Special Report

The Dirty Little Secrets

of Manufacturing

Execution Systems

Introduction
Manufacturing execution systems (MES) and lean manufacturing have become popular topics in recent years. Today there are a variety of offerings on the marketand understanding how they differ is a challenge. While many of these applications can help you achieve efficiencies on the shop floor, they may also hinder your ability to streamline your overall supply chain. In fact, many systems lack the functionality and structure required to manage inventory effectively throughout your internal and external supply chain network. The rules have changed. Efficiency and cost reduction require you to move toward a demand-pull model, making what you need based on actual customer orders instead of inaccurate sales forecasts. Functional silos need to be broken down to allow information about inventory position and material flow to be communicated easily across the Considering an MES? supply network from suppliers, through manufacturing, and on to warehousing, There are many critical capabilities to take into account distribution and delivery. Anything less will be a barrier to achieving an when evaluating an MES. Make sure you understand efficient supply chain. exactly what types of processes you need to carry out on your shop floor when choosing a system.

What You Will Learn in This Report

Core functionality that should come with an MES: Youll discover five secrets of MES that you dont want to find out after youve purchased a system. Knowing these as you evaluate vendor offerings will enable you to find a partner whose MES will help you take manufacturing optimization to the next level by integrating with overall supply chain initiatives. Work-in-process tracking (labor, machines, materials) Inventory management Production reporting: finished parts/goods, scrap, material issues and returns, machine setup and downtime Online work orders, instructions, drawings and quality steps Lot and serial number genealogy Quality management: sampling tests and employee certifications Automation integration: PLC/SCADA/HMI/Historians/ SPC Bar code and RFID data collection Visibility: real-time and historical reporting And also consider an MES that: Seamlessly integrates with applications for yard management, supplier enablement, warehouse management and transportation management Has pre-built capabilities for common interface methods and integration to ERP systems such as: SAP, Oracle, PeopleSoft and others Allows users to adapt workflows and upgrade quickly/ cost-effectively without re-applying changes Noteworthy: Most MES do nothing to connect the shop floor with the broader supply chain. An MES should help you take manufacturing to the next level by coordinating those operations with the broader supply chain. This will enable you to achieve a smooth flow of inventory and related information among all supply chain participants

The Five Dirty Little Secrets of MES

1. Most MES lack lean material flow capabilities within the four walls.
Many manufacturers face the challenge of managing inventory and orders as they move into the plant, through various stages of manufacturing, and into the warehouse or distribution center. This black hole of information within the four walls has a negative impact on the supply chain as a whole. Simply put, this is an inefficient and error-prone way to approach both the production process and an overall lean manufacturing effort. Unfortunately, this lack of inventory management is commonplace in many companies and in most MES offerings. While the concept of lean is becoming ever-present, systems that incorporate lean practices in the area of material management are not the norm. Many MES offerings fail to provide the ability to coordinate the activities of material handlers to support manufacturing. They also hinder demand-pull production by not allowing shop floor systems or operators to request raw materials as needed in real time. Whats required is a material flow system that tracks inventory position at a detailed level in coordination with optimized work task management for material handlers and production personnel. In other words, a manufacturing logistics approach within the scope of manufacturing. This includes having better control and visibility over raw materials, work-in-process (WIP) inventory, and location managementspanning inbound shipments and work cell locations on the shop floor.
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Examples of manufacturing logistics include: Flagging an incoming shipment for immediate shop floor use Performing inspections with pre-determined criteria Directed and tracked moves of WIP from one shop floor work cell or operation to the next Directed replenishments (electronic kanban) of raw materials to a work cell Having lean capabilities and a successful demand-pull model necessitates that you readily know where things are and where they need to go. It also means your shop floor operators can perform pull functions versus only allowing push activities. Directing material handlers to complete these tasks properly with radio frequency (RF) devices enables optimized put-away into storage for later use, or to a work cell where its needed immediately. Product may be stored in the warehouse or line-side locations, or moved to optimized pointof-use storage locations, such as supermarkets. Typically there is a material handler managing the supermarket and ensuring parts reach the different areas of the shop floor. These elements work together to create optimal material flow through manufacturing. Raw and finished goods locations are easily tracked, as is information regarding where they need to be and when. An MES should also automatically direct material, or allow shop floor operators to request material as needed, versus allowing the material handler to take the easy way out by overstocking a work area. For example, the shop floor operator can use the system to send kanban signals to material handlers. Via an RF device, the system automatically alerts the material handler and can quickly direct him/her to a supermarket or raw material storage location. Once the activity is completed and the status is reported on the handheld, the operator receives notification of the status and the job is complete. By contrast, most MES do not offer this capability out of the box. This results in an inefficient process of material handlers driving around looking for inventory to determine what to pick and reorderthus cherry-picking the tasks they wish to perform. What you can do: Ask MES vendors exactly how their out-of-the-box systems manage and track inventory levels within the four walls. What types of functionality do they offerand whats missing from their application? Perform a detailed audit of your inventory management needs and the types of materials that pass through your operations. Consider using an RFP or consultant to carry out this portion of the evaluation.

