MES Investment and ROI

This article was first published in a series of blog posts at Critical Manufacturing's website.

Manufacturing Execution System (MES) applications were first introduced in the semiconductor industry during the 80s. The semiconductor industry is very capital intensive and its manufacturing processes are very complex.

Even though the hardware costs have decreased by several orders of magnitude since the first MES systems were implemented, the investment required for an MES system implementation can still be significant. Therefore, it’s necessary to build a strong business case to justify the project.

A detailed ROI analysis requires identifying all benefits gained and costs incurred due to the MES implementation.

THE BENEFITS

MES benefits can be grouped in four categories: Quality, Productivity, Regulatory compliance and Agility.
An improvement in performance indicators for each category will generate a benefit for which the value can be calculated with some degree of accuracy (click on each category to view details).
All benefits are cumulative (and hence recurring) once the MES is implemented.

QUALITY
This category includes benefits associated with yield and product performance improvement and increase in customer satisfaction:

PRODUCTION YIELD - increased through:

• Analysis of process and equipment data as well as benchmarking;
• Online process control (using SPC or other type of monitoring);
• Enforcement of business processes (e.g.: sampling, maintenance);
• Increased degree of automation;
• Reduction of manual errors;
• Early containment of process or equipment excursions (with full traceability to affected WIP).

$$ Value of the Yield improvement x Volume

PRODUCT PERFORMANCE - increased through:

• Analysis of process and equipment data as well as benchmarking.

$$ Value of Product Performance improvement x Volume

CUSTOMER PRODUCT RETURNS - reduced through:

• Online process control (using SPC or other type of monitoring);
• Enforcement of tests and inspections.

$$ Avoided Cost of each avoided Product Return + Value of customer satisfaction and retention

ON TIME DELIVERY - increased through:

• Scheduling and dispatching;
• Real time status and visibility.

$$ Value of customer satisfaction for delivering on time

PRODUCTIVITY
This category includes benefits associated with a higher output with the same resources (or the same output with less resources)

PRODUCTION VOLUME - increased through:

• Increased degree of automation;
• Scheduling and dispatching;
• Real time status and visibility;
• Proactive actions and alarms (e.g. Inventory levels, expiration dates, maintenance tasks);
• Industrial engineering (including Overall Equipment Effectiveness - OEE), data analysis, benchmarking

$$ Value of additional volume

WIP - reduced through:

• Increased degree of automation;
• Scheduling and dispatching;
• Real time status and visibility;
• Industrial engineering data analysis, benchmarking.

$$ Value of interests on saved working capital + Value of saved physical space and buffer /storage locations

CYCLE TIME - reduced through:

• Increased degree of automation;
• Scheduling and dispatching;
• Real time status and visibility;
• Industrial engineering data analysis, benchmarking.

$$ Value of shorter lead time for the customer + Value of earlier revenue realization

COST - reduced through:

• Paperless manufacturing;
• Increased degree of automation;
• Manufacturing cost data analysis, benchmarking.

$$ Cost savings

REGULATORY COMPLIANCE
This category includes benefits associated with mandatory compliance to country and/or industry regulations (such as FDA CFR Part 21 for medical devices in the USA)

COMPLIANCE - improved through:

• Business process and regulation enforcements;
• Electronic Tracking and Traceability;

$$ Cost of compliance without using MES

AGILITY
This category includes benefits associated with time and cost to introduce new or modified products and processes

TIME AND COST TO INTRODUCE NEW OR MODIFIED PRODUCTS AND PROCESSES - improved through:

• Flexible master data configuration;
• Flexible business rules definition and implementation;
• System enforcement and execution of business processes.

$$ Cost of introduction of new or modified products and processes without using MES + Value of additional time saved (in terms of time-to-market)

This list covers the BENEFIT side of the equation. Stay tuned for next Tuesday to learn about the COST side or read the full article today here.