functions are consistent, performed by shared services teams, and performed using the same digital platform, data accuracy goes up:

• Inventory valuations are calculated the same way everywhere
• Cycle count information is automatically shared directly from the IoT warehouse to the ERP
• Discrepancies are detected and flagged in real time by shared service teams

This translates to more accurate production costing for manufacturing leaders, more accurate margin reporting by product and location, and more information for pricing and investment decisions.

• Accelerated Digital Transformation for Manufacturing

Manufacturing companies mired in day-to-day transactional work face the same internal problem: the people who should spearhead transformation programs are tied up in transactional work. Shared services absorb that volume.

By standardizing and outsourcing transactional work to shared services, manufacturers can create the space to:

• Deliver smart factory integration and predictive maintenance to manufacturing
• Adopt robotics process automation in enterprise resource planning and business processes
• Create real-time dashboards to keep plant managers informed
• Adopt other Industry 4.0 best practices without resource limitations

Tools for Digital Finance and Operations Change

These are the platforms that enable digital shared services in manufacturing.

Conclusion: The Future of Manufacturing Is a Smarter Operating Model

The digital transformation story in manufacturing is frequently told in terms of technology – the sensors, the algorithms, the cloud, the software.

But the manufacturers getting ahead are not getting there simply through technology. They are winning because they are creating more efficient operating models around those technologies.

Shared services – powered by cloud, IoT data streams, and AI platforms – are one of the most important structural changes manufacturers can make right now. They allow firms to:

• Tap into retained expertise at scale, regardless of where it’s located
• Drive down the cost of transactional processes
• Manufacture at scale using technology without additional headcount
• Liberate on-site resources to lead improvement and innovation in manufacturing
• Create headroom to accelerate Industry 4.0 technology adoption

The drop in the cost of cloud computing has made this a new possibility, particularly for mid-size manufacturers. No longer the exclusive domain of multinationals, it can be applied by any manufacturer willing to change the way work is organized.

The future of manufacturing is not just smart factories. It is data-driven manufacturing strategies built on smarter, more scalable operations – operations that can expand as the business expands.

Companies that make the technology and structure investments will be the Industry 4.0 leaders of the next decade.