2. The integration capabilities of many MES arent what you think.

Although some companies run MES as a standalone system, the general need is for MES to communicate a myriad of informationwork orders, material usage, labor utilization and tracking datato an ERP or other business systems. Reliable, real-time, two-way data exchange is essential to keep production operations on schedule and customer satisfaction high. Many MES vendors lack both common and certified interfaces to ERPs. Often vendors merely form marketing relationships with ERP vendors, versus creating long-term product partnerships that focus on true integration and interconnectivity. The result of this can be extended, expensive interfacing projects that may require unexpected downtime, additional costs and potentially data loss. Once completed, the interfaces may preclude real-time information exchange, resulting in batch-based work orders that slow process completion. An MES with common interfaces or certified ERP interfaces will help you speed the integration process. System configurability is also an important factor when it comes to completing necessary integration for other business systems or equipment running in your facility. A servicesoriented architecture (discussed in secret #4 of this report), is one way to establish communication among a variety of systems. In addition, current efforts in the ERP and MES industries are focused on creating a standard data library that specifically defines relevant terms, business processes and data flows. This set of information, referred to as ISA-95, includes a common vocabulary, data flow definitions and object models. ISA-95 will give both ERP and MES providers a common vernacular. For example, production scheduling would become the standard term used to represent the business process of scheduling for the plant, and schedule would become the standard term for the set of information communicated to the shop floor. If an MES claimed to offer production scheduling, it would mean the same thing to everyone. What you can do: While standardization will help, it is still a future event. Today you can discuss with your vendor their plans for migrating to this form of communication as standards become finalized. The key is to determine each vendors integration experience. Look for a proven track recordessential to help ensure your systems will interface properly without loss of data integrity.
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Remember that just because two companies (i.e., an MES and ERP provider) co-market, this doesnt mean their products are truly integrated. Ask each vendor which certified interfaces are in the base application and how configurable the system is regarding the development of new interfaces.

