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MES: A Supply Chain Solution for the Shop Floor
Consider these two manufacturing problems. In the middle of a production run, your assembly line shuts down, idling machinery and resources that are costing you $55,000 a minute. The problem is traced back to the warehouse, where it turns out you ran out of a $3 item. The line sits idle until you obtain more parts or find an acceptable substitute.

Or, you're an appliance manufacturer that has just shipped 1,500 refrigerators to dealers. Afterwards, you learn that 50 compressors have a defect that will result in a shock every time the door is opened. Without a way to track the 50 compressors, you recall all 1,500 refrigerators at a cost of nearly $2 million.

In both real-world scenarios, a system that integrated forecasting and inventory control with the shop floor could have prevented those costly problems.

For all the focus on the order fulfillment aspects of the supply chain, it's easy to forget that the manufacturing process is just as important. To be a successful manufacturer, you need to integrate the flow of materials through the production process just as tightly as you do through the distribution portion of the supply chain.

Manufacturing execution systems (MES) control that process. Created initially as a way to track parts in the semiconductor business, an MES is a factory-floor, performance-oriented system that manages production on a real-time basis.

As a solution to the first scenario in this section, the MES would have anticipated the shortage of parts and automatically substituted an alternative. In the second it would have created a bill of materials for each refrigerator so that the 50 bad compressors could be easily identified and recalled.

As part of a total supply chain solution, the MES lies between two warehouses: One that feeds the shop floor and another that is fed finished product by the manufacturing plant. The MES provides a way to track raw materials from dock to dock, making them available to manufacturing once they arrive at the factory's warehouse, and tracking them until they are handed off to a WMS for distribution to customers.

The MES accepts data from ERP, MRP, and MRP II systems in the form of forecasts, costs, general production, planning, process definition, and inventory status reports. The MES turns that data into an actionable plan that can be modified along with the situation.

The software can also take into account changing conditions. These include production equipment availability, priorities such as orders scheduled for completion that day, and limitation including inventory levels. The MES dynamically accommodates these conditions by:

Allocating, reserving, scheduling and dispatching resources, including materials, machinery, and people. Controlling documentation Collecting and maintaining relevant process data Managing labor Managing quality process and maintenance requirements Tracking products and their genealogy Performance analysis

Ultimately, the goal of an MES is to reduce the cycle time necessary to build a product and to take advantage of excess capacity and inventory reductions.

Like a WMS, and MES forces people to work differently. It breaks down barriers between departments on the shop floor, requiring people who once worked independently of one another to act as a team, sharing real-time information and resources.

It's also important to note what an MES doesn't do. For instance, it doesn't eliminate the need for planning software such as MRP, MRP II, and order management. "There is no all-inclusive MES solution that will make all your problems go away," says Steve Rodgers, an integration expert with Waterstone Consulting. "You may need several different packages on the floor, and you will need links to the ERP system."

Who is a candidate for a MES system? "Just about any manufacturer," says Rodgers. "The more technically oriented companies tend to get more bang for their buck, but the less technically oriented ones can benefit as well."

"You need an MES system if you need to manage resources, like a highly flexible work force or if your throughput is less than optimum," adds David Corey, vice president of sales and marketing for Auto-Soft. "If you don't understand how you're utilizing resources, or your line is shutting down because of missing materials, then you need an MES."

A typical MES user is a company doing more than $250 million a year in sales. MES solutions can be expensive, costing $300,000 or more for licensing plus implementation costs of three to five times the software fees depending on the number of components. However, Rodgers points out, entry level systems with basic functionality are now available for as little as $10,000.

Implementation times of nine months are typical. "The real work in getting an MES up and running is in understanding how it's going to be applied on the shop floor, keeping in mind that you're not going to run the same product through it very often," says Corey.

Companies that make an investment in MES can expect significant paybacks in all phases of manufacturing, from leaner inventories to reductions in cycle time, lead times, and materials waste. The average return on investment reported to the Manufacturing Execution Systems Association (MESA) is 14 months.

The MES industry is growing by approximately 30% a year reports MESA, a rate that is expected to continue into the near future.

The Benefits of MES

Manufacturers who implement an MES strategy can expect improvements across all phases of production, according to a 1997 report of MES users by the Manufacturing Execution Systems Association.

Improvements reported by users included:

Average reduction of manufacturing cycle times by 35%
Average reduction of data entry time by 36%
Average reduction of Work in Progress by 32%
Average reduction of paperwork between shifts by 67%
Average reduction of lead time by 22%
Average reduction in defects by 22%
Average reduction of lost paperwork/blueprints by 55%