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There is No Execution without Integration
Manufacturing Execution is also known as :
Manufacturing Execution,
Manufacturing Execution Systems MES,
Business MES Integration ,
MES Performance,
Manufacturing Intelligence Integration Performance,
MI Performance,
MES ERP Integration ,
ERP Execution Integration,
Execution Integration ,
Execution System Manufacturing,
Execution Systems ERP Integration ,
Manufacturing Execution Systems ERP Integration,
MI Manufacturing Intelligence Execution ,
Manufacturing Intelligence MI,
Improve Manufacturing Execution Performance,
Manufacturing Execution Integration,
MES Integration Systems,
ERP Manufacturing Execution,
MI Manufacturing Execution.
Executive Summary
Many manufacturers today are getting caught on the wrong side of a technology
adoption wave that is quickly gaining momentum. Of the more than 200 surveyed
manufacturers 54% are planning on adopting MI (Manufacturing Intelligence)
within the next 24 months. Additionally, 56% of manufacturers having
already implemented MES (Manufacturing Execution Systems) did so within the past
two years. Moving forward, it is important that manufacturers embrace technology in
order to either solidify or gain competitive advantages. However, in the many fast paced,
low-margin, environments that make up the manufacturing industry it is crucial that
manufacturers do not adopt technology for technology's sake. This benchmark is a
roadmap for reducing overall manufacturing costs through the utilization of manufacturing
technologies.
Best in Class Performance
Aberdeen used five key performance criteria to distinguish Best in Class; these manufacturers
averaged the following performance across the five KPIs:
- 98% On Time Delivery with a 9% improvement year over year.
- 88% Throughput with a 10% Improvement year over year.
- 3 Stock Outs averaged per line per week with a 52% Improvement year over year.
- 2.9% Direct Material Usage Variance with a 50% Improvement year over year.
- 61% Work In Process Reduction year over year.
Competitive Maturity Assessment
Survey results show that Best in Class performers shared several common characteristics
with respect to Manufacturing Execution Technology strategies:
- Best in Class manufacturers are 52% more likely to utilize MES, three times
more likely to utilize MI, and 61% more likely to integrate MES with ERP.
- 77% of Best in Class manufacturers utilize automated data collection for production,
inventory, and quality data and are 67% more likely than other manufacturers
to provide this data to the necessary job roles for effective decision making.
Required Actions
In addition to the specific recommendations in Chapter 3, to achieve Best in Class performance
manufacturers must:
- Focus on efficiency and cost reduction by adopting MES or MI and integrating
with ERP.
- Utilize production scheduling optimization, quality assurance and control, and
work in process resource management functionality.
- Measure On Time Delivery, Throughput, and Manufacturing Cycle Time; ideally
in real time and at a minimum daily.
- Adopt automated data collection and dashboard visualization for production, inventory,
and quality data.
Table of Contents
- Executive Summary
- Best in Class Performance
- Competitive Maturity Assessment
- Required Actions
- Chapter One: Benchmarking the Best in Class
- Maturity Class Framework
- Best in Class PACE Model
- Aberdeen Insights ' Part 1
- Chapter Two: Benchmarking Requirements for Success
- Competitive Maturity Assessment
- Aberdeen Insights ' Part 2
- Chapter Three: Required Actions.
- Laggard Steps to Success
- Industry Norm Steps to Success
- Best in Class Next Steps
- Appendix A: Research Methodology
- Appendix B: Related Aberdeen Research
Chapter One:
Benchmarking the Best in Class
Key Takeaways
- Over the past year there has been a major shift in the number one driving force behind
manufacturing execution initiatives from closing the gap between ERP and plant floor
(52%), to improving efficiency and reducing overall manufacturing costs (79%)
- Best in Class manufacturers handily outperform the competition, especially in On Time
Delivery where the Best in Class average 98% compared to 87% for all other manufacturers.
For the past 2 decades Enterprise
Resource Planning (ERP) has
been releasing production requirements
to the factory on a weekly or
daily basis. The resulting work orders
become the basis for managing materials,
labor, and production. Recent Aberdeen
research shows that all too often
work in process disappears into a black
hole on the plant floor leaving the enterprise
lacking the necessary information
to make dynamic decisions. To fill the
gap between ERP and the plant floor
manufacturers look towards Manufacturing
Execution Systems (MES) to
provide the necessary functionality to
fill this gap and improve the efficiency
of manufacturing operations.
