Implementing MES boosts profits
Replacing existing custom-built production information improves operations
- MES systems mainly focus on a part of the manufacturing operations management, namely the support of activities within the production department.
- The faster the company can feed results back to employees, the faster employees can take corrective action.
- Implementing a workflow management system could lead to shorter turnaround times and improved delivery reliability.
By Bianca Scholten
As a consultant, I visit many production facilities. Currently, several factories are replacing their 10- to 15-year-old, custom built manufacturing execution systems. An even larger amount of industrial companies have only just become aware of something called MES. They still have to convince management that MES is worth the investment.
What is MES? MOM?
What is MES? That is the first thing to explain to the board. And what is the relationship between MES and other terms like manufacturing operations management (MOM)? Why do companies invest in these kinds of information systems? And why should you replace the old system, to which people are so attached?
"The term MES arose in 1991," said Jan Snoeij, board member of MESA International. "Multiple people claim they invented it. At that time, it stood for manufacturing execution systems. Today, it means manufacturing enterprise solutions. After all, MES is more than just a system for production control. Issues such as quality, inventory, maintenance, product data management, and product life-cycle management can't be viewed as separate from the MES domain. ... That's why we changed the term in 2004."
In one of its white papers, MESA International distinguished 11 manufacturing execution activities, which later gained recognition primarily thanks to the MESA honeycomb model.
Simply put, the original concept, "Manufacturing Execution System," concerns information systems that support the things a production department must do in order to:
- Prepare and manage work instructions
- Schedule production activities
- Monitor correct execution of the production process
- Gather and analyze information about the production process and the product, and feed this back to other departments, such as accounting and logistics
- Solve problems and optimize procedures
MOM concerns the activities within the production department, the maintenance department, the lab, and the warehouse. MES systems mainly focus on a part of MOM, namely the support of activities within the production department. For the other parts of MOM, other kinds of information systems are available. The function of asset management systems focuses on maintenance departments; laboratory information systems (LIMS) support the activities within the lab; and warehouse management systems support warehouse activities.
Advantages of MES
At MESA's European conference in 2007, the organization asked the audience several questions. They handed out green, red, and yellow cards that stood for the answers "Agree," "Disagree," and "No opinion," respectively. One of the questions was, "Who believes that MES can produce significant advantages for industrial companies?" I was in the audience and thought to myself, "Hmmm. Who believes? ... Apparently, MES is a belief."
By the way, most of the audience held up a green card. Believing is not the problem. But wouldn't it be great if plant managers and IT managers could walk up to their bosses with hard-and-fast numbers?
Fortunately, market research agencies have not let us down. For example, at its members' request, MESA commissioned a study into the way in which manufacturing companies improve their financial performance, and how they justify their investments in production automation software. MESA hired a consulting firm to create an analysis program. The analysis team's Internet questionnaire produced 151 valid responses.
Based on a list of widely used key performance indicators, like labor cost per unit and on time delivery, respondents to the study indicated how many improvements they had realized in the past three years. The consulting team then divided the companies into two groups, "Business Movers" and "Others." The Business Movers are those companies that demonstrated considerable improvements, in breadth or in depth. That is, they started performing more than 1% better on six of the 11 business metrics in the study, or they demonstrated more than 10% improvement on at least one of the business metrics. These Business Movers serve as a model for other companies. What qualities did they have that were possibly the source for realizing so many improvements?
The report describes the profile for these companies as follows: They are fast; they have coupled their operational goals to their financial and business goals; they know their results; their plant activities are profitable; they concentrate on what is important; they use software applications; and they have, in general, a return on investment of two years or less on their investments in plant software.
According to the report, speed is one of the characteristics of the Business Movers. The faster the company can feed results back to employees, the faster employees can take corrective action. Automated data collection can help make this information available earlier. Many Business Movers feed results back within 24 hours, or even in real time. They more frequently use automated data collection than do others.
Another conclusion from the report is Business Movers more often use MES and information dashboards. This group clearly shows more improvements than do companies that have not adopted these types of systems.
MES is a belief, but various market research agencies think they have found a causal link between the use of MES functionalities and improvements to operational and company-wide performance. Keep in mind, however, these studies are not always conducted at the request of an independent organization, but often on behalf of vendors. In that case, you might question the market research agency's objectivity.
Ultimately, of course, we have to keep using our own sound judgment under all circumstances. Let's try to explain those expected improvements just by thinking logically.
Using the detailed production scheduling functionality of MES may possibly lead to higher efficiency. Such a module can quickly calculate diverse options (simulation) and, in so doing, propose the most efficient combination and sequencing of orders, changeovers, and cleanings.
If you implement a module for recipe management, assembly instructions, or standard operating procedures, you can synchronize master data automatically with the Bill of Materials in the enterprise resource planning system. Particularly for companies in which recipes often change, this delivers advantages. There is a smaller risk that operators will be using outdated instructions, and changes from R&D can be more quickly incorporated. Because the recipes are flexible, you can always use the least expensive raw materials, as is common practice in the feed industry. The software can also automatically send product-related parameters to the PLC-SCADA layer. Because operators no longer have to manually transfer those data, they win back time, and the risk of error is reduced.
A historian module can take over the operator's task of collecting various data, so they can concentrate on their real task of monitoring and guiding the process. Moreover, a historian gives you the opportunity to store large quantities of data over a long period of time in a central location. This improves access to historical data and lays the foundation for process analysis and optimization.
In many plants, people use paper forms and spreadsheet programs to create reports. For example, there are pharmaceutical companies that produce more pounds of paper batch reports than they do pounds of end product. Customers and government require tracking and tracing, and as long as you are recording data, why not use all that information for other objectives, such as continuous improvement? But collecting data from paper forms and Excel files, converting units of measurement, and then making comparisons takes a lot of process engineers and production managers' time-time they would rather spend improving the process, quality, efficiency, and so on.
