The MES value proposition
Manufacturing execution systems are turning shop floor data into dollars and cents.
By Staff -- Modern Materials Handling, 2/1/2000
Who would have thought a year ago that we could see ads on prime time television for supply chain software? Probably not many of us. But there they are, night after night.At the same time as supply chain software in general became highly visible, manufacturing execution systems (MES) in particular remained hidden in the background. While some would say the software is just doing its job quietly, many more would ask what is its job (see sidebar below - italic text).
To find out exactly what is going on with MES, Modern Materials Handling talked with Eric Marks. He is chair of the software trade association MESA International and principal consultant at PriceWaterhouseCoopers.
MMH: Where does MES fit in the world of supply chain software?
Marks: On the manufacturing side, MES is the software that allows a company to deliver on promises made by its planning systems. For instance, ERP (enterprise resource planning) systems can create an available-to-promise date. But it's often based on standard lead times. Now the MES is the only system that knows if the standard lead times are the case out on the shop floor that day or any other day, for that matter.
By directing production activities, an MES can then provide live information back to the ERP system. That's the first time that anyone really knows if the available-to-promise date is accurate. In essence, ERP and other planning systems such as APS (advanced planning and scheduling) software can't do the best planning to improve operational efficiencies and cut costs without live data from an MES. That's the value proposition of an MES.
MMH: So why isn't MES more visible?
Marks: There are probably lots of reasons. You can probably blame some of the lack of visibility on Y2K. Those projects pretty much consumed IT departments for most of last year. I know that Y2K stalled a lot of MES initiatives. But now that we've cleared the 2000 hurdle, there are companies that are ready to begin a global roll out of MES to their plants.
And then there's e-commerce. So far, we've heard mostly about buying on the Web and how it's affecting distribution centers and warehouses. But that's only part of the story. I expect that companies are going to begin to focus on the manufacturing end of their order fulfillment systems this year.
The competitive issues of e-commerce go far beyond "Do I have enough of this item in the warehouse." There is going to be a ripple effect back to manufacturing and people are going to be challenging the models they've been living with. The next question facing e-commerce is, "Do I have to carry finished goods inventory of this item in my warehouse or can I switch to a make-to-order model?"
To answer yes to that, companies must be able to handle highly variable demand. And that will challenge traditional manufacturing models. It's also where MES comes into the picture in both business-to-consumer and business-to-business supply chains. I fully expect to see increased demand for MES driven by e-commerce.
MMH: What have MES suppliers done to upgrade their software to meet such increasing demands on manufacturing systems?
Marks: There have been several packages that now run on Windows NT or have at least added new NT modules to the established software. In addition, others have integrated browsers so that the software is Web-enabled.
On the business side, at least a couple of MES suppliers have merged with manufacturing hardware suppliers, particularly makers of semiconductor and electronics assembly systems. MES has long been strong in these industries and the move tends to simplify integration issues. You're also seeing tighter alliances between MES suppliers and controls suppliers. Again, it simplifies the integration process. It also enhances what might have been controls that work with batches of data to controls that have access to real-time data.
MMH: It sounds as if you think MES is here to stay.
Marks: I find discussions that MES is going away to be a complete waste of time. The software is going to be there. It will become increasingly integrated with other systems as we've already seen but it is a best-of-breed class of software that delivers results no other software can. Its traditional capabilities to reduce cycle times, increase inventory turns, lower inventory costs, improve inventory management, and increase finished product quality are going to become more highly valued not less as supply chains pick up the pace.
What exactly is an MES?
In its most basic form, a manufacturing execution system does for the shop floor what a warehouse management system does for the warehouse or distribution center. The software manages in real time resources from inventory to labor, and dynamically adjusts for shifts in the availability of resources to complete orders to a pre-set schedule.
"The resulting rapid response to changing conditions, coupled with a focus on reducing non-value-added activities, drives effective plant operations and processes," says the trade association MESA International. "MES improves the return on operational assets as well as on-time delivery, inventory turns, gross margins, and cash flow performance."
In addition to what it does on the shop floor, MES provides operational data to other information systems across the enterprise. In turn, this information can then be used to keep customers and suppliers current with supply chain conditions on the shop floor.
Does MES really work?
Hand tool maker Ryobi needed a couple of things - less inventory from raw materials to finished goods and shorter manufacturing cycle times. To make that happen, the company's manufacturing plant in Pickens, S.C. needed to improve its ability to schedule, monitor, and coordinate both the direct and support activities that make up the manufacturing cycle.
What it got with MES (SynQuest www.synquest.com) was nearly an 8% surge in value-added production improvements in the first year alone. Basically, the MES paid for itself in 12 months.
One of the great revelations with the software was how much time work-in-process spent idle in the plant. In machining, WIP was idle as much as 20% of the time. "A reduction in idle time translates into a reduction in manufacturing cycle times," says general manager Carl Klebe.
Elsewhere, he found that overruns were more common than realized previously. Now operators know up to the minute what they need to produce, eliminating the guessing game that had just contributed to bloated finished goods inventory earlier.
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