In our past issue we provided evidence for the Manufacturing Execution Systems (MES) performance advantage. The best plants use it today. They are improving faster, and meeting greater challenges more effectively. What about ROI? What can you realistically expect? Today it is time to take a close look.

Part 1: Benefits

MES is a powerful information tool and a vehicle for business process and cultural change. MES provide long-term benefits beyond easy-to-quantify operational cost savings

The Easy-to-Quantify Operational Cost Savings

Most manufacturers will justify their MES investments on tactical and easily measurable cost reduction metrics: labour, inventory measures, lead times, maintenance, data accuracy, and reporting. And the payback is real. The majority of MES implementations can be expected to pay for themselves within 12 to 24 months of going live:

• Reductions in the time and labour component of data entry, signature review, inventory counts, and root cause failure analysis are quite common. Some examples:

- One pharmaceutical manufacturer saved two hours of the batch review process-a significant saving over thousands of batches per year.
- Another manufacturer has eliminated nearly one million manual entries per year by integrating MES into weighing & mixing operations
- And the same manufacturer has achieved a 90% plus reduction in the time required to handle a batch exception, and this on top of a substantial reduction in the overall number of deviations.

• In fact, manufacturers moving for the first time to automated data collection, electronic work instructions, and electronic signature-based review processes may pay for their implementations on head-count reductions alone.

• And yet another area users can expect is dramatic reductions in production reporting latencies

The Long-Term Benefits Beyond Easy-to-Quantify Operational Cost Savings

The largest benefits of MES come from the visibility that it provides into continuous process improvement (CPI) and supply chain management strategies. At a fraction of the cost and time of an ERP initiative, a MES platform provides visibility into accurate, high-velocity information about production performance. By extending production visibility throughout the internal supply chain, manufacturer can increase product margins on both higher volumes and higher product mix, all the while keeping costs constant. While MES may not be solely credited for performance at this level, it has an important role in creating an information environment that allows the following:

• Support improvement initiatives by providing continuous performance feedback through real-time information

• Provide visibility needed to manage and streamline the supply chain

• Create a performance culture among production personnel

Part 2: Costs

Depending on the complexity of the installation, MES implementations for larger manufacturing units fall in the $1.M (plus or minus 30%) range. Cost break-down:

• One time costs:
- Hardware
Price range $25K to 100K (approx. 10% of total costs, trend: declining)

- MES Software
Price range $100K to 400K (approx. 30% of total costs, like anything else, the price of MES Software is heavily influenced by the competitive situation and prospect for future business. Economies of scale hold, and large corporate buyers are more likely to get deeper discounts)
- Services
Price range $75K to 500K (approx. 60% of total costs, mainly implementation services provided by vendor and/or consultants, and internal resources)

• Recurring costs:
- Recurring fixed costs
Price range $25K to 75K per year (18% of software license plus add. workstations)
- Recurring variable costs
0.5 to 2 fulltime employees based on loaded costs (incl. staff to perform routine maintenance, add or modify functionality, administer and train users)

Part 3: Implementation Time

• Initial system:
6 to 18 months, mainly depending on functionality scope and plant size
• Subsequent roll-outs
30 to 90 days

Conclusions & Considerations

Traditional hard savings give sound basis for MES business case, but the larger soft benefits are real. Our recommendations for prospective buyers:

• Allocate 30% of your initial project budget for software
• Seek mutually beneficial partnerships with your vendor and be creative with your negotiations. Good will has value, as does the willingness to act as a reference account for the trade press or prospective clients.
• If you are funding development of functionality that your vendor can ultimately resell in the larger market-a frequent theme in MES business relationships-assign a value to your contribution and leverage it into a discount either upfront or on recurring expenses.
• Anticipate 6 to 18 months for an MES implementation. The length of time required depends heavily on the extent of non-product features that need to be developed to accommodate the existing production environment. Customization means more time and higher cost.
• Recurring expenses are minimal compared to initial project costs, but change always has a cost. For highly regulated industries, the expense of revalidation discourages frequent changes to the installed systems, so recurring expenses are paradoxically lower than in other industries.

Free Consultation

While MES maybe new to some people and customers may have questions, we will provide satisfying, understandable answers.

Simply contact Factorytalk and “Call for a Coffee” for a free consultation.

We are located at :
Factorytalk Co., Ltd.
12th Floor, Liberty Square
287 Silom Road
Bangrak, Bangkok
10500 Thailand
Telephone : +66 (2) 630-4525      
Facsimile : +66 (2) 630-4527

Factorytalk Pte Ltd
25 International Business Park,
#04-106-107A,
German Centre,
Singapore 609916
Telephone :  +65 6562 7634       
Facsimile : +65 6562 7635

E-mail Address :
contact@factory-talk.com