ERP offers improvements but MES may take plant performance one step further.
The major IT investment for food and beverage companies for much of the last ten years has been enterprise resource planning (ERP), while manufacturing execution systems (MES) were often ignored. Many advantages have developed from ERP but some processors are now realizing that their ability to measure and manage the performance of their plants has failed to improve. "In the ongoing saga of ERP benefits realization, we find IT groups are increasingly mandated to use the ERP system wherever possible, often without regard for functional fit," says Colin Masson of AMR Research. "For manufacturing execution, this is a naïve, risky and costly proposition."
There are three areas where ERP can fail to live up to expectations. First, investments in order-to-cash and procure-to-pay business processes have not produced the benefits expected. Oftentimes, systems that support plant applications take a back seat to ERP. The lack of manufacturing, work-in-process inventory management and plant scheduling applications resulted in lost manufacturing visibility. The supply chain is dependent on the plant but the plant is mostly invisible to the supply chain. Manufacturing, inventory and plant scheduling need to work with the supply chain in real-time to yield the visibility required for a world-class supply chain. The supply chain needs visibility into what's available, what's coming and what's possible and MES has a role in providing this information.
Another potential issue with ERP is its reliance on standard costs and fixed lead times. Actual production performance is frequently not reflected in this model. There is also a lack of timely data synchronization between ERP and plant realities. Reconciliation in the ERP world takes place on daily, weekly or even monthly intervals while the plant functions in real time. The result is two disconnected versions of the truth: one in ERP used for planning and one in production, used for scheduling and production. To optimize the supply chain and customer service, one up-to-date version is mandatory. As the drive to cut costs and maintain margins continues, ERP's financial model is not a sufficient tool to understand the realities of production costs. Accurate costing requires detailed actuals collected at the transaction level on the floor, best managed by MES.
Finally, many enterprises were searching for a lower total cost of ownership (TCO) with their ERP investments. Corporations believed ERP could be applied to the breadth and depth of manufacturing business processes. While lower TCO and the prospect of maintaining a single, omnipotent application have been seductive selling points at the corporate and plant levels, reality can be unsettling. Corporate mandates cannot improve performance if the tools and technology are not up to the task. At the plant level, ERP is often heavily customized to support manufacturing. For many of these projects, IT attempts to use ERP to accomplish objectives for which it was not designed. ERP designed to meet corporate needs, often fails to meet operational needs. "Users are better served by establishing well-defined points of integration between ERP and production systems," says Masson.
MES, then, may be a necessary component to the success of ERP and interest in it is increasing. "MES applications and services grew to an estimated $1.06 billion in 2004 from $705 million in 2001," says Masson. "We expect to see increasing emphasis on the integration between MES and ERP." Initially, forecasters expect this will take shape as shared visibility but as standards like ISA-S95 evolve, transaction-level support for key data exchange will follow.
Does MES contribute to ERP success?
October 1, 2006