MES can provide more insight by quickly generating a variety of reports and charts based on the collected data, relating to quality, overall equipment efficiency, performance by shift, by day, by batch, and so on. These reports form an important input for team discussion in order to get everyone on the same wavelength and to concentrate on what is really important.
But reports alone will not get you there. They do offer a basis for making various comparisons, but by definition, they look at the past, and they always contain the same information. Reports are static. A company that runs its plant based on reports is like a car owner who drives while looking in the rearview mirror. It is better to know what is happening now, to respond proactively, and to make adjustments. And because you cannot be everywhere at once or talk to everyone at once, it is useful to have a dashboard.
Finally, workflow management modules can function as the orchestra conductor. They streamline processes in which different departments are involved, by pointing out tasks and priorities to employees and by providing insight into who is working on which order and where. Implementing a workflow management system could thus lead to shorter turnaround times and improved delivery reliability.
Replacement of existing MES solutions
Those pioneers who already built their first custom MES 15 years ago are facing the challenge to replace the old system. In many cases, this is necessary because they are based on outdated technologies and maintenance costs are high. IT managers have nightmares because the plant has become completely dependent on the knowledge and skills of one technician. Extending the MES with new functionality is expensive or impossible. So from an IT cost efficiency point of view, the replacement of the old custom built system by a system with out-of-the-box functionality, which can be supported by different system integrators, has many advantages. But how is the IT guy going to convince the users who by now are so attached to this solution that was built with a complete focus on their specific requirements? A new, standard system will never have the same perfect fit. It is like the difference between haute couture and prêt a porter. You do not have your clothes made by a famous designer; you buy them at the mall. It is not a perfect fit, but you are okay with it because the price is acceptable. Now, convincing the users to move from designer solutions to standard, fit-all systems is the biggest challenge in replacement situations. You will have to carefully stitch in the change to avoid a culture shock.
ABOUT THE AUTHOR
Bianca Scholten (email@example.com) is a principal consultant at system integrator firm TASK24 in The Netherlands. She is a voting member of the ISA95 committee. Her books, MES Guide for Executives and The Road to Integration, are available at www.isa.org.
The business case for MES at Palm Breweries
Before we started to use the new MES system, we had a custom built production information system that we had been using for about 10 years. For a long time, we were very happy with the old solution, but toward 2006, it was outdated. It did not cover all the modern requirements anymore. For example, the requirements for tracking and tracing had become much more rigid, and the old package did not support that. Furthermore, we of course wanted to continuously improve things, and therefore we need good information, e.g. about the usage of raw materials and consumables and quality costs. In the old system, it took us two or three days to collect the right data, so that was hard to do. We knew we were overseeing things and savings had to be possible in the process. But it was not feasible to adjust the old system, which had become basically unreliable, because we had not updated the latest versions of the software platform.
Finally, we concluded we wanted to purchase a new system, which had to make it easier to comply with regulations. We also defined other advantages and tried to quantify them. We assumed the system was going to cost approximately $812,800 (€600,000), and for that, I had to present the business case to the Board of Directors.
We estimated the consumption of raw materials could be lowered 1% and the usage of consumables 2%. Up till then, we used to calculate our losses in Excel, by comparing the purchased amounts of raw materials with the amounts of finished products we had sold. But it was very cumbersome to analyze in which process step and during which week the exact loss had been generated. Now, with the new system, we know our losses per lot and per process step, and we can easily look up the lots of specific periods of time and compare them. The same is true for consumables. Thanks to the storage of historical data in a historian, we would gain better insight in the process, and we would be able to relate quality data to production data. This way you discover where savings are possible concerning consumables and energy.
We also made an interface between the planning functionality in MES and the level 4 purchasing system. By improved planning and less rush orders, we estimated we would be able to purchase packaging materials at a lower price.
Quality also was a very important driver. The MES system should be able to lower the costs of solving quality issues 25%. We made this estimation by listing historical incidents and understanding how the future MES could have avoided these issues. Furthermore, the risk of unavailability of the old software system would end.
We also saw some advantages that we could not quantify. For example, we have a quality index that tells us what percent we produce according to desired specifications. Our standard is 95%, but thanks to a better monitoring, 97% should be possible. We wanted to realize that by purchasing a laboratory information system but also by improving production tracking and tracing. That would make our quality even more stable. Quality is the trump of our brewery. It is possible other breweries purchase a MES mostly to lower costs, but for us, the focus was on quality.
We also fill and package beer for other breweries. One of the advantages that we could not quantify was the satisfaction of these business-to-business customers. For those clients, it is nice if they quickly and accurately receive reports about the products we made for them. Making those reports in the old situation took a long time, and it was error prone. Now, we have automated this process, and reports are sent in near time to our customers. We know from our own experience-we have our beer filled in cans by another brewer-that you trust in your supplier when they provide insight this quickly, as if it were packaged on our own site.
We also found the employee satisfaction an important driver. We want to be ahead in the market and offer a professional working environment. The old system led to frustrations, whereas the people are happy to work with the new system.
We have realized the most important goals. Some we even surpassed. On others, like the reduction of raw material losses, we are still working. Of course, it is difficult to prove specific savings were caused by the software package, but we believe in it. We earned back the investments. We had calculated a onetime savings of $135,000 (€100,000) and a yearly saving of $101,000 (€75,000). We saved two full-time equivalents, so there we already have our yearly calculated savings. We are satisfied. In the mean time, we keep discovering new possibilities in the system that is all extra benefit.
SOURCE: Alex De Smet, head of production, Palm Breweries (interviewed by Bianca Scholten in January 2010)