Manufacturing execution systems in the manufacturing industry

In a three-part blog series, we examine methods, trends and challenges relating to manufacturing execution systems (MES). This blog post is the first in the series and shows how companies in the manufacturing industry can determine the ROI of an MES in a structured manner. The next post will focus on SAP DM in the life sciences industry, and the final post will provide an insight into cloud-native future MES for automotive production.

What is a manufacturing execution system and why is it so important in modern manufacturing?

The manufacturing industry is undergoing profound change. Production processes are becoming more complex and diverse, while at the same time needing to remain economical and resilient. A manufacturing execution system (MES) plays a key role in managing this complexity. It is the digital heart of production and forms the operational layer between the shop floor or machine level and the higher-level planning systems such as the ERP system. While the ERP system specifies what is produced, the MES ensures how and with what results production takes place.

The core tasks of an MES include (according to VDI guideline 5600):

• order management (release, prioritisation),
• detailed planning and personnel management,
• data acquisition via machine data acquisition (MDA) and production data acquisition (PDA),
• traceability,
• quality management,
• resource and material management, and
• performance analysis to determine performance indicators such as OEE in real time.

An MES can therefore offer a wide range of functions and is indispensable for modern manufacturing today. This is due to the following reasons, among others:

• Complexity of manufacturing: Variant diversity, batch size 1 scenarios and highly fluctuating demand require precise and flexible production planning and control that adapts to current conditions.
• Transparency: Without live data, problems such as machine downtime, quality defects or capacity bottlenecks cannot be identified in a timely and structured manner. Approaches such as CIP (continuous improvement process) cannot therefore be controlled in a targeted manner.
• Efficiency gains: OEE improvement, lower scrap rates, reduced throughput times – all this can only be achieved with digital support, which can significantly improve planning and control and reduce response times to unplanned events.
• Compliance: In industries such as medtech, pharmaceuticals and automotive, complete documentation is already mandatory in many areas. Maintaining this manually requires enormous manual effort and thus costs, and also carries a high potential for errors. Requirements for complete traceability are now also finding their way into the manufacturing industry.

In short: An MES enables stable, transparent and efficient production – and is becoming increasingly relevant in times of rising demands.

Why an MES project always starts with a potential analysis and not with a budget

When starting MES projects, whether it's an initial implementation, the expansion of functions in an existing system or the replacement of an existing system, many companies make the same mistake: they define a budget and then try to get ‘as much MES as possible’ for it. However, this approach usually leads to suboptimal decisions, missed potential or oversized systems.

The right way is actually the opposite: The budget for an MES is the result of a structured process, which I would like to present below:

Step 1: Create a baseline and analyse potential

Before requirements are formulated, technologies evaluated or systems selected, a thorough analysis of existing and relevant processes is necessary. These include both the processes directly on the shop floor and the higher-level processes for planning and controlling production.

Two results should be determined from the analysis:

• What is the current status of production and
• Where is there potential for improvement that could deliver a monetary contribution to the company?

The current status of production forms the so-called baseline against which the business case for an MES must be measured. The requirements for an MES that need to be implemented in order to realise the benefits are derived from the potential for improvement.

Specific questions that need to be answered as part of the analysis of the current situation include, for example:

• Where do losses occur (machine downtime, waiting times for employees)?
• Which bottlenecks limit production?
• Which processes are not currently under control (variation in parameters such as quality metrics or throughput times)?
• What data is missing in order to make better decisions?

The analysis of the relevant processes must be accompanied by strategic aspects, such as whether production orders should be processed according to the make-to-stock principle or the make-to-order principle in the future.

Step 2: Defining areas of action and deriving requirements

Concrete requirements are then derived from the potential analysis. The motto here is that each requirement must either be directly mappable to a positive value contribution for the company or indirectly, for example, if it is a technical requirement that must be met in order for requirements with a direct value contribution to be fulfilled. Requirements can be functional (automatic machine data collection (MDE), detailed planning and control, integrated tool management) and technical (edge architecture to increase reliability, standardised interfaces). In addition, non-functional and organisational requirements (role model, change management) must also be defined in order to increase acceptance within the company.

