Making Sense of the ROI for an MES

Many shop floors struggle to justify the cost of an MES, even as errors and inefficiencies that would be eliminated with a shop floor system drain profit and production from the company.

Here’s the problem for shop floor and operations managers looking to implement an MES or paperless manufacturing solution – many of the greatest benefits of a shop floor system offer soft savings, but management approves investment with an analysis of the hard savings from a capitol project.

Consider this – you put in a modern MES, and you’ll have real-time production data that provides the foundation for continuous improvement. Shop floor production and control improve, errors and quality escapes are eliminated, and planners benefit from revision control and a library of approved work plans.

Many Shop Floor Managers and Quality Engineers drool at the prospect of any ONE item in that list.

The ROI Conundrum for MES

But, a business case isn’t built on “better,” but on hard numbers. Procurement and the CFO don’t care about, and may not even understand, revision control. How can the shop floor measure the benefit of real-time data and continuous improvement? How do you articulate the savings from fewer errors, when you struggle to consistently capture any data at all from your shop floor processes? For the CFO, “more data” is nice, but it doesn’t translate to a line item in the finances.

Truth is, there is a disconnect between the accepted way we measure ROI, and the needs of production operations and modern manufacturing. Typically, ROI requires a measurement of hard savings and direct benefit from a capital investment. Modern manufacturing seeks continuous improvement, agility and flexibility from an MES – all characteristics that are difficult to measure with hard data, and aren’t easily quantified with numbers.

The Problem for Manufacturing

In a way, accepted accounting techniques don’t adequately represent the true value of an MES – at least, not without a leap in logic or an adjustment in the techniques used. This doesn’t mean there is a problem with MES or standard accounting practices; it just means you are using the wrong tool to take the measurement. A good example might be using a ruler to measure temperature. The ruler offers hard data, just not the right data to measure a summer day.

This disconnect, while unfortunate, is often compounded by the reluctance of some companies to quantify and value the perceived benefit of the shop floor system. Rather than finding a way to communicate the need for better production control, and connect a shop floor tool like paperless manufacturing to company goals, they decide it is easier to make what they have work and ignore a potential long-term solution.

In the end, this problem costs manufacturers revenue and production every year. Scrap and waste accumulate for no reason other than the operations team hasn’t found a way to collaborate and communicate with the financial team.  

Breaking Out of the Cycle

I’m not suggesting operations get a free pass when they seek money for a shop floor system. I suggest we need to adjust how we determine ROI when discussing MES. The shop floor needs to assign value to their investments early in the process, and collaborate early-on with internal partners as they select a software solution.

Building a business case and determining ROI shouldn’t cause a shop floor improvement project to crash and burn. Done right, it should help a company determine if the selected system is the right one, helping create an even better solution for the company.

Want to learn more, or see how you can better collaborate on an MES solution? Contact CIMx today for a free shop floor solution analysis. We’re always happy to help.