3. Most MES cannot support inventory management outside the four walls.
Managing your supply chain using a make-to-stock philosophy is the easy way out because its predictable. The problem, of course, is that the excess inventory costs that come with this model are passed to all players within the supply chain. As mentioned, visibility is paramount to optimized inventory management throughout the supply chain. Likewise, lean manufacturing that operates on a demand-pull model helps maintain low inventory levels while meeting order requirements in a timely manner. An MES that integrates seamlessly with applications that help you manage your yard and share data with your suppliers and subcontractors can be extremely instrumental in extending inventory control beyond the four walls. The trouble is that most MES vendors dont include this type of functionality in their offerings, just as most supply chain execution providers typically overlook manufacturing execution. Either way, the result is that manufacturing-related activities and the associated inventory data remain isolated from the rest of the supply chain. This ultimately prevents your operations from becoming as lean as they could be if all components were linked. To carry out the demand-pull model in a way that helps you meet your strategic goals, you need an MES that allows you to trigger replenishments from suppliers (or the warehouse) based on actual consumption signals. This could occur when inventory is consumed in manufacturing, reaches a certain stage in WIP, is required for other orders, etc. In this way, the MES requests re-order on an optimal, real-world demand signal versus historical information or guesses. For example, material in a work cell or supermarket might be based on orders to be completed over a one-week period, but the system doesnt know if something is consumed on day one or day seven. The right MES should be able to track inventory consumed on day one and send the supplier a signal to replenish immediately, versus on day seven when the order might not arrive in time for the next job. Alternately, the system could generate an e-mail or text message that would alert a procurement manager to place a new order. In either scenario, your suppliers could leverage either a Web portal or direct system integration to exchange this data. Another example of MES facilitating a demand-pull model can occur with kanban requests. A material handler should be able to submit a kanban request to the system, which then determines whether it can be filled in the warehouse or by an outside supplier. Once the shipment arrives in the yard, the MES is alerted. This can save valuable time if a high-priority order needs to be completed and the necessary parts just arrived on a truck. Likewise, yard management functionality extends the inventory visibility into trailers either in the yard or at the docks. In this way all available materials are within the scope of the system and can be considered available inventory. MES can also be instrumental in facilitating communication with sub-contracted operations. These systems can help you coordinate timelines and expected arrivals with outside parties as part of the manufacturing process. The increased visibility youll achieve into the status of materials required to complete WIP will strengthen your ability to complete orders on time. One final, notable benefit of integrating various aspects of the supply chain is inventory traceability. Traditional MES can lose track of unique identifiers such as serial numbers, genealogy and lot numbers as inventory moves to the next node in the supply chain. Additionally, most MES do not have the integration

to allow traceability from raw materials through shipment of finished goods. In the food and beverage industry, this is a requirement to comply with the Bioterrorism Act of 2002. For other industries that must trace products for warranty purposes, this is also an important aspect. What you can do: Talk with your MES vendor about extending visibility and execution to your yard and supplier network. Does your vendor have a full scope of solutions that allow you to manage inventory all the way from sourcing the product to the point where its consumed? Ask how this functionality can be integrated and whether all solutions share a common execution platform and core database. You will want to work with your suppliers to make sure they are willing to operate on this lean model. Make sure your MES vendor offers supplier-related solutions (often termed supplier enablement software) that can operate either through direct system integration or via Web portal to encompass a variety of technology capabilities and budgets.

4. The so-called service-oriented architectures of many MES will probably make you change your business practices to fit the software.
Service-oriented architectures (SOA) have become widespread in the MES and supply chain execution software industries today. Or so vendors would make you think. But what is an SOA and why is it important in manufacturing? The proliferation of technologies on the shop floorPLC, SCADA, quality controls, ERP, CAPA, etc.requires a standard technology approach to maintain data flow and overall productivity. SOA is a way to unify these technologies using Web services. From a technical standpoint, a service-oriented architecture enables solutions to be constructed from pieces of business functionality exposed as services. These services span business logic, devices and all manner of business technology. They may be run separately and/ or assembled in various ways to create business processes. If business needs dictate change, the services may be re-orchestrated to adapt to the change without involving costly edits to underlying codein essence, customizations. Many systems claiming to have SOA still house functionality with option switches in a failed attempt to keep up with ongoing business changes. However, these systems lack not only true SOA capabilities but also general flexibility. Every business has different requirements that no single software package can address with features, functions and switches. To make matters worse, the costs and timeframes required to make changes that address new demands can become cost prohibitive and cannot be made without involving the vendor or a consultant. Additionally, upgrades can exceed initial system expenditures because changes do not carry forward with the new version and must be reapplied. In this way, businesses succumb to changing their processes to meet the rigidities of the MES. A lot of MES do not have true SOAs. Although many vendors use Web services, you are limited in flexibility because the underlying business rules cannot be easily changed. By contrast, an MES with a true SOAone where users can change the underlying behavior of the serviceswill help your business become more agile and exchange information fluidly among a variety of enterprise systems. It will also provide a platform in conjunction with the operating system and a unique development environment that optimizes the behavior and assembly of the services rendering the solution. This means you can embrace the changes your business faces over the long term while keeping total cost of ownership low. SOA also allows users to make changes to workflow and complete upgrades without extensive consulting projects to bring system changes into the latest version. It is important to note, however, that for the SOA to deliver these benefits, the applications must embrace SOA intrinsically from the beginning of their development. The architecture should be developed using a configuration environment that differs from custom coding and features a deep level of granularity to facilitate change.