Step 3: Define use cases – the key to structuring

To make the requirements tangible, it has become established practice to bundle them into use cases, defining which process step they improve, what benefits they deliver, what data is required and which systems need to be integrated.

Typical use cases include, for example:

• Increasing OEE by reducing downtime and speeding up troubleshooting in a defined production area, supported by central dashboards that monitor the performance of production resources and trigger alarms when critical KPI values are reached.
• Improving planning and control to prevent material flow interruptions at machines and ensure that materials from different production areas arrive at the assembly line in sync.
• Reducing error rates and accelerating training times through visual work instructions on a digital worker guidance system with test plans, checklists and automated QA documentation.
• Reducing manual data entry and increasing the proportion of value-adding activities performed by employees.
• Faster responsiveness through real-time transparency and targeted conversion of unplanned downtime into CIP measures.
• Compliance with legal requirements without manual documentation, thereby ensuring operational capability.

Step 4: Business case – evaluate costs and benefits

Finally, the use cases must be evaluated. This is done by means of a business case that links costs and benefits. The costs of introducing and operating an MES (this also applies to the expansion of existing system functionalities or the replacement of legacy systems) include licence and implementation costs, integration costs, training and change management costs, and operating costs (IT/OT hardware, support). Not only the costs for external partners and the software must be taken into account, but also internal costs (i.e. opportunity costs) for employees who are needed for the introduction and operation of an MES.

On the benefits side, the specific cost savings and opportunities for increasing revenue defined in the use cases should be listed. These can include, for example, savings through reduced scrap, productivity gains through shorter downtimes, higher output per unit of time, and higher delivery capacity, which may avoid contractual penalties. Other aspects that can be taken into account include possible postponements of investments in capacity expansions, which will only become necessary later due to increased productivity.

The profitability of the MES project can ultimately be determined using suitable calculation methods, such as payback analysis, ROI calculation or the net present value method. This should be one of the key decision-making factors when deciding on MES projects.

It should be noted at this point that such a business case is very much driven by assumptions, particularly on the benefits side. It therefore makes sense to underpin the business case with a sensitivity analysis in order to evaluate the stability of the assumptions. This includes, for example, an analysis of how the payback period changes if the increase in productivity is lower than initially assumed in the business case. The same applies, of course, to the cost side, where an analysis could be made of the effects if the costs turn out to be a certain percentage higher than initially assumed.

Once the costs and benefits have been compiled in a business case, the appropriate budget can be derived on this basis.

The MES landscape in transition: away from monoliths, towards modular architectures

In the past, MES systems often consisted of monolithic applications that delivered large function packages ‘from a single source’ but were inflexible and difficult to integrate. These times are currently undergoing fundamental change.

Today, architectures are emerging that can be composed of different building blocks, such as specialised MES modules, workflow engines, low-code platforms, edge devices and IIoT platforms, or a manufacturing service bus (MSB). This modular world enables greater flexibility, upgrades without completely replacing systems, simplified integration of different manufacturing technologies, interoperable systems via standardised interfaces (OPC UA, REST APIs) and, above all, an evolutionary rather than revolutionary transformation within the company.

This means that today's MES can be leaner and more flexible because it no longer has to map every function itself. The previously defined use cases are implemented step by step through the gradual expansion of new functions and new systems.

How adesso supports you on the path to digital production

Specifically, our experts help you to

• take stock of shop floor processes and production IT and evaluate how well they are prepared for modern production,
• identify specific areas for improvement, requirements and use cases are relevant for you,
• structure and calculate the business case,
• select or develop the right systems for you,
• set up digital pilot projects for modern production and
• step by step transform successful pilots into a scalable, secure series solution.

If you are thinking about digitising your production, expanding the functionalities of your existing systems or re-evaluating your production IT, please feel free to contact us – regardless of whether you are still in the early stages or already have specific use cases in mind.