Insights & White Papers

Manufacturing Execution Systems: ERP on the Shop Floor

By Alex Jay

Transformation & Assurance

MES has the potential to increase yield, enhance quality, and reduce production costs. Without diligent and upfront planning prior to purchasing such a solution, manufacturers run the risk of costly overruns or, worse yet, a failed implementation.

Executive Summary

Enterprise resource planning (ERP) solutions help businesses to function efficiently while providing transparency into their financial performance.  Manufacturing environments, however, require granular visibility across workstations to comprehend whether production is optimal.  This raises resource planning questions for manufacturers to ask before pursuing costly solutions that may take months, if not years, to implement:

  • Will this ERP solution track material movements across the entire assembly line?
  • Is the solution able to support detailed production planning based on actual material levels, including work in progress (WIP)?
  • Can it perform predictive maintenance analytics and, based on algorithmic outputs, automatically schedule maintenance periods?
  • Does it support quality management to identify defects and facilitate repairs?
  • Does it possess analytical capabilities that provide real-time performance metrics to help producers optimize their manufacturing procedures?

This paper will explain differences across resource planning solutions tailored for production-based businesses, and examine what to consider when purchasing a product to manage shop floor operations.

Enterprises, Materials, and Manufacturing

ERP solutions are often supported by material requirements planning (MRP) modules designed to create a holistic solution that enables companies to manage financial, customer, planning, logistical, and inventory data.  Where ERP and MRP products fall short, however, is in overseeing manufacturing operations.  This where manufacturing execution systems (MES) come into play – these are designed to run factories at the workstation level and manage the flow of data across equipment.  To help delineate these solutions, Table 1 summarizes the functional attributes of each product relating to sales, accounting, marketing/customers, human capital management, procurement, planning/scheduling, inventory, production control, material tracking, process traceability and control, and quality management.

Table 1:  Functional Differences Across ERP, MRP and MES Solutions

MES ERP MRP

Identifying a comprehensive solution or set of products that can manage this range of functions establishes connectivity between the office and shop floors. This also positions a company to realize the benefits of the Industrial Internet of Things (IIOT), where shop floor machines are not only connected but also provide full visibility into granular operations. This level of detailed transparency facilitates predictive analytics through automated and real-time analyses of production data. Further, manufacturing productivity can be improved by continually assessing overall equipment effectiveness (OEE) and modeling various scenarios to enhance output. To achieve these gains from the IIOT, manufacturers need to understand what software options are available and whether these products are suitable for their particular industry.

Solutions that support the functions listed in Table 1 tend to fall into one of two camps: a comprehensive ERP product that includes MES functionality or a standalone MES solution that can operate alongside an E/MRP package.  To bring this into focus, Table 2 provides an overview of certain comprehensive and standalone products – from SAP, Oracle, Siemens, Dassault, Emerson and Parsec – the industries that they support, and whether they are designed for discrete and/or process manufacturing companies.

Table 2:  Snapshot of MES Solutions

MES Applications

Considerations Before Purchasing a Costly MES Solution

Although there are numerous resource planning products with different features and capabilities, they all have one thing in common: they are expensive to purchase, implement and maintain.  Compounding matters for potential buyers, the research organization Gartner estimated that 55% to 75% of resource planning transformations fail to meet their objectives.  Fortunately, there are actions that manufacturers can take to identify the right solution and mitigate implementation risks, and Liberty Advisor Group has identified 11 considerations to support organizations that are contemplating an MES transformation.

