The Right Tool for Your Shop Floor Contrasting ERP and MES Solutions Abstract Today’s competitive manufacturing arena demands: (a) lower cost, (b) improved supplier‐network management, (c) more product variants, (d) shorter new product introductions, and (e) compliance to industry standards and regulations. For increased efficiency, visibility, and compliance many manufacturing companies are looking at commercial software solutions for their shop floors. But choosing the best manufacturing software for a facility is not an easy task. Enterprise Resource Planning (ERP) software is touted as improving efficiency in organizations by integrating and standardizing enterprise‐business processes onto a single platform. ERP‐software vendors have been adding manufacturing capabilities to their products, which can now handle manufacturing scenarios where products and routings are simple, the product mix is low, and engineering changes are seldom. But is ERP enough? Does further investment in an ERP system provide the strategic differentiators your organization needs to be more competitive? Should ERP be extended to the shop floor or would an investment in an integrated best‐in‐class Manufacturing Execution System (MES) prove more valuable to the organization for a competitive edge? To determine if MES is required, an organization must evaluate its business practices and requirements to support production, including quality inspection, traceability of used materials, product genealogy, verification of certifications, verification of equipment, and frequency of engineering changes to work in process. The requirements are then evaluated against the capabilities of different ERP and MES solutions to determine the best combination of tools for the organization. Many companies in complex discrete and regulated industries have determined that an MES solution integrated with ERP is the best platform for their manufacturing operations. This paper discusses the myths and realities surrounding the solutions needed at the shop floor, and why many leading manufacturers are improving performance with an MES. These are important factors to consider when evaluating the right tool for your shop floor. This paper is targeted toward Operations, Operations Support and Information Technology personnel who are evaluating software solutions to improve production‐management capabilities in complex discrete industries, including aerospace, defense, shipbuilding, nuclear energy, industrial electronics, industrial equipment and complex medical devices. © Copyright 2010
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ERP’s Role According to the survey results published in “Manufacturing ERP Software Selection Demystified” by Panorama Consulting Group, the top reasons identified for implementing ERP were the following: (1) to standardize global business practices, (2) to improve business performance, (3) to replace old ERP or legacy system, and (4) because other companies have ERP. Three out of the four reasons buyers gave for implementing a new ERP system had little to do with improving manufacturing operations or increasing manufacturing capabilities. Yet, ERP has been a top area of investment for IT in manufacturing companies. Why? Out of the project drivers listed above, only “improving business performance” is a valid business driver for an investment in new software tools. Before making buying decisions, organizations should clearly understand their business goals and requirements, including the requirements from manufacturing operations. It is also important to understand the value of these new software tools as enablers to new capabilities and improved business processes. ERP systems are integrated multi‐module applications designed to support business administration functions across the organization. ERP systems originated as an extension to Materials Requirements Planning (MRP) applications, integrating capacity planning, procurement, inventory control and financials. Today, ERP systems include human resources, customer‐relations management, and basic production and quality management functionality. The table below shows typical functions for an organization supported in ERP or MES systems. Many ERP systems have added basic engineering and production management functions, including bills of material, work order routers, material pick lists, operation status and labor tracking. Some ERP systems have also added capabilities for data collection, defect/scrap documentation and online display of “paper‐on‐glass” work instruction attachments. With ERP vendors adding more production functionality, more corporations are asking their IT departments to determine if the organization can get by with ERP functionality to support production, perhaps with a few custom additions. Functions in ERP Functions in MES Financials Sales, Order Fulfillment Program Management Capacity Planning Production Scheduling Procurement, Contracts Inventory, Receiving, Issue Asset Management Personnel Training and Certification Distribution, Shipping Process Plans, Routings Tooling Orders Work Instructions Equipment Maintenance Machine Numerical Control Tooling Calibration Parts and Tools Kitting Work Order Job Dispatch, Assignment Job Status, Data Collection, Inspection Quality Control, Statistical Process Control Typical Functions in ERP and MES Systems © Copyright 2010
