How much Return on Investment (ROI) should you expect from implementing a Manufacturing Execution System? 3x? 5x investment? It’s something that is often debated in the boardroom. The target itself can often be the key determining factor in business transformation.

Manufacturing Execution Systems (MES) are a prime example of an investment that can truly transform a business for the better. However, the degree of potential business change can vary. How brave, committed and visionary are you? In the battle for competitive advantage, the manufacturers that come out on top see macro opportunities for transformation over and above micro successes from a single plant.

Increasingly, manufacturing enterprises around the globe are looking for ways to streamline, increase responsiveness and become more data “smart.” With an investment on this scale comes an expectation of ROI. MES offers a wide range of cascading hard and soft benefits that accrue over time. However, businesses tend to be pre-occupied with traditional targets revolving around short-term cost cutting on a local scale.

The temptation to rush development to meet an average ROI target of three times investment is significant. A quick and easy return may be politically alluring, but is ultimately short sighted. Businesses like the reassurance of seeing a dollar saved, but those that stop here might risk missing out on the larger savings that could impact strategic business outcomes in the future.

Expand Your Time Horizon

It is often easier to work in the short term. “What IT project can I get approved and implemented this year?” might be a consideration that is top of mind for those tasked with an IT systems update. Similarly, those responsible for approving such expenditures are equally risk-averse to embark on a multi-year deployment. Projects get derailed, budgets cut and new priorities set, which can each have an adverse effect on a multi-year deployment.

It is for these and other reasons that initial ROI to justify an MES implementation are often evaluated within the four walls of a single plant. Estimated benefits from cost savings, greater efficiency and expanded throughput can then be applied to the cost of an MES project. But why stop there? Success shouldn’t be derailed by a short-term business strategy or an impatience to see immediate ROI.

The first phase of MES lays the foundation for even more cost reductions and performance benefits over time. If an MES is rolled out over multiple plants and embraced as a companywide initiative, an ROI way beyond the average three times is possible. The cumulative effects of near-real-time visibility of production processes, as well as an understanding of them, will surface the less easily quantified, but equally significant benefits.

Recent industry analyst research by Gartner suggests the following list of potential benefits await those ready to embrace a longer timeframe horizon (read the full report here):

Potential benefits in first 3-12 months:

• Efficiency gains
• Cost reductions
• Improved quality

Potential benefits 12-36 months from implementation:

• Process improvements
• Shortened cycles / work flows
• Reduced inventory carry costs

Potential benefits 3+ years from implementation:

• Accelerated new product introduction
• Reduced indirect labor costs
• Better managerial decision support
• Increased organizational agility
• Improved asset utilization

A specific manufacturer’s future success could come down to their team’s ability to see the bigger picture, maximize MES across multiple plants and learn from the data generated. Making the right decision at critical times can have a significant on future profitability – or even viability. Yet these benefits are seldom incorporated in an MES purchase decision. It is ironic that one of the biggest benefits is rarely incorporated as part of the ROI process. Data analysis and decision support is the catalyst a business needs to leapfrog its competition to start performing in a different league.

In the battle for competitive advantage, MES is the investment that keeps on giving to manufacturers on a mission to achieve and sustain operational excellence. Businesses that fail to use the new information generated are debilitating the long-term benefits or potential gains. One manufacturer, for example, created a new metric for factory idle time after it discovered that 40% of its WIPs sat idle for two weeks without being touched. The MES gave the manufacturer data it didn’t have before to drive change in its supply chain.

Manufacturers are increasingly operating in an information-driven environment. Increased visibility of processes across multiple sites offer manufacturers the tools needed to recognize and seize new opportunities that might not have been previously even considered. Don’t let your business invest in MES, and then fail to look beyond the first phase of benefits. Be patient, learn from the information generated, act upon the insights and reap ROI in the long-term. MES is truly the hidden weapon of manufacturing. It is up to you to enable it to transform your business for the better in a continuous improvement philosophy!

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