However, manufacturers today can choose from many different technology categories,
not only MES, for the feature functionalities that are traditionally associated with MES
solutions. In fact, SCADA (Supervisory Control and Data Acquisition), HMI (Human
Machine Interface), MI (Manufacturing Intelligence), and ERP (Enterprise Resource
Planning) that is integrated with the plant floor all deliver some portion of this functionality
to varying degrees. Having so many choices in regards to both feature functionally
and technology delivery methods is leaving many
manufacturers confused. These manufacturers all
have questions as to what functionality is truly needed
to improve the efficiencies of manufacturing operations
and what are the best ways to deliver that which
is truly needed.
To answer these questions Aberdeen has surveyed
over 200 hundred manufacturers; these manufacturers
will be segmented into Best in Class, Industry Average
and Industry Laggard manufacturers based upon
operational performance. These Best in Class manu
facturers will then be benchmarked based
upon several defining characteristics, including
process, organizational structure, knowledge
management, technology usage, and
performance management.
Maturity Class Framework
The value of manufacturing technologies is
tied to the results attributed to its utilization.
Aberdeen used five key performance criteria
to distinguish Best in Class manufacturers
from Industry Average and Laggard manufacturers.
These key performance indicators
(KPI) are on time delivery, throughput, stock
outs, direct material usage variance, the improvements
in each over the past year and reductions in work in process inventory over
the past year. This set of KPIs was chosen because each measures performance in a distinct
aspect of the manufacturing process and when all five are considered in tandem the
overall success of the operation becomes apparent. To better understand the overall performance
of manufacturers Aberdeen has defined and calculated a weighted average
across all five KPIs to establish which manufacturers are truly performing at the Best in
Class level. Table 1 summarizes the mean performance that each segment of the market
enjoys for each of the KPIs.
Best in Class PACE Model
The manufacturing technology functionality
utilized by Best in Class
manufacturers clearly contributes to
the performance Best in Class manufacturers
enjoy. However, for organizations
attempting to make the transition
from Industry Average or Laggard
performance levels there is much more
to the story than simply adopting technology
and a specific functionality set.
Aberdeen's PACE framework gives
these manufacturers a structured way
to understand exactly how Best in
Class manufacturers have coordinated
the entire enterprise to best capitalize
on the benefits of technology usage.
Through the PACE framework Aberdeen uncovers the specific pressures driving Best in
Class manufacturing execution initiatives. The strategic actions Best in Class manufacturers
are taking in response to the market pressures. The business capabilities Best in
Class manufacturers have in place in order to make the strategic actions a reality and the
technology enablers Best in Class manufacturers utilize to automate, standardize, and
improve the necessary business capabilities.
Table 2: Best in Class PACE Framework
| Pressures |
Actions |
Capabilities |
Enablers |
- Improve efficiency
and reduce
the costs
of manufacturing
operations.
|
- Increase the visibility and control of manufacturing execution.
- Coordinate manufacturing execution processes across the enterprise.
|
- Production scheduling,
resource optimization and
quality assurance processes
are standardized.
- Manufacturing execution
technology is standardized
at the corporate level.
- KPI data collection is
automated and made
available to the proper decision
makers.
- Manufacturing execution
technology is integrated
with ERP.
- KPIs are visible and utilized
in real time.
|
- Production schedule optimization
- Quality assurance and
control
- Work in process resource
management
- Work order dispatch
- Production process management
- Dashboard KPI visibility
- Automated document management
- Fixed asset resource management
- Work force performance
optimization
|
Today the number one pressure driving Best in Class manufacturers is the desire to improve
operational efficiencies and reduce overall manufacturing costs, with 79% of Best
in Class manufacturers indicating this as a driving pressure. This may be surprising to
many manufacturers, especially when those pressures not filling the top spot are considered,
namely, filling the gaps between ERP and the plant floor, which was only a driving
pressure for 42% of Best in Class manufacturers. Two major conclusions can be drawn
from this relationship; first Best in Class manufacturers are less likely than other manufacturers
to be experiencing a gap between ERP functionality and plant floor operations
and second Best in Class manufacturers are less likely to adopt technology without an
operational objective to achieve
To summarize, Best in Class manufacturers are not going to adopt technology simply
because there is a gap in functionality or visibility; technology will be adopted to improve
operational performance and ultimately reduce costs. Subsequently, Best in Class
manufactures will improve visibility and control not as an objective in and of itself, but
rather as a strategic action along the journey. This differentiation is a common one
among Best in Class organizations and this theme is seen throughout the entire PACE
framework, which is summarized in Table 1. In the next chapter, we will see what the top
performers are doing to achieve these gains.