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One of the important values available in ERP systems is the optimization of inventory levels. The organization might be able to improve inventory accuracy and optimize inventory levels. Demand‐driven scheduling versus ordering to forecast can lead to further reduction of waste in inventory. However, ERP systems must support modern practices like Kanban, which pulls in replenishment inventory straight from the supplier to the shop floor. Kanban is triggered by actual usage, instead of relying on inaccurate lead times and safety stock levels. Different production‐scheduling methods can also yield significantly different performance results. ERP vendors continue to evolve their scheduling options and functionality to optimize the results for different types of manufacturing scenarios. Computer hardware is constantly aging. Typically after three or five years, warranties expire and maintenance costs begin to rise. Once parts turn obsolete, it may become a necessity to replace legacy systems that run on these old platforms. The expense of maintaining legacy systems can be a real driver for implementing a new ERP system, even if other tangible benefits are not obvious. Instead of replacing the old ERP system and process with a similar one, this can become an opportunity to re‐evaluate and improve business processes and systems. Are the benefits of ERP enough to remain competitive and meet the organization’s goals? The savings from inventory reductions can be significant, but the productivity improvements enabled by a new best‐
in‐class manufacturing system can lead to much higher returns by improving first‐time quality and eliminating wasted cycle time and rework. Some manufacturers have also realized that the huge investments made in ERP over the last decade have not yielded the required visibility and tools to manage the following demands on current manufacturing operations:  Higher product quality and lower cost  Improved supplier‐network management  Quicker product introduction and change management  Assured compliance to industry standards and regulations ERP Myths In the article “ERP Myths Boost MES Realities,” AMR Research points out that IT groups are often mandated to invest in ERP and to use ERP functions wherever possible, including the shop floor, often without regard to functional fit. For manufacturing operations, this can be a risky and costly proposition. Its research also found that users are usually better served by well‐defined points of integration between ERP and a production system like a Manufacturing Execution System (MES). The following myths expand on the ones highlighted in the article. Myth #1: A single solution provides lower Total Cost of Ownership (TCO) The prospect of managing an organization with a single omnipotent application suite can be seductive, but in many cases, it doesn’t provide the depth of functionality needed to support the requirements of production. Instead, IT departments have been developing extensive customizations on top of ERP systems to compensate. This custom development is often done with specialized expensive ERP resources and creates an ongoing maintenance need for resources. It is common for ERP © Copyright 2010
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implementations to require five‐seven times the cost of services, on top of the cost of the software licenses, and end up costing much more to support and maintain than initially expected. ERP vendors are enabling easier integration to help reduce some of these implementation costs. For example, both SAP and Oracle have embraced the integration of third‐party manufacturing applications through web services, XML integration standards and partner programs. iBASEt has also invested in creating off‐the‐shelf integration interfaces for its Solumina MES to support common integration scenarios to ERP. The integration services have been developed based on OAGIS XML industry standards for discrete manufacturing. These interfaces have also resulted in faster Solumina MES implementations with 1:1 or better ratio of services to software cost. When asking for third party recommendations, be mindful that system integrators tend to stick to what has worked before and might recommend custom options, since they are in the business of writing interfaces and developing custom functionality. It is important that an organization’s IT team reviews the MES’ integration services package before deciding on an integration strategy in order to leverage the latest XML and standards‐based off‐the‐shelf integration options. Myth #2: You get better visibility and a “single version of truth” from a centralized ERP system Will ERP functionality be broad enough to eliminate all the logs, databases and spreadsheets floating around the shop floor? ERP systems usually do not provide enough functionality to turn the shop floor completely paperless. As long as there are multiple paper logs and spreadsheets on the shop floor, there is a chance that these different data sources will become different “realities” for different departments. Many ERP vendors have acquired third‐party modules to expand their production functionality. There is often very little difference between the integration of internal ERP modules and the integration achieved with an MES vendor solution. The best way to ensure a “single truth” is to have a good integration strategy between ERP and MES that makes the shop floor truly paperless, eliminating all the paper forms, logs, databases and spreadsheets that are often used on the shop for production control and support activities. Organizations can still support corporate decision making tools with consistent visibility into global operations through well‐
integrated ERP and MES applications. Myth #3: Standardizing on the same system across the corporation increases productivity Many leading organizations have realized that their ERP system can service some plants and operations just fine, but other plants with different manufacturing models are better serviced with a specialized integrated MES system. It is becoming more common for organizations with diverse products and manufacturing models to standardize on two or even three solution sets, instead of just one. The cost of supporting an additional MES system can be easily justified in these situations. © Copyright 2010
