1. Why Should Manufacturers Consider a Cloud-
based Manufacturing Execution System (MES)?
By Mekala S Rao
New Product Introductions (NPI) have helped fuel
technological advancement in the manufacturing
industry. As the market for high-quality compliant
products with higher throughputs expands,
manufacturers have had to work with reduced
margins to keep pace. As a result, manufacturers now
depend more heavily on Manufacturing Execution
Systems (MES).
MES systems are difficult to evaluate, and have
been expensive to own and maintain. Due to the
ever-evolving nature of the IT landscape and the
technological components involved in MES platforms,
it’s often difficult for manufacturers to see adequate
ROI. Additionally, the shortage of skilled resources
necessary to enhance MES applications and business
functionalities in an efficient and timely manner has
burdened manufacturers of all sizes.
This white paper addresses the MES forces and
paper-based processes that are contributing to
manufacturing operations’ loss of flexibility and
time-sensitive market innovations. Atachi Systems
has proposed how manufacturers can leverage the
latest disruptive IT technologies (Cloud, SAP HANA)
available in today’s economy.
Challenges
Regardless of size, all companies face similar
manufacturing challenges and requirements
that include:
• Product recalls that tarnish brand names
and cost millions of dollars to fix
• Preventing offshoring and loss of contracts
while remaining cost-competitive
• Full compliance with the latest industry
regulations
• The necessity to reduce IT operational
expenditures
• Responsiveness to customers’ needs
• Reconciling greater IT investments within a
resource-strapped budget
• Profitability
• Customer churn rates
WHITE PAPER
About Atachi Systems
Based in San Jose, CA, Atachi Systems
provides discrete manufacturing companies
with a seamless, cloud-based Manufacturing
Execution System that reduces dependencies
on infrastructure, lowers maintenance costs,
and improves access to real-time data.
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2. Paper-based Shop-floor
Many manufacturing floors still use simple tools like paper, spreadsheets and archaic internal software
to run and maintain their shop floors. Since Atachi has successfully assisted several manufacturers
convert to a paper-less shop floors, Atachi can help answer common questions that manufacturers ask
themselves every day, such as:
• How quickly can we provide customers with information about our products?
• What are the costs associated with maintaining product paper trails?
• How much does it cost to retrieve product information and provide it to the customer?
• How effectively do we handle product recalls? How much do recalls cost a manufacturer?
• Can we look at historical operational data to implement programs that improve processes, through-
put and yield?
• What does it take to actually calculate the profitability?
• How much do improvements costs and how will they affect profitability?
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3. ROI on On-Premise MES or Moving to Paper-less Shop-floors
Most of the above questions are addressed by MES systems that are being deployed by major manu-
facturing companies throughout the world. But these MES systems come with an expensive price tag
which is hard to justify for majority of the manufacturing companies.
There are many MES systems that have a wide range of functionality in the marketplace, however most
vendors build MES systems with only major manufacturers in mind. Likewise, there are many pertinent
questions about MES systems that manufacturers must ask prior to making a final purchase and begin-
ning integration.
• Which MES platform should be used? Different MES platforms were built on different technologies,
such as .NET, J2EE, Oracle, SQL Databases, Linux, Windows, JBOSS, WebLogic, WebSphere, etc.
Manufacturers must ask themselves where they see the strategic alignment with the MES platform’s
technology and the rest of the applications they have on their floor. What is the integration cost now
and in the future? Most MES systems are leaning toward one or two – three at most - preferred in-
dustry verticals. On average, major manufacturing companies say it takes them roughly one year to
make a decision about an MES platform.
• Which modules are available? Most functionalities needed by major manufacturers are divided into
several modules. Further, MES systems are offered as different modules. This often means a small
or mid-size manufacturing company would need most of these functionalities, yet would end up
buying multiple modules, like SPC, Quality or CAPA, to handle all critical functions, thereby increasing
the total cost of the system.
• What is an appropriate license model? Some vendors offer the Enterprise License models, which
aren’t necessarily designed for small and mid-sized manufacturers. However, these license models
do provide benefits for major manufacturing companies. Still, other vendors offer perpetual license
models, which can lock buyers into the technology and force them to make future IT investment de-
cisions around that service provider’s specific offerings. Other regular license models are bought on
an annual basis, often leading to purchases that are either more or less than what is actually needed.
• What does it cost to install an MES? The process includes the purchase of the required hardware
and software, in addition to the installation of MES components. Establishing this infrastructure re-
quires time, investment and commitment to manage. Medical device and diagnostic manufacturers
also need the Installation Qualification (IQ), which necessitates the replication of required time and
effort.
• What does it cost to maintain the MES? Generally, a small IT team would be required to manage the
application, OS and databases, along with process supervisors who are all trained for a fee by the
MES and other vendors. Building, managing and training this team of different skill sets to receive
the ROI of MES systems is a daunting - and expensive - task. Obviously, the annual support ties to
different software vendors (OS, Database, middleware, MES, OS administration, DBA, Application
maintenance) that provide different components of the application.
• What is the life cycle of an MES? Most MES systems last five years without another capital expen-
diture. This means that five years after the implementation date, the operating system, databases,
middleware, such as JBOSS, and the MES software would no longer be supported by the corre-
sponding vendors. This is another trigger to facilitate an additional investment, irrespective of wheth-
er ROI has been achieved.