Aberdeen Insights ' Part 1
MES has been around for over ten years, but when Aberdeen surveyed over 200 manufacturers a
trend in the industry became readily apparent. MES is just now beginning to truly gain traction
among manufacturers, with over half of all implementations being less than 2 years old. Manufacturers
must understand this trend and embrace this robust technology category while it can still
be utilized as a competitive advantage.
Chapter Two:
Benchmarking Requirements for Success
Key Takeaways
- Manufacturers having standardized labor management, production scheduling, and quality
assurance business processes are 47% more likely to be Best in Class manufacturers.
- 77% of Best in Class manufacturers utilize automated data collection for production, inventory,
and quality data and are 67% more likely than other manufacturers to provide
this data to the necessary job roles for effective decision making.
A clear relationship exists between the pressures Best in Class manufacturers are
facing to reduce operating costs and the utilization of manufacturing technologies.
As stated previously, manufacturers are setting strategies and taking actions
primarily around improving visibility into operations and coordinating decision
making across the enterprise. However, these
strategic actions can only be made a reality when the
necessary business capabilities are in place. In order
to help manufacturers put these business capabilities
in a structured context Aberdeen created a competitive
maturity assessment to characterize the necessary
business capabilities.
Competitive Maturity Assessment
To better understand the business capabilities that precede
Best in Class performance all manufacturers are
examined based upon five key organizational attributes:
process, organization, knowledge management,
technology adoption, and performance management.
In each of these categories Best in Class manufacturers
are compared to Industry Average and Industry
Laggard manufacturers and Table 3 summarizes how
Best in Class manufacturers have differentiated from
other manufacturers.
Process
The first way Best in Class manufacturers differentiate from other manufacturers is in the
decision to standardize the processes surrounding labor management, production scheduling,
resource optimization, and quality assurance. This is a curious finding because
manufacturers do not view the costs of non-standardized business processes as a key
pressure driving manufacturing execution initiatives (Figure 1). However, those manufacturers
that have standardized these processes are 47% more likely to be Best in Class
manufacturers.
This finding just further solidifies the fact that manufacturers must have a firm understanding
of the difference between why technology should be implemented and how
technology should be implemented. Manufacturers should not view the goal of Manufacturing
Execution Technology as the standardization of business processes. The real goal
is to reduce costs. However a key business capability for improving performance and
lowering costs is standardized business processes.
Organizational Structure
Best in Class manufacturers also differentiate based upon the corporate strategy regarding
implementations and upgrades of manufacturing technologies, being more likely to
manage these aspects at the corporate level. This finding is closely mapped to an additional
finding regarding the scope of implementation for manufacturing technologies:
38% of Best in Class manufacturers have manufacturing technologies standardized at the
enterprise or business unit level compared to 33% and 32% of Industry Average and
Laggard manufacturers respectively.
In both cases these are still not majority findings, but they all clearly precede and are
bellwethers for Best in Class performance. The key take away here: many manufacturers
are still not rolling out localized plant level benefits from manufacturing technologies to
the entire enterprise. Subsequently, such a strategy can still be utilized as a competitive
advantage for many manufacturers.
Knowledge/Data Management
When benchmarking knowledge and data management
the first major connection between strategic
actions and business capabilities becomes apparent.
A full 77% of Best in Class manufacturers
utilize automated data collection for production,
inventory, and quality data. Furthermore, these
Best in Class manufacturers also provide this data
to the necessary job roles for effective decision
making and are 43% more likely to be doing so
than Industry Average firms and are twice more
likely to be doing so than Industry Laggard firms.
Unlike the above minority findings regarding the
corporate strategies surrounding the implementation
and upgrade of manufacturing technologies
the knowledge and data management findings are a
majority finding among Best in Class manufacturers.
Being a majority finding implies that Best in Class manufacturers have already
achieved a competitive advantage by automating data collection and providing this data
to the proper decision makers. Subsequently, Industry Average and Laggard manufacturers
can not obtain a competitive advantage by doing so, but rather must do so just to
keep pace with the Best in Class.
Technology Usage
Best in Class manufacturers differentiate from Industry Average and Laggard firms in the
utilization of every single technology category, including HMI, SCADA, MES, MI, ERP,
and the integration of ERP with the plant floor. This differentiation is the strongest for
MES and MI utilization and ERP integration. Best in Class manufacturers are 52% more
likely to utilize MES, 61% more likely to integrate manufacturing technologies with
ERP, and three times more likely to utilize MI than other manufacturers. Again we see
that the adoption rate of manufacturing technologies is relatively low and clearly short of
a common practice among manufacturers. Therefore, Industry Average and Laggard
firms that have not yet implemented and integrated these technologies can do so to gain a
competitive advantage. Additionally, those manufacturers that have already done so can
rest assured that the proper steps are being taken to achieve Best in Class performance
and the focus can be turned to the other organizational differentiators of Best in Class
manufacturers.