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Myth #4: A single vendor will provide better ongoing support Some stakeholders in organizations might believe that dealing with a single vendor or a single system integrator provides better results and technical support. But, the reality is that organizations serviced by smaller MES vendors that specialize in specific industries receive better service and quicker response when questions or issues arise. At the last Solumina User Conference, many users pointed out that the high level of service provided by iBASEt is a big differentiator between iBASEt and its competitors, especially when compared to big ERP vendors. Users also noted that iBASEt is quicker to incorporate best practices from the user community into the product. Myth #5: The functionality in ERP is good enough for the discrete production shop floor According to AMR Research’s 2006 survey, the following issues arose among companies using and evaluating ERP for their plants:  ERP has a complex user interface for manufacturing staff  ERP doesn’t address all of our manufacturing requirements and can’t model our complex manufacturing processes  ERP takes too long and costs too much to customize and implement for manufacturing  ERP configuration requires specialized and expensive ERP software skills  ERP screens require expensive configuration for prompting and validating manufacturing data collection These survey results on ERP systems are still valid today. To confirm these impressions, the organization should research the amount of screens and commands required in the ERP system to perform a few common production support transactions, like a work order split or a change to multiple work order routings and work instructions to incorporate a critical engineering change. Then, compare the efforts required to perform the same functions in an MES designed for the specific industry. Also, it would be beneficial to compare the times required for a mechanic on the shop floor to perform inspection data collection and signatures in both systems. These simple data points will give a quick idea of the differences in ease of use and off‐the‐shelf options in each application, and how they each support specific requirements in specific industries and production environments. Shop Floor Reality Manufacturers are realizing the need to integrate real‐time manufacturing data into their corporate information view. Many production environments have been historically serviced by paper‐based processes and homegrown systems that have not kept up with newer requirements for increased speed, agility and traceability. Manufacturers realize that having disparate, disjointed applications supporting the shop floor increases the difficulty to integrate the required plant data into a complete and accurate top‐level view of operations. Higher customer expectations, diverse product lines and complex supply chains are driving plants away from running the facilities with spreadsheets, paper and knowledge held by a few key experienced employees that might be nearing retirement. © Copyright 2010
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Look around the shop and see how many forms are used on a daily basis to (a) track engineering changes, (b) track installation of serialized parts or lot‐tracked material, (c) document nonconformance, (d) track component swapping, and (e) document rework and repairs. Then, take a look at how many systems or spreadsheets are used to log these forms and track other support functions for the shop floor, like tooling manufacturing and calibration status. All of these tasks can be managed by a single operations management solution designed for a specific industry. Can you get by with ERP software for your shop floor? This question was addressed by Alison Smith, industry analyst for AMR Research, in the article “Differentiating ERP and MES.” In this brief article, Smith points out that complex manufacturing would find a specialized application, like MES, more suited to the job at the shop floor. To answer the question, you have to look at all process requirements, including engineering changes, parts and material traceability, quality issues on each assembly, and resolution documentation. ERP solutions are not very deep in these areas of manufacturing, do not have adequate data structures to track detailed data, or force users to navigate through too many screens to accomplish routine tasks. Manufacturers of simple products that do not change the product mix very often should look to their ERP solutions first. On the other hand, manufacturers with more complex requirements should look at off‐the‐shelf operations management or MES solutions instead of spending millions to customize a solution around an ERP system. An MES is an information system that drives effective execution of manufacturing operations. Using current and accurate data, MES triggers, guides, verifies and reports on plant activities in real time – from order release into manufacturing to delivery into finished goods inventory. MES systems have been evolving and broadening functionality to manage internal quality and the supply chain. The new term Manufacturing Operations Management (MOM) has been used in some products and publications to recognize the new expanded functionality scope in MES. Commercial MES software vendors are constantly updating their products to keep up with the latest computer technology and platforms, while retaining their systems’ compatibility with the latest ERP upgrades. iBASEt’s product roadmap for Solumina MES incorporates best practices learned from a range of user companies. A large, diverse user community is a great bonus when using a commercial‐