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4. Cloud-based MES
A cloud-based MES is provided as a service so there is less investment and maintenance needed.
By working in the cloud, manufacturers don’t have to worry about the following:
• What technology it is built on? Is it J2EE or .Net? Are there developers to maintain these apps?
• How many application servers are needed? Are these Windows or Linux Servers?
• How many Database servers are needed? Are these databases Oracle or SQL servers?
• How many licenses are needed? What is the turnaround time to increase or decrease licenses?
• Is IT ready internally to own and manage the above infrastructure?
• How difficult is it to get skilled resources acquainted with MES technology?
• What is the maintenance cost for the above hardware, software and application?
• How quickly will ROI be obtained?
• How quickly can applications be scaled for increased workloads?
Moving to the cloud is elastic in the sense that:
• Servers are up and running for as long as needed, or only during necessary operating hours
• Licenses can be increased or decreased as needed, meaning manufacturers only pay for what the
precise functionality and performance they require
The chart below summaries the cost comparison for on-premise versus cloud-based MES.
0.00
160.00
320.00
DollarsinThousands
On-Premise Cloud-based
Total Capital
Investment
Total Annual
Recurring Cost
Year 1
Cost
PlatformSelection
Infrastructure
ImplementationCost
LicensesCost
DBA+WinAdmin
MESAdmin
MESProductSupport
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5. Cloud Concerns
Obviously there are some concerns or misconceptions which many companies are trying to ad-
dress. Some of these concerns are resolved by continual investments aimed at preventing potential
cloud errors.
• Security: Major cloud providers like Amazon, SAP, IBM and Microsoft are all making large invest-
ments to increase the security of their cloud platforms while ensuring applications running in the
cloud are protected. This is because many companies put all of their applications that handle finan-
cial transactions in the cloud.
Application Performance:
• Traditional Databases vs. In-Memory Databases: Applications written using the latest technologies,
such as in-memory databases like SAP HANA, are capable of handling and storing massive amounts
of data. As of now, many major companies are developing or have been using these applications for
real-time business cases that can manage the petabytes of data.
• Convergence of the application and Database servers: Applications can be written so they co-exist
with database servers, bringing the commuting time between the application servers to the data-
base servers to ZERO, which greatly improves speed and performance.
• Application Design: If applications are designed so they don’t have to travel to servers that are host-
ed across multiple data centers, any performance concerns related to network latency can be effec-
tively addressed.
• Bandwidth: Depending on how the application is designed, traditional on-premise models share
computing between application servers, clients and databases within the intranet. Today, comput-
ing is performed in the cloud on one site (using the in-memory technologies, parallel processing,
distributed computing and convergence of the application and database server technologies) and
sends results back to the browser/mobile device. Due to this factor, operational bandwidth doesn’t
require anything more than surfing the Internet. This is a marked advancement for the depth and
scale of bandwidth capabilities, as small and mid-sized manufacturing companies can expect faster
response times.
• Cost Benefits: In addition to all the benefits of removing IT complexities, there is significant cost sav-
ings associated with cloud-based MES solutions. Per the chart below, the total cost
vof cloud-based MES is approximately $100,000 vs. on-premise cost is over $320,000.
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6. On-Premise MES Implementation Numbers:
• On average, it takes about three to four months of combined effort for a business/IT resource to
make the decisions about the right technological (on which MES platform is built) fit. This includes
a comparison of features and an assessment of the amount of development time required to make
further enhancements. In total, this translates to about $25,000 in terms of cost.
• A minimum of three application servers and three to four database servers are required, amounting
to $40,000-$50,000.
• The average time it takes two resources to implement a simple MES system is roughly four to eight
weeks, depending on the industry. This equates to $30,000.
• One DBA and one Windows Admin is required to manage the infrastructure, costing about $200,000
per year.
• Leading MES vendors charge $3,000 per user license. A small to mid-size manufacturing company
would need about 20 licenses, which translates to $60,000.
• An MES support Engineer would cost a minimum of $100,000.
Upfront capital investment of $100,000 is required and an annual maintenance cost of $160,000
plus additional $60,000 for shared infrastructure maintenance can be expected.
• Four years out, the estimated cost of MES implementation is $1 million, or $250,000 a year.
• Additionally, the recurring 5-6-year life cycle of MES applications means manufacturers would need
to purchase new hardware and software as well as software migration tools, among others.
Cloud-based MES Implementation Notes:
• Cloud-based MES simplifies IT complexities and provides efficient cost-savings, roughly one-fourth
of the on-premise cost on a robust platform.
• No software and hardware upgrades are necessary, except MES application upgrades.
Conclusion
Leveraging SAP HANA technologies and Cloud infrastructure saves manufacturers a significant amount
of time in evaluating an MES system. Because of the low implementation and management expense,
obtaining financing for a significant investment isn’t necessary. This means ensuring commitment from
IT management and achieving ROI is accomplished before the time for MES is due for an application
upgrade. SAP HANA technologies give immediate ROI, as manufacturers spend as they go in the cloud.
Applications built on SAP HANA and in the cloud provide real-time benefits without having to make
major investment decisions. Manufacturers that choose to forgo MES systems in favor of paper-based
processes are inherently restricting their growth potential and not capable of meeting customer and
regulatory demands both today and in the future.
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