1. Is an MES solution needed?

Deciding whether to purchase an MES product should not be done haphazardly given that costs can run in the millions and internal resources will be disrupted for months.  A thorough business case analysis will clarify whether such an outlay is in the organization’s best interest, and the following factors should be included in the assessment:

  • Does it solve a pressing issue? Examples of such issues include:
    • Is the current MES a legacy solution that is no longer vendor supported?
    • Is the E/MRP being upgraded and, if so, will it become incompatible with the current MES?
    • Will the company be at a competitive disadvantage without a new or upgraded MES?
  • What are the opportunity costs? Committing budget and resources means that other initiatives will be deprioritized.  Leadership needs to decide whether the benefits of an MES investment outweigh those of alternative programs, such as new product development, market entries or hiring highly skilled employees.  If the rationale for an MES transformation cannot be clearly defended, then serious questions need to be asked about whether to pursue the program.
  • What is the return on investment (ROI)? A defined ROI threshold is needed to gauge whether an expense meets financial performance requirements.  Moreover, an MES purchase should be treated with the same scrutiny as an investment in capital equipment – that is, the asset must have a demonstratable benefit over a specified period of time.

2. Is leadership onboard?

MES transformations are arduous endeavors that require the full commitment of company leadership.  Without this pledge of support and active involvement in the decision-making process, programs are more likely to fail.  Liberty recommends that leadership becomes engaged at the onset, with accountability for approving the program based on the outcome from the business case analysis.  Once approved, leadership should send a clear message to the organization as to why an MES transformation is being undertaken.

3. Are the current manufacturing processes documented?

The starting point for any resource planning program is to understand the current state.  In the case of manufacturers, production procedures need to be fully documented.  Without this foundation, it is not possible to define the desired future state and corresponding requirements.  This can lead to a nebulous program with a poorly articulated end state, thus increasing the likelihood of a failed implementation and/or an expensive rescue.

4. Is the current IT landscape documented?

The benefits of an MES solution extend beyond the factory floor; the ability to share production data across an organization enables leadership to make informed near and long-term planning decisions based on customer needs and market trends.  To realize this advantage, however, requires an MES to interface with resource planning products and other apps.  Creating a landscape of IT assets and identifying which ones are likely to exchange data with an MES allows the organization to vet the compatibility of proposed solutions, while also being able to better control the transformation’s scope.

5. Are the future state requirements documented and agreed to?

Requirements define how the product should function based on the needs of stakeholders and the design of the future state.  From a granular perspective, they support factory and site acceptance testing (FAT and SAT, respectively) which enables an organization to run simulations (FAT) to validate an MES before proceeding to production trials (SAT).  This logical and sequential approach, which is underpinned by approved requirements, improves the prospects of a successful go-live.

6. Is the transformation being led by production/manufacturing?

The tendency across industries is to place IT in charge of technology-driven transformations.  The production department, however, is the ultimate customer as it will use MES to run the shop floor.  In view of this, production should lead the initiative to ensure that the proposed future state is an improvement over the status quo and that milestones can reasonably be achieved.

7. What is the ideal MES solution?

Before investigating potential products, the transformation team should first confirm that leadership has endorsed the initiative, current states for manufacturing and IT are documented, and stakeholders have approved future state requirements.  These elements facilitate MES selection because they establish the desired outcomes, which allows the team to concentrate on the following factors:

  • Decide whether to use the E/MRP’s MES module, if one is offered, or a standalone solution
  • If pursuing a standalone solution, assess how well this will integrate into the existing technology infrastructure
  • Determine whether the MES is appropriately designed for the company’s industry and type of manufacturing processes (see Table 2)
  • Run comparative assessments based on reviews from publications/journals, professional organizations, consultancies with firsthand transformational experience and, where possible, the experiences of existing customers
  • Perform trade-off analyses between future state requirements and the capabilities of each solution
  • Identify assurance delivery (AD) and system integrator (SI) partners who have managed and implemented the MES solutions that are under consideration

Identifying appropriate partners is an important step, as most manufacturers do not have expertise with resource planning transformations.  AD partners are well-versed in managing the lifecycle of MES programs and, in certain cases, are able to advise on selecting a vendor and an SI.  SIs are the hands-on partners responsible for implementation, configuration, customization (if applicable), and validation.  In short, engaging the right partners increases the probability of a successful transformation.

8. How will the program be governed?

Program governance establishes the rules of the transformation that stakeholders and partners are obliged to follow.  At the same time, governance should avoid burdensome bureaucracy that could impede progress.

