Fabtech 2014 - Leading Your Organization to Profitability Using a Manufacturing Execution (MES) System
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According to Gartner, Manufacturing Execution Systems manage, monitor and synchronize the execution of real-time, physical processes involved in transforming raw materials into intermediate and/or finished goods. A manufacturing execution system solution may be used to achieve important business and production goals including: Reducing paper-based shop floor processes where possible Improving order timeliness and increasing efficiency Improving quality information gathering and tracking Improving accuracy of labor reporting, time & attendance Improving production and shop floor scheduling and reporting Improving materials management This session will help to connect the dots between business and production goals while explaining how to illustrate costs saving and increasing profitability to justify the utilization of manufacturing execution system technology.
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Fabtech 2014 - Leading Your Organization to Profitability Using a Manufacturing Execution (MES) System
- 1. FABTECH ATLANTA 2014 Leading Your Organization Leading Your Organization to Profitability Using a Manufacturing Execution System (MES) Mike LeRoy www.paperlessllc.com 262-354-3220
- 2. FABTECH ATLANTA 2014 Mike LeRoy 30+ years background in manufacturing technologies including Manufacturing Execution Systems (MES), Enterprise Resource Planning (ERP) Software Developer and Management Sales and Sales Management President of Paper-Less, LLC
- 3. FABTECH ATLANTA 2014 What is MES? MES stands for …. Manufacturing Execution System MOM, CPM, POM……
- 4. FABTECH ATLANTA 2014 What is MES? Is a Data Collection system an MES system? MES - Data collection oriented ERP Centric Machine Centric MES - Process oriented Oriented toward procedures and processes And, they collect data Sometimes from machines, others from people
- 5. FABTECH ATLANTA 2014 What is MES? Is a Data Collection system an MES system? MES - Data collection oriented ERP Centric Machine Centric MES - Process oriented Oriented toward procedures and processes And, they collect data Sometimes from machines, others from people Top Down Bottom Up Inside Out
- 6. FABTECH ATLANTA 2014 MES Types ERP Centric Machine Centric Process/Procedure Centric
- 7. FABTECH ATLANTA 2014 ERP Centric Attendance Recording Labor Reporting Operation Statuses Job Starts and Stops Inventory Issuance and Consumption Operation Step / Order Completion
- 8. FABTECH ATLANTA 2014 Machine Centric MES Machine Performance Speeds and Feeds Statuses and conditions Environmental Downtime Setup and adjustment times Performance KPIs and Dashboards
- 9. FABTECH ATLANTA 2014 Procedure Centric Scheduling Work Assignment Shop Packets Material Movement Kanban Management Barcoding Quality Control And more…….
- 10. FABTECH ATLANTA 2014 MES Types vs Manufacturing Types High Volume / Long Runs / Repetitive Low Volume / Short Runs / Batch Procedure Centric / ERP Centric Machine Centric MES MFG Greater Variability Less Variability .
- 12. FABTECH ATLANTA 2014 Typical Orientation - ERP Accounting/ITEngineering Maintenance Manufacturing Customer Service ERP Centric
- 13. FABTECH ATLANTA 2014 Typical Orientation - Machine Engineering Maintenance Manufacturing Customer Service Machine Centric Accounting/IT
- 14. FABTECH ATLANTA 2014 Typical Orientation - Procedure Engineering Maintenance Manufacturing Customer Service Procedure Centric Accounting/IT
- 15. FABTECH ATLANTA 2014 Issues Divergent systems Single purpose solutions Many disparate systems and databases emerge over time End users have disjointed experiences with software Redundant data entry and duplication of efforts Non-value add activity Workflows are not consistent and synchronized
- 16. FABTECH ATLANTA 2014 Why Implement an MES?
- 17. FABTECH ATLANTA 2014 Why Implement an MES? • You can’t manage a process until you can measure it,,,,,, and, • You can’t measure it until you collect relevant data. • You certainly can’t improve it until it can be measured.
- 18. FABTECH ATLANTA 2014 Move Tickets Material Picking Serial Tracking Labor Reporting Productio n Reporting Electronic Shop Packet Electronic Routing Job Schedulin g Time & Attendanc e Manu- facturing Receipts Purchase Receipts Material Tracking Electronic Kanban Testing & NCR Machine Statuses Why Implement an MES?
