Why do some MES initiatives succeed more than others? What can we learn from the most successful companies? Just as importantly, what can we learn from those companies that have not achieved all their goals?
These are important questions for manufacturers who are thinking of investing in IT systems that (they hope) will improve profitability and supply chain collaboration, and propel them closer to the Digital Factory of the future.
To find answers to these questions, Gartner, a global technology firm, partnered with the Manufacturing Enterprise Solutions Association (MESA) to survey more than 100 MES-user companies. It’s critical to note that all the companies in the survey have actually deployed manufacturing execution systems, thus providing real-world insights into benefits and challenges. The results of the “Business Value of MES Survey” are important for manufacturers who are making—or plan to make—substantial MES investments.
Good news, bad news
The good news is that most manufacturers are achieving significant benefits and ROI from their MES investments, especially in the short term. For example, the study found that 48% of MES projects resulted with improved quality within 3 months, and 80% in a year or less.
Of course short-term payback is good, but not if it comes at the expense of long-term success. And that’s the bad news: most manufacturers are failing to achieve all the benefits they expected. Specifically, slightly more than two-thirds said they achieved less than 75% of the intended business results, and 31% achieved less than half. As a result, these companies are having trouble planning the next step and getting the funding needed to continue transforming their manufacturing operations.
What exactly is going on?
Obstacles to success
Manufacturers do recognize the problem, at least to some extent. When asked what obstacles were in their way, they cited failure to fully understand the cost, business case and/or ROI of their MES investments.
This may seem surprising. How can an enterprise make this kind of investment without fully understanding it? There are at least two reasons.
One is the low-hanging fruit mentioned above. Manufacturers can see rapid ROI in the short-term from capabilities such as improved visibility and quality, and that is enough to justify the first wave of MES technology. After that, manufacturers often find they don’t have a business case for going further, and this can lead to problems down the road.
As the survey analysis notes: “While there are some ‘quick hit’ benefits achieved in implementing MES, lasting improvements (reduced labor cost, and improved inventory and cash flow) still take time and require a long-term focus on people and process as well as technology.”
A second reason enterprises have struggled is that global manufacturing is enormously complex and touches every other system in the organization, and many outside it as well. Enterprise MES intersects literally every activity, from process, materials, and equipment, to planning, people, and partners. Developing an IT strategy for managing this involves much more than inserting technology into factories. It requires a long-term strategy for change and transformation.
Applying lessons learned
Perhaps the most critical lesson is that manufacturers cannot afford to underestimate the scope of the project. “Value buckets” are typically used to scope the most important and impactful areas for the company to focus on when implementing a MES system. Most manufacturers look at less than 20 buckets focusing on the near term success. In contrast, Dassault Systèmes DELMIA recommends assessing over 75 high value areas when deploying an MES system to ensure both short and long term goal achievement.
A second lesson is that successful MES implementations are not just about technology, they are also about people, processes, and organizational transformation. Understanding this difference, and how to address it, is a key to success in enterprise MES.
Gartner concludes that manufacturers need to “shift the focus from IT projects prioritized on short-term ROI to a formal application strategy for manufacturing operations.” This strategy needs to include centralized management of MES technology and a broad view of the role of MES beyond the four walls in order to meet the enterprise goal of greater supply chain collaboration.
In the rush to modernize, many manufacturers are missing the opportunity to make significant, long-lasting impact on their organization. Instead of going it alone, or viewing MES as an application that can be plugged into their operations, manufacturers would be well served to find a partner that has a proven process and “path through the MES forest” that delivers a comprehensive ROI plan capable of delivering the desired impact that comes from a well-planned MES strategy.
With a broad business case, realistically planned and based on measurable ROI expectations, manufacturers can achieve more in less time with their MES deployments. And critically, they can lay the foundation for continued long-term business improvement, supply chain collaboration, profitability, and competitive advantage.
In a future blog, I’ll take a closer look at the Gartner/MESA survey and what we can learn from it.
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