Performance Management
The final organizational characteristic
where Best in Class manufacturers differ
from their Industry Average and Laggard
counterparts s in the real time
measurement of KPIs. Currently, Best
in Class manufacturers are the only segment
of the market taking advantage of
these capabilities. In fact, Best in Class
manufacturers are over four times more
likely to be currently measuring the top
three KPIs in real time than other manufactures.
Conversely, of the Best in Class manufacturers
that do not currently have real
time capabilities, virtually none are planning on moving to real time by next year. This
does not bode well for these manufacturers when the adoption plans of Industry Average
manufacturers are considered. In fact, if the Industry Average manufacturers make good
on what has been planned, both Best in Class and Industry Average manufacturers will
be in a dead heat by next year. This implies that Best in Class manufacturers must be
completely secure in the fact that daily measurement is sufficient for meeting business
needs.
Aberdeen Insights ' Part 2
"IBM utilizes a home grown MES solution for all of its chip fabrication facilities. In the fabrication
business MES has become so institutionalized that cost reductions are no longer a driving
force behind technology adoption, it has really become a requirement of doing business. We utilize
the technology for optimizing build time, managing materials, and tool control. The KPIs we
measure are cycle time, throughput, and yield. We have the capability to measure these KPI in
real time but for our purposes daily measurement is all the business requires."
Karl Gartlan, IT Architect,IBM Global Engineering Services
The above is a great example of a Best in Class manufacturers that leads the market in performance
and has carefully analyzed the business needs and decided daily measurement is sufficient.
Chapter Three:
Required Actions
Key Takeaways
- Integrate manufacturing technologies with ERP.
- Measure On Time Delivery and Throughput ideally in real time and daily at a minimum.
- Standardize labor, production scheduling, and quality assurance business processes
across the enterprise
- Implement dashboard KPI visibility technology.
- Adopt automated data collection technology for production, inventory and quality data.
Whether a company is trying to move its operational performance from "Industry
Laggard" to "Industry Average," or "Industry Average" to "Best in Class," the
following actions will help spur the necessary performance improvements:
Laggard Steps to Success
Focus on efficiency and cost reduction by adopting manufacturing technologies
and integrating with ERP.
Do not adopt manufacturing technologies for fear of falling behind the competition
nor because the plant floor is perceived to be a "black box". Manufacturing
technologies should be adopted to improve operational performance and ultimately
reduce operating costs. Subsequently, manufacturers should first utilize
functionality that has an immediate impact, namely: Production Scheduling Optimization,
Quality Assurance and Control, WIP Management, Work Order Dispatch,
and KPI Dashboards.
Measure On Time Delivery and Throughput at a minimum daily and ideally in
real time.
The majority of Best in Class manufacturers measure two specific KPIs: On
Time Delivery and Throughput. These KPIs are easily measured and when
measured in tandem become a robust measure of the operations overall health.
Often just measuring the correct aspects of the operation will drive significant
improvements if it has not been done properly in the past.
Industry Norm Steps to Success
Standardize labor, production scheduling, and quality assurance business processes
across the enterprise.
Many MES and MI vendors have recently released or are planning to release
platforms enabling the use of standardized applications across the enterprise.
Such a delivery method allows manufacturers to manage the implementation and
upgrades of the solutions at the corporate level, which is a strategy that many
Best in Class manufacturers utilize to coordinate the enterprise. It also fosters
the standardization of production, inventory, and quality business processes,
which is an additional strategy commonly utilized by Best in Class manufacturers.
Implement dashboard KPI visibility technology.
Best in Class manufacturers start by measuring just a few major KPIs such as
Throughput or On Time Delivery, but this is not where Best in Class manufacturers
stop. Industry Average firms looking to follow the lead of Best in Class
manufacturers and leap into this performance category should consider measuring
one or two additional KPIs; suitable options include manufacturing cycle
time, product quality, and OEE (Overall Equipment Effectiveness). Adding
quality and cycle time visibility gives additional insight into the performance of
operations. At this point additional cost savings can be found, whether it is in
production capacity bottlenecks, re-work scrap losses, et cetera. Furthermore,
the measurement and visibility of these KPIs should be moved to real time and
provided to the necessary decision makers within the organization, i.e. dashboard
solutions. When this all comes together is the point where manufacturers truly
stop living off of low hanging fruit and move into the meat of continuous improvement.
Best in Class Next Steps
Accelerate real time capability adoption.
