MES (manufacturing execution systems) revenue broke the $1 billion mark last year, according to Advanced Manufacturing Research Inc. ( Boston), as larger manufacturers looked to add functionality not provided by their enterprise resource planning (ERP) systems. And larger manufacturers in regulated industries (such as biotech, pharmaceutical and medical devices) began a MES shopping spree to provide the tracking, tracing and quality management functions they need for compliance.

The “Big Black Hole”

But where MES used to be cost prohibitive for small- and mid-size enterprises (SMEs), prices have come down to the point where, for the first time, many SMEs are considering MES as a replacement for non-automated, paper-processes. That is good news for smaller companies, which are struggling with the same need to increase efficiency and improve compliance and reduce waste as their large-company peers.

For the small- to mid-size manufacturer, "anything over $100,000 or $200,000 per plant is too much. In the past, it would have been much more than that. MES used to be called the “big black hole. If you didn't have half a million to a million dollars to start, you couldn't get anywhere. That is not the case anymore.

But given their focus on every aspect of manufacturing, MESs may still require more customization than ERP systems, which are now mostly pre-configured. The services-to-product license cost ratio for most MESs is about 3-to-1, only very few vendors deliver a ratio of 2-to-1 or better.

Smaller manufacturers need to be very sensitive to this.

MES high on many large companies' priority lists

And SMEs don't have the economies of scale their larger counterparts enjoy. A large manufacturer, for example, can leverage its buying power to get significant discounts. But many smaller manufacturers have only a single site, so vendors are less inclined to discount their software or services. And now that large companies are beginning to spend money again, it's easy for a SME to get lost.

The larger companies are catching up on their investment levels. MES is high on many large companies' priority lists. These tend to be multi-site deals and might be worth millions of dollars. If you're spending $150,000 on a single site, you might have trouble getting the vendor's attention.

The MES vendors to date have not swarmed the mid-market as the ERP players have, and they may not need to any time soon.

Our recommendation: Very early in the courtship, watch for signs of the vendor's level of attention (or lack thereof) and, when you do are ready for the deal, get service levels in writing in order to assure they'll stay attentive.

Is the MES investment justified?

It's not always clear whether or not a MES investment is justified. As a SME, you'll want to move slowly and deliberately, taking care to establish your company truly has a business need for MES before taking the leap.

To that end, there are some questions to ask:

MES gives you better visibility into your product operations -- things such as yield, bottlenecks, throughput and management of equipment, letting you produce the goods as quickly as possible and bill as quickly as possible. This is a huge benefit for smaller companies, which are more likely to have cash-flow issues.

Support Capability

As with other types of software, support is more important for the SME than the large enterprise. SMEs are likely to have smaller IT staffs than large companies. Support spans the application's lifecycle, from needs assessment to selection to implementation to maintenance. For many smaller manufacturers, it's important to pick a vendor that has a local reseller or distributor who can help at each stage. If there is no local partner, the implementation may be a lot more difficult.

Strength in your industry

The single most important selection criterion, vendors and analysts agree, is strength in your industry. They need to demo out-of-the-box functionality for your industry. While some custom development may be necessary, the vendor should have templates for your industry so you don't have to start from scratch. That helps keep the cost down and lowers the risk.

Ask the vendor for references of a same-size customer in your industry, and then ask those references for references so you're not relying on the vendor’s sales and marketing pitch alone. Visit the companies to see the MES installation in person, if possible. Most companies will be quite happy to let you see how they have done the implementation of the system. They can at least show that it does the basic operations in your industry.

Implementation roadmap

Without money and IT resources to burn, SMEs need to shorten the time to benefit as much as possible.

The shortest path to seeing a return on investment is to start with a specific objective (such as the need for better control of the raw materials weighing process) and build from there. You may start with that need for a particular customer or product, but you can expand that over time to go across product lines or manufacturing units.

But don't forget the bigger picture. You needs will most likely change in the coming years. Your organization could grow beyond the SME designation, making scalability an issue. You don't want to end up with many different MES products.

Future-proof your MES investment by picking a modular, component based MES that covers possibly every aspect of manufacturing in your industry.

Conclusion

When choosing a MES package and vendor, smaller manufacturers need to be more strategic in their thinking.
Selecting one of these systems is the starting point of a long relationship with that vendor. Smaller companies might not know that what they select now will affect decisions they make five years from now. You will enhance the installation over time as you come up with new areas of focus for your company.

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