I recently wrote about an emerging trend whereby a two-tiered ERP strategy is being used when trying to manage growth in new or expanding markets. In this post I will take a deeper dive into why combining a manufacturing execution system (MES) makes a lot of sense, offering insights as to what benefits are possible by pursuing this strategy.
To start, I think it is important to think about what business drivers are guiding your decision for expansion, as the time, effort and resource investment must make sense. Are you trying to lower costs? Are you in pursuit of new customers? Are you trying to follow your existing customer’s growth into new markets? Chances are your answer is “yes” … you are seeking all three. A cost reduction mindset must accompany every decision. At the same time, product quality must remain consistent to meet customer expectations. Maintaining quality on a global scale means that processes are standardized and executed the same, regardless of location; continuous process improvement must also be supported at every location.
One of the biggest challenges when managing remote, off shore or outsourced operations is quality control. How do you really know that a specific operations process has been followed to ensure brand integrity? And, how can you be absolutely sure that your product’s genealogy history is accurate, down to processes performed and materials utilized? If you are supporting common customers across geographies, how can you be sure that you are executing the exact same processes at each of your own locations, on behalf of your customer? These issues are escalating in importance – the decision on whether operations can be effectively managed on a global basis is now being called into question.
The Benefits of a Manufacturing Execution System
A manufacturing execution system (MES) can ensure process and production consistency while supporting Lean and other continuous improvement initiatives. When implemented as a platform-based or “enterprise” solution, these benefits can be expanded to multiple locations. In other words, production processes executed at new facilities or emerging markets, such as Brazil, Russia, India or China (BRIC), can be performed in a consistent manner. This capability can be a tremendous benefit, translating into significant Return on Investment, especially when partnering with other companies or joint ventures in markets where visibility to daily operations is limited, at best. Potential savings include idle inventory reductions (20-60 percent), lower operating costs and higher quality for a reduced cost.
More importantly, when a robust MES solution has been implemented, it is less critical what ERP system has been selected – manufacturing intelligence, visibility and control has already been accomplished, ensuring corporate financial systems are “fed” all the necessary data they need. And, this choice then gives greater flexibility to save costs by pursuing a two-tiered ERP strategy.
Getting back to reducing costs … often new, smaller locations simply don’t warrant a full scale implementation “army” of IT consultants necessary for “full scale” ERP implementation, especially if it can’t realistically be supported. Those manufacturers working with a joint venture partner might face added complications. An ERP system might already be in place that is different than their corporate standard. In these cases, why not simply pair the existing “light” ERP deployment with a platform-based manufacturing execution system? This type of solution ensures the necessary process governance, delivers consistent intelligence and measures and executes processes consistently across locations.
What does it all mean?
It is important for any IT decision to align with the broader organizational goals for growth and competitive positioning. Input and support from senior management, operations, IT and third party service providers are all critical factors to success. In fact, broad based support across the organization is often more likely to dictate success than any particular strategy. Now you have a choice if faced with an expansion facility that already has existing ERP footprint, or if you can’t cost justify expanding your “single” instance ERP strategy to a new BRIC location.
Have you had experience in this area? Do you agree? Or, tell me I am wrong. It would be great to hear from you, as this is a pretty new trend I am only now starting to hear about. Are there other considerations to a combined MES and ERP strategy you have observed?