Best in Class manufacturers currently lacking real time capabilities are almost
entirely disregarding the benefits of real time capabilities. These manufacturers
are also woefully behind Industry Average manufacturers in regards to plans for
adopting real time capabilities over the next year. If these Best in Class manufacturers
are not careful, a year from now the entire group could easily become
Industry Average firms looking to adopt real time technologies just to remain
competitive with the "new" Best in Class. Real time capabilities can still be utilized
as a competitive advantage and manufacturers should utilize it as such before
it becomes another mandated requirement to maintain competitive positioning.
Adopt automated data collection technology for production, inventory and quality
data.
Utilization of manufacturing technologies is the number one way manufacturers
can prepare for and institutionalize Best in Class performance. However, overall
adoption is still relatively low and manufacturers from all performance levels can
still benefit from and achieve a competitive advantage from utilizing this class of
technology in the ways described in this benchmark. An often overlooked functionality
is automated data collection yet Best in Class manufacturers are 43%
more likely than other manufacturers to utilize this technology.
Appendix A:
Research Methodology
Between January and February 2007, Aberdeen Group examined more than 200
enterprises from a diverse set of manufacturing enterprises. Responding manufacturing
executives completed an online survey and Aberdeen supplemented this
online survey effort with telephone interviews with select survey respondents,
gathering additional information on manufacturing strategies, experiences, and results.
The study aimed to identify emerging best practices for utilizing manufacturing technologies
and provide a framework by which readers can assess their own management
capabilities.
Responding enterprises included the following:
- Job title/function: The research sample has the following breakdown by job titles:
Staff (14%), Manager (35%), Director (9%), Vice President (6%), CEO
(5%), Internal Consultant (225), and Other (8%).
- Industry: The research sample has the following breakdown by industry: Automotive
(18%), Consumer Packaged Goods (10%), Food and Beverage (13%),
High Technology (26%), Industrial Equipment (19%), Metals (13%), and
Pharmaceuticals (12%) among others.
- Geography: The research sample has the following breakdown by geography:
North America (58%), Asia/Pacific (17%, EMEA (19%), South/Central America
and Caribbean (5%)
- Company size: The research sample has the following breakdown by company
size: Small (25% less than 50 million), Medium (41% between 50 million and 1
billion), and Large (34% greater than 1 billion).
Solution providers recognized as sponsors of this report were solicited after the fact and
had no substantive influence on the direction of the MES Benchmark Report. Their sponsorship
has made it possible for Aberdeen Group to make these findings available to
readers at no charge.
Table 4: PACE Framework
PACE Key
Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions,
capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These
terms are defined as follows:
Pressures external forces that impact an organization's market position, competitiveness, or business
operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive)
Actions the strategic approaches that an organization takes in response to industry pressures (e.g., align
the corporate business model to leverage industry opportunities, such as product/service strategy, target
markets, financial strategy, go-to-market, and sales strategy)
Capabilities the business process competencies required to execute corporate strategy (e.g., skilled
people, brand, market positioning, viable products/services, ecosystem partners, financing)
Enablers the key functionality of technology solutions required to support the organization's enabling
business practices (e.g., development platform, applications, network connectivity, user interface, training
and support, partner interfaces, data cleansing, and management)
Table 5: Competitive Framework
Competitive Framework Key
The Aberdeen Competitive Framework defines enterprises as falling into one of the three following levels of
FIELD SERVICES practices and performance:
Best in class (20%) Retail RFID practices that are the best currently being employed and significantly
superior to the industry norm, and result in the top industry performance.
Industry norm (50%) Retail RFID practices that represent the average or norm, and result in average
industry performance.
Laggards (30%) Retail RFID practices that are significantly behind the average of the industry, and result
in below average performance
Table 6: Relationship between PACE and Competitive Framework
PACE and Competitive Framework How They Interact
Aberdeen research indicates that companies that identify the most impactful pressures and take the most
transformational and effective actions are most likely to achieve superior performance. The level of competitive
performance that a company achieves is strongly determined by the PACE choices that they make
and how well they execute.
Appendix B:
Related Aberdeen Research
Related Aberdeen research that forms a companion or reference to this report includes:
- Global Manufacturing: MES and Beyond
- MES Solutions and Managing Compliance
- The Manufacturing Intelligence Benchmark Report: Bridging the ERP and Shop
Floor Divide
- Manufacturing Intelligence - Implementation Strategies
- Manufacturing Flexibility: Synchronizing the Shop Floor and Supply Chain.
Information on these and any other Aberdeen publications can be found at
www.Aberdeen.com.
MES Adoption Drives Performance