What you can do: Consider the cost advantage of true flexibility and evaluate the vendors business model accordingly. Ask vendors to demonstrate system changes so you can see how easy or difficult it truly is for users to configure the systems workflows. Ask about the vendors license-to-services ratio to see if youre buying a solid software product or simply services to tweak your system continually over the long term. Ask how upgrades are carried out and whether changes carry forward with the new version of the platform, or if code must be used to re-apply previous configuration. Make them prove it.

5. An MES vendors lack of customer experience and/or financial viability could hinder its ability to support your business over the long term.
The MES industry contains a variety of vendorsautomation equipment vendors, small software vendors, and ERP vendorsthat began offering MES for different reasons. Youll find a variety of experience levels with manufacturing customers and their challenges. Likewise, in an industry where consolidation is commonplace and vendors of all sizes disappear overnight, strategic direction, years in business, and financial viability play key roles in long-term partnership selections. The market is moving toward the need for a broader supply chain footprint that includes manufacturing execution; those whose offerings are more limited might find it difficult to stay in business over the long term. Large process equipment and manufacturing automation vendors, many of which arent necessarily software providers to begin with, have grown through acquisition. They often have a variety of software platforms, no vision of long-term fit, and lack a consistent technology approach because it is not their core competency. Software can represent a nice to have offering to complement the equipment they sell to customers. The problem is that while their equipment offerings are well-supported, software customers dont always receive the attention they require. These solutions are sold through distributors, so you are always one level removed from the system provider. While the distributor model works for automation equipment, it does not provide the same level of intimacy most organizations expect from their software providers. By contrast, smaller MES vendors that focus solely on software often lack the R&D dollars to support product development. While they are devoted to the MES software market, their budgets are such that new functionality takes longer than it should to be introduced. Furthermore, there is an overall viability concern with these vendors, as they are not always financially sound, or they are operating their businesses for the main purpose of an exit event (e.g., acquisition, recapitalization) for their venture capitalists. Another deficiency of these MES companies is that they dont offer a full suite of integrated supply chain solutions. Large and mid-tier ERP vendors also target MES to a small extent, having little to no experience in shop floor environments. Their MES applications are often general manufacturing modules that tie to financial transactions and cost accounting instead of focusing on manufacturing excellence, lean manufacturing, and the requisite functionality. They lack breadth and depth in terms of their scope and capabilities. Like the large equipment manufacturers, ERP providers are not focused on these applications and how they can be enhanced through R&D to streamline workflows. What you can do: Ask potential vendors about where MES fits into their overall offering. How much of their R&D budget is applied to their manufacturing software, and what are their plans for enhancements? Evaluate viability as much as possible by discussing financial performance (if public) and any plans for acquisition. How many customers do they have using systems on the shop floor? Support will also be a factor in selecting a vendor. Determine whether the support staff will be able to meet your needs from a knowledge and availability standpoint. How are concerns escalated?

Conclusion
Now that you know the five dirty little secrets of MES, youll be prepared to begin or continue your search for this technology. The more prepared you can be when meeting with vendors and discussing their offerings, the better off your companyand ultimately your customerswill be in the long run. Learn to separate marketing from true solution depth. Challenge your vendors with tough questions about how their systems will work in your environment and make them prove it. There are systems available today that can help you accomplish your goals without sacrificing the unique aspects of your business operations or compromising your budget.

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