- 19. FABTECH ATLANTA 2014 Why Implement an MES? • Reducing reporting latency / Increasing visibility into production • Getting accurate information into the hands of those who can impact change • Interface with ERP • Improve communications across the enterprise/gain insight to production status
- 20. FABTECH ATLANTA 2014 Why Implement an MES? • Improve on-time delivery performance • Providing manufacturing the tools they need to operate day to day • Establishing a foundation for continuous improvement • Enhance plant floor processes All of which help to increase efficiency and reduce costs.
- 21. FABTECH ATLANTA 2014 Why Implement MES? Communicate Requirements Support Execution Manage Results Continuously Improve
- 22. FABTECH ATLANTA 2014 What to choose? This is not a one size fits all. + Understand your goals Have a vision for the future Define your requirements Unite the parties affected by the vision Educate yourself on these system types
- 23. FABTECH ATLANTA 2014 MES Types vs Manufacturing Types High Volume / Long Runs / Repetitive Low Volume / Short Runs / Batch Procedure Centric / ERP Centric Machine Centric MES MFG Greater Variability Less Variability -
- 24. FABTECH ATLANTA 2014 Difficulties as a Sponsor of MES • Business requirements are not effectively defined • Not realizing the reach of a comprehensive MES system • Source of the sponsorship • The solution can be bigger than the immediate problem being solved • Sponsors are not effectively prepared with ROI and TCO analysis presented • Include all aspects of costs
- 25. FABTECH ATLANTA 2014 Establishing ROI Tangible and intangible ROI
- 26. FABTECH ATLANTA 2014 Tangible ROI Savings in Production Expediting Preparing the shop packet/traveler Communicating changes / redistributing or updating the shop packet Production time lost to material handling logistics Savings in Scheduling Sequencing and communicating job priorities Labor Reporting Preparation, distribution and collection of labor cards Recording labor/production activity Errors in recording and correction time Data entry and delays in recording
- 27. FABTECH ATLANTA 2014 Tangible ROI Rework – Internal and external Additional costs Labor Material Administration and tracking Reductions in scrap Material and labor cost savings Overhead with managing scrap Redundancy in data recording Compliance with government or customer demands Late delivery fines, improper labeling, wrong products…..
- 28. FABTECH ATLANTA 2014 Intangible ROI Impact of lack of visibility into production status Compromised customer satisfaction Delayed answers to customer inquiries Missed delivery dates Costs are too high/prices are not competitive/jobs sold at loss Inconsistent procedures from line to line or plant to plant Impact of delayed reporting Employee morale, attitude, job satisfaction, empowerment Enabling business growth Increased customer satisfaction Customer retention
- 29. FABTECH ATLANTA 2014 MES Claims for ROI Description Benefit realized within 12 months Reducing Reporting Latency 78% Regulatory Compliance 65% Improving Quality 80% Standard Process Enforcement 74% Improve employee decision making and competency 73% IT Modernization 72% Reducing Cycle/Lead Times 67%
- 30. FABTECH ATLANTA 2014 Description Benefit realized within 12 months Increasing Asset Utilization 69% Improved inventory and cash flow 55% Improving Unit Margin 55% Reducing Direct Labor Costs 57% Expanded Markets/Segments 50% Customer Retention/growth 31% Improved Market Share 25% MES Claims for ROI
- 31. FABTECH ATLANTA 2014 Key ROI Calculations
- 32. FABTECH ATLANTA 2014 Key ROI Calculations ROI = Gain from the Investment – Cost of the investment Cost of the Investment Payback = Cost of a Project Periodic Cost Savings
- 33. FABTECH ATLANTA 2014 Other Relevant Calculations Future Value Present Value Weighted Average Cost of Capital Net Present Value Internal Rate of Return
- 34. FABTECH ATLANTA 2014 Do your homework • Understand the business case and business requirements • Interview representatives from all areas affected to discover value • Thoroughly understand the current and future state • Value the impact the future state will have on material, machine and people cost
- 35. FABTECH ATLANTA 2014 Do your homework • Set conservative and optimistic ROI scenarios • Consider the ancillary impacts • Be thorough – Include everything • Be a champion for your project
- 36. FABTECH ATLANTA 2014 Resources • MESA International (Manufacturing Enterprise Solutions Association) • Manufacturing Leadership Council • Frost & Sullivan • Gartner • IDC • LNS • MES- Manufacturing Execution Systems LinkedIn Group
- 37. FABTECH ATLANTA 2014 Thank You Mike LeRoy www.paperlessllc.com 262-354-3220
Editor's Notes
- Who knows what an MES system is? Who knows what a CRM system is?