The following guidelines create an administrative foundation that is straightforward and holds people accountable without encumbering them with excessive or unnecessary policies.

  • Establish a steering committee (steerco) with leaders who have the authority to make decisions concerning timelines and budgets
  • Staff the program with shop floor representatives to ensure the “voice of customer” is directly involved and represented throughout the transformation
  • Enact cadences for status reviews and milestone events, and confirm who needs to attend each session
  • Create a one-page status template that teams are required to submit for each review; appendices should only be used for items that require leadership decisions
  • Define a grading system for risks and issues that enables leadership to prioritize critical/severe items that can thwart a program’s progress
  • Establish an escalation procedure for risks and issues that require immediate attention and resolution
  • Create a change request procedure, committee and forum to address proposed scope modifications for the transformation

9. Has the project plan been signed-off by stakeholders?

MES project plans are lengthy schedules with multiple tracks of work and numerous interdependencies.  In light of this complexity, manufacturers should review work plans with affected stakeholders to capture their input and, ultimately, gain their buy-in.  These reviews are not limited to internal teams – AD and SI partners should be consulted as well for their industry and functional perspectives.  In addition to having a thoroughly vetted document, securing the approval of concerned parties demonstrates to leadership that the plan is realistic and has achievable milestones.

10. How will data be managed?

Before commencing an enterprise transformation, manufacturers need to determine how they will manage and effectively transfer their legacy data to the new MES or comprehensive E/MRP solution.  Too often, however, this step is an afterthought resulting in downstream issues that require additional time and significant resources to resolve.  Examples of problems stemming from poor data preparation include:

  • Equipment does not function properly leading to certain processes being temporarily taken offline or, in a worst-case scenario, causes the complete shutdown of an assembly line
  • End of line (EOL) rejection rates increase / products do not pass QA
  • Defective products make it to market and, consequently, degrade customer satisfaction and increase warranty expenses
  • MES can neither receive nor transmit data with the E/MRP

Developing a data readiness plan mitigates these issues, supports a successful MES go-live, and enables manufacturers to realize the benefits of the IIOT within a shorter timeframe.  To support clients with transformations, Liberty has developed a straightforward, four-step readiness plan:

1 – Data Definition: This is the pertinent information that enables manufacturing operations.  These data and their role in manufacturing processes need to be documented, along with rules for data creation and modification.

2 – Data Deactivation: With data definitions recorded, the next step is to identify active and stale data.  Active data is information that has recently been used in the production process, such as equipment configuration, procedural steps, and QC/QA analyses.  Stale data, conversely, are no longer used or have been dormant for years; examples of staleness include information linked to a discontinued product and operational data for decommissioned equipment.  Once stale information is confirmed, these data are deactivated and not incorporated into the new MES solution.

3 – Data Cleansing: No matter how well data are managed, they are subject to potential issues that may require cleansing activities.  To help control the level of sanitization required during a transformation, the previous two steps concentrated on identifying germane manufacturing information.  With the scope of data confirmed, dataset owners, such as the Quality Department for QC and QA information, and Engineering for machining and welding parameters, review their records for problems and, as needed, take any necessary corrective actions.

4 – Data Governance: In Liberty’s experience, the first three steps in this readiness process are needed because many organizations either have ineffective governance or completely lack data controls.  Enacting or revising an existing data operating model (DOM) is a required step in an MES program and should consider the following elements:

    • Establish an empowered data governance team responsible for data integrity, both during and after the MES program
    • Run annual or bi-annual data reviews to identify and resolve pressing issues and how to improve current procedures
    • Place limits on data entry fields in terms of what can be entered or selected
    • Assign user levels for data entry fields, i.e., owner, editor, viewer
    • Introduce training programs that explain how to maintain the quality of data, and ensure that data owners and their teams are trained prior to MES go-live

For a comprehensive overview of data readiness with regards to largescale transformations, please see Dave Leopold’s article “ERP Implementations: Four Steps to Ensure Data Readiness”, which can be found here.