manufacturing product. The user community becomes an additional source for process improvement ideas What are some specific production requirements addressed by commercial MES solutions? User Interface. To improve productivity instead of creating new constraints, the production system must provide an intuitive user interface that guides mechanics through complex operations and step sequences, work instructions and data‐collection requirements. The user interface must also leverage fast‐input devices, including touch‐screens and barcode readers, and must respond to common transactions within one‐two seconds to avoid impacting a mechanic’s job performance. Real‐time Visibility. To make good decisions, managers must be able to answer questions, like, “How am I doing?” and “What can I make today?” MES provides visibility and answers with timely information about job status, resource utilization, performance against planned numbers and current production constraints. © Copyright 2010
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Integrated Quality Control. The Solumina MES software provides visibility into areas that need improvements, but more importantly, it provides the processes to implement and sustain continuous process improvements. Built‐in quality control procedures include in‐process inspection and verification steps, Statistical Process Control (SPC) procedures that automatically alert mechanics to out‐of‐control conditions, and integrated handling for discrepancies found during production, including defect containment and corrective actions to eliminate recurrence. Integrated quality control processes ensure that containment alerts and holds are automatically reflected on similar work orders and supplier inspection orders. Rework instructions and deviations are easily incorporated and approved to override the normal processes. All deviation approvals become part of each unit history. Change Management for Work In Process. Bringing a complex product like a jet engine or satellite to market involves managing and juggling a continuous stream of engineering changes. iBASEt views the integration of engineering and production systems as a component of a broader collaboration effort required to accelerate the launch of new products and major product upgrades. The integration of these systems can create a seamless link among product development, manufacturing planning and manufacturing execution functions to close the loop on engineering changes and ensure that as‐built configurations match as‐
designed configurations. Solumina provides enhanced change‐management functionality to hold units in‐process, supersede work instructions and propagate changes across multiple work orders with full traceability back to Engineering Change Orders. Regulatory Compliance. Many of the functions found in Solumina MES, including change management, work instructions, quality control and corrective actions, are part of the compliance requirements for Quality Management Systems (QMS), which are found in industry standards and regulations like IS09001 and AS9100. Other functionality required for regulatory compliance includes:  Detailed component parts and material usage genealogy, where‐used traceability and lot splits  Production process audit trails  Operator training verification  Equipment calibration verification MES is needed when organizations need to document production history down to the details in each product unit versus tracking at the batch level. MES is needed when there is a need to document exactly who, what, when, how and why―like who completed the job, what equipment was used, which parts were replaced, and who approved the changes. Global Deployment. In a global deployment, local MES can provide better performance and higher level fault tolerance for operations execution than a central ERP system. Some ERP systems also require © Copyright 2010
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periodic maintenance downtime, but manufacturing operations must continue to run 24x7. ERP systems were not necessarily designed to support 24x7 real‐time operations execution. ERP vendors, including SAP and Oracle, have acknowledged that industry specific manufacturing scenarios call for MES functionality in addition to ERP. In 2008, SAP acquired an MES application from the electronics industry, Visiprise, and rebranded it as SAP ME. Oracle released Oracle MES in 2007 to complement its Oracle Manufacturing suite. These MES solutions from ERP vendors will handle certain types of manufacturing processes and facilities. But, MES remains a very specialized function for each industry, and many companies have realized that their manufacturing operations are best serviced with best‐in‐class manufacturing systems. “The industry has gotten into this situation with the lack of integration in part because the parties involved tacitly agreed to distribute or to divide the world into disjoint sets of vendors — this is the Automation vendor, this is the MES vendor, and this is the ERP vendor. I think viewing things with this old model has brought many things to a halt, due to the question of where is the line between MES and ERP. The answer is that there is no one line. We have a lot of customers that use SAP functionality to tie directly into the low‐level shop floor systems. We have customers that use it, customers that are happy. We also have customers that use it, and at the same time—at another facility, at another operation—