- MES aids with execution and data collection does not. MES systems aid production process and collect data with less burden
- This is where it started ERP – Transaction intensive Industry has drifted from skilled laborers and diverse machines to lesser skilled workers and specialized machines machines. Labor cost is down as a direct expense of overall revenue
- Machine oriented MES system are largely isolated from ERP and business systems.
- These system are often where a lot of system disparity comes into the solutions companies have in place
- Shorter runs – greater variability Job shops - need better communications and they need to be responsive to those changes. More repetitive shops and those with higher volumes have the luxury of greater stability. Think of production workflow needs to determine the type of MES solution to seek.
- Depending upon where we come from, we have different expectations of what an MES systems does. Customer Service – Job statuses, expected completion times/dates Engineering – Performance against standards, speeds, failure codes Manufacturing – Assignments, priorities, standards, machine statuses Accounting – Time on jobs, work center, employee Maintenance – Machine cycles, failure codes, quality or performance deviation The point is that there will be a dramatically different approach based on who is sponsoring the initiative. We all have different backgrounds and different paradigms we come from when it comes to the need and role for MES. Buyers of MES and Providers of MES systems are the same in this regard. We had a recent customer situation where the buying process literally took years because from the project inception the could not resolve these differing orientations on what an MES system should do. And as a result they called in different vendors that matched various people’s opinions of what an MES system was which only amplified the issue they were having as a team. Until they resolved these differences, the MES providers that were compared where like comparing apples to oranges.
- Single Purpose Solutions – WIP and Inventory labeling systems, Solutions for mobility, machine monitoring California based Syteline ERP prospect called interested in 6 different solutions, all of which he had already automated. But, on 6 different solutions, six different databases, 6 different licenses and vendor relationships to manage.
- Connie – customer who complained of executive team who wanted the results of what data collection could offer but would not invest in software to manage the data, and as a result they never effected change and never got the benefits of what they could have improved on.
- Bottom up - machine statistics and performance metrics. Top down - ERP events. Inside out – any one or many of the production processes involved on the shop floor. Industry analysts describe MES with a broad reach like this describes Companies tend to find disparate solutions for these MES is more than just data collection – it is execution support.
- Increase efficiency and reduce costs…………….
- These are not necessarily listed in order of importance. But they are listed largely in the order we see driving the searches for MES software. To lean out the production process. Getting real-time data from the plant floor to interface with ERP and gain insight to production statuses is what we see the most of which suggests why most people regard MES solutions as data collection systems. Sub-Routings – ERP does not always have what you need. Torque Wrenches etc.
- ...... With an information infrastructure and a culture that embraces it, you will be able to answer questions in the future that you can’t even fathom asking today.” Gartner – MES offers – Retrospective, Perspective, Predictive opportunity based on the data leveraged toward process improvements
- Individuals within customers and vendors alike all have a heritage and paradigm for what they believe MES is. As a result, customers look for solutions that match their history, and vendors offer solutions that match their history. The result has a risk of being a short-sighted solution for a company if the buyers do not expose themselves and learn the differences in MES providers and solutions.
- Gartner Report – Customers, Commercial, R&D, Operations, Business Management, IT, Administration, Suppliers
- Matching components used to that expected in a bill of materials from ERP – Refrigerator condensers and key component verification.
- Remember that cost avoidance can be as valuable if not more valuable than cost reductions.
- Not represented in this list is how an MES that effectively integrates with ERP can affect improvement in ERP planning tools. With the new advanced planning systems they demand realtime information from the production floor. So MES is a key factor in improving the accuracy and value of ERP planning.
- ROI stated as a percentage – multiply result by 100 Payback - Periodic
- Ancillary - Hardware, software, services, network infrastructure machine integration, internal resources, TCO, ALF
- Ancillary - Hardware, software, services, network infrastructure machine integration, internal resources, TCO, ALF When budgets are frozen ……… Large Milwaukee based mfg with 13 capital projects, all cancelled except one – MES with Paper-Less. Key here is that management will occasionally put a blanket freeze on capital projects for their reasons, but they will always listen to a true case for ROI and process improvements for the company. If there is ROI, the company is already paying for it.