When it comes to prioritizing IT projects, there’s a quick and simple formula: Stakeholder Benefit /Cost + ROI = Business Value. The project with the best business value wins. But the real benefit of technology can’t be explained in a math equation. Or, can it? There are hundreds of unnoticed nuances that impact a deployment. Many of them are soft benefits – those intangible outcomes that are hard to measure by dollars and cents. Things like improved product quality, more efficient workflow, better communication, and a better connected culture. These are the outcomes that make a technology deployment successful, but are often overlooked at the start.
In addition, when there’s a choice between investing in an enterprise system or a manufacturing system, there’s no need to apply a formula or even flip a coin, because the enterprise always wins. The reason has little to do with business value and everything to do with professional pressure. If an ERP upgrade gets delayed, everyone—including the C-suite — knows about it. That forces the IT agenda into the top spot, because let’s face it, if a manufacturing execution system (MES) deployment gets pushed back does anyone blink an eye? No, because manufacturing is complex, expensive, and localized, requiring enormous attention to detail on day-to-day tasks and activities. It’s hard to measure; at least that is what business folks think …
The Coming of Age of Manufacturing Enterprise Systems
Perhaps that was true several years ago when Forrester published its 2008 MES market overview introducing the push to multisite MES deployments and global process governance. But back then, even as the MES was welcomed as an important bridge between the plant floor and the enterprise, it was viewed as secondary – more of an extension of ERP. Indeed, in the 2008 report Forrester concluded that “ERP maturity is the single biggest factor in predicting MES adoption.”
Today, one could argue that those acronyms should be flipped. MES maturity drives ERP productivity. Savvy IT departments recognize that MES is not relegated to the plant. Rather, it is integral to the supply chain and the enterprise. In the same way that the mythical Phoenix rose from the ashes to give new life to itself, one might argue that MES is now having its own “re-birth” or renaissance.
The emergence of a centralized MES architecture with real-time visibility across global sites makes it an invaluable business tool.
A Longer-term Perspective on Value
According to Gartner, MES has a wide range of cascading benefits that accrue over time. In the short-term, there are immediate ROI benefits from local production in the form of improving efficiencies and cutting costs. This lays a foundation for cost reduction over time as well as gains in process performance. The cumulative results from the phase one short-term benefits translate to visibility and analysis of production processes. Visibility translates into tangible savings, such as reductions in scrap, reduced cycle times, more efficient work-in-progress (WIP), and process standardization, which can reduce the total cost of ownership (TCO).
So clearly significant benefits exist from implementing an MES, but what’s the big benefit or primary driving force? Well, consider this—from Gartner’s March 2014 report “Extending the Value of MES Beyond the Plant” – by using local benefits to drive scale across multiple sites, one company achieved a 3% savings (estimated $1.25 million) in net material spend at one site alone which was enough to create demand for other sites to deploy MES.
Ultimately, the savings realized by an MES upgrade or even Greenfield rollout can easily surpass the ERP payback—and could actually fund the ERP upgrade.
The total cost of ownership story is important. Today, many CIOs and CFOs now understand what ERP brings to the table. It’s time to bring MES into that discussion. MES is quickly becoming an important enterprise system, and one worthy of closer examination.