they use our systems in conjunction with an MES system.” Stefan Schaffer, Senior VP, Application Solutions, BSG, Manufacturing Industries, SAP AG. MES Benefits A 2010 Aberdeen report on interoperability in manufacturing found that investments in integration of MES/MOM systems to engineering systems and ERP were on the rise. Why? Because manufacturers are realizing the benefits of implementing and integrating an MES. MES is becoming a competitive necessity in some industries. Are investments in MES paying off? Yes. A 2010 survey by the Aberdeen Group found that among companies benefiting from Lean Manufacturing efforts, the top performing companies had higher investments in production systems for the following functions: (a) scheduling and dispatch, (b) engineering change orders, (c) WIP inventory optimization, (d) dashboards and metrics, (e) manufacturing process planning and (f) compliance management. Manufacturers using MES An Industry Directions’ report, titled “The MES Performance software realized 70% greater Advantage,” studied Industry Week’s list of top 100 productivity improvement, manufacturers for four years and found that among these 34% greater cost reduction, top performing manufacturers, the ones using MES software realized 70% greater productivity improvement, 37% greater cycle time 34% greater cost reduction, 37% greater cycle time reduction, and 15% greater reduction, and 15% greater improvements in yield. These improvements in yield. companies were all achieving benefits from Lean Manufacturing and Six‐Sigma initiatives, yet the ones with © Copyright 2010
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the greatest performance leaps were using information technology to complement these strategies. These results explain why investments in MES software are on the top of many manufacturers’ wish list. Conclusion Manufacturing companies require speed, flexibility and reliability, and must improve in these areas while reducing cost to stay competitive. An investment in MES and integration to ERP provides the platform required to achieve these business goals and is fundamental to gaining the competitive edge for future programs. The best way to leverage an ERP investment in production is not necessarily trying to use the ERP at the plant floor but instead integrating an MES system optimized for a specific industry. If inventory and scheduling problems are a top priority, then an investment in ERP might be appropriate. If productivity, quality, change management, agility and regulatory compliance are higher priorities, then consider adding an integrated MES to an organization’s enterprise system landscape. Industry reports and surveys show that many industry leaders are reaping the benefits of implementing a specialized MES, and are achieving best‐in‐class productivity improvement, cost reduction, cycle time reduction and first‐time quality. Operations‐management software has long been a secret weapon for large top‐tier manufacturers to tame the complexities of manufacturing highly engineered products with deep levels of assemblies. Specialized plant‐management software is no longer a secret and no longer a luxury item. It is becoming an essential ingredient in the recipe for success for many second and third‐tier suppliers in complex and regulated industries, including aerospace, defense, nuclear products, industrial equipment and medical devices. In complex, discrete manufacturing industries, iBASEt’s Solumina MES has a proven record of delivering the functionality required and easily integrating to popular ERP systems to provide the best performance and production data accuracy. Solumina includes functionality required by production supervisors, mechanics, inspectors, manufacturing engineers, quality engineers and production control personnel. The software replaces the old paper‐based processes with new streamlined online processes that eliminate many wasteful steps, and enable more agile and responsive support functions for the production floor. References  “Manufacturing ERP Software Selection Demystified: How to Evaluate ERP Platforms”, Panorama Consulting Group, 2009  “ERP Myths Boost MES Realities”, Managing Automation, AMR Research, Colin Mason, Alison Smith, Simon Jacobson, June 2005  “The MES Performance Advantage – Best of the Best Plants Use MES”, Industry Directions, Julie
Fraser, 2004  “Lean Operations: Software Strategies for Manufacturing’s New Normal”, Aberdeen Group, June 2010 © Copyright 2010
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 “Differentiating ERP and MES”, Managing Automation, AMR Research, Alison Smith,
August 2005  “SAP Discovers the Plant Floor”, ARC Advisory Group, Greg Gorbach, March 2005 Author Conrad Leiva started his career in Aerospace and Defense at McDonnell Douglas as a graduate of M.S. Industrial Engineering from Georgia Tech in 1986. Over the last fifteen years at iBASEt, Conrad has had the opportunity to work on optimizing the information flow among engineering, quality and production disciplines with multiple Aerospace and Defense companies, including Boeing, General Dynamics, Pratt & Whitney, Sikorsky, Gulfstream, BWX Technologies and Portsmouth Naval Shipyard. iBASEt is a leading provider of software solutions to complex, highly regulated industries, including Aerospace, Defense, Nuclear, Industrial Equipment, Electronics, Medical Devices and Shipbuilding. iBASEt’s Solumina® Operations Process Management (OPM) software suite streamlines and integrates Manufacturing Execution System (MES/MOM), Maintenance, Repair and Overhaul (MRO), and Quality Management System (QMS) software for operations and supplier management. Solumina is implemented by industry leaders, including BAE Systems, General Dynamics, Lockheed Martin, NASA, Northrop Grumman, United Technologies and United Space Alliance. For more white papers and resources on manufacturing systems, integration of engineering and operations systems, and regulatory compliance, visit the Library section at solumina.com. © Copyright 2010
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