11. Do not forget about PLM solutions

Product lifecycle management (PLM) is the practice of overseeing the development of a product from an idea through to production and, ultimately, to its in-market performance.  An important aspect of PLM is the collection and maintenance of technical data, such as functional and performance specs, materials, schematics/CAD, part number history, bill of material (BOM), and other applicable information.  Taken together, managing a product’s lifecycle and data is a demanding task that only intensifies the more technically complex an assembly becomes.

To help organizations run numerous and challenging development programs, vendors introduced PLM software that centralizes all technical data and links them directly to the lifecycle process.  As a result, products have a single source of truth (SSOT) that can be shared across an organization and with external suppliers.  Further, the SSOT evolves as the product progresses through developmental milestones, which includes marketplace feedback that can cultivate new insights and ideas for mid-cycle releases and new product introduction (NPI).

Given PLM’s prominent role for product engineers in a manufacturing organization, it should come as little surprise that PLM data are direct inputs into MES.  Said another way, PLM provides the blueprints and requirements and MES uses this information to build and assemble the end item.  One clear example of this relationship is the BOM: PLM establishes the engineering BOM (eBOM) which is converted into a manufacturing BOM (mBOM), based on the assembly procedure, and this informs how routings should be established.

As manufacturers contemplate MES and/or comprehensive ERP options, they should consider PLM compatibility as well.  Congruent PLM and MES solutions allow manufacturing departments to enhance product programs in the following ways:

  • Advise on manufacturing feasibility earlier in the development lifecycle
  • Recommend design reconfigurations that lower production costs and/or augment yield
  • Model initial operations based on preliminary eBOMs rather than waiting for the final release

Compatibility among MES, ERP, and PLM solutions creates a digitized closed-loop across the front-office, production, and engineering.  Here, commercial, product, and manufacturing data are accessible throughout the organization and can be leveraged to:

  • Accelerate development cycles so that products make it to market ahead of the competition
  • Reduce the time to design, setup and qualify assembly lines
  • Identify quality issues quicker and take the necessary actions to contain and permanently correct the problem
  • Optimize developmental pipelines and in-market product portfolios based on historic and current marketplace performance

Closing Thoughts

MES has the potential to help manufacturers realize the benefits of the IIOT, which includes reduced shop floor downtime, greater throughput that meets EOL QA criteria and a more responsive and flexible manufacturing environment.  To realize these gains, however, requires a thorough understanding of current procedures and careful documentation of the future state and its associated requirements.  Identifying the right MES product should align as closely as possible with these requirements while taking into account the time, number of resources and budget needed to architect, configure, validate, and implement a manufacturing solution.  Last of all, MES transformations cannot be run in isolation – compatibility with ERP and PLM solutions is paramount if a producer wants to have a digitized feedback system where business, engineering and manufacturing can create competitive advantages that are difficult for other players to imitate.

About the Author

Alex Jay is a Principal at Liberty Advisor Group.  Alex spent 14 years in the automotive industry, nearly 13 of which were with the Ford Motor Company.  His automotive roles include Dimensional (GD&T) Engineer, Product Development Engineer, Six Sigma Black Belt, Business Analyst, and Engineering Change Management Lead.  As a consultant, he focuses on product lifecycle strategies with an emphasis on how to design and execute commercialization strategies.  Alex earned his B.A.Sc. (Chemical Engineering) from the University of Waterloo and his MBA from the Ross School of Business at the University of Michigan.

About Liberty Advisor Group

Liberty Advisor Group is a goal-oriented, client-focused and results-driven consulting firm. We are a lean, handpicked team of strategists, technologists and entrepreneurs – battle-tested experts with a steadfast, start-up attitude. Our team, with an average of 15+ years of experience, has delivered over $1 billion in operating income improvement and over 300 M&A deals for our clients. We collaborate, integrate and ideate in real-time with our clients to deliver situation-specific solutions that work. Liberty Advisor Group has the experience to realize our clients’ highest ambitions. Liberty has been named to the 2019 Best Places to Work in Chicago and to FORTUNE’s list of Best Workplaces in Consulting and Professional Services.

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