MES and the Modern CFO

Modern CFOs are not only concerned about managing the company’s money – they are looking for ways to pull the levers of profitability and financial success throughout the enterprise. For companies with manufacturing facilities, CFOs will find many of these levers in the production plants themselves. While production may seem far removed from a finance director’s training and background, it can be a major determinant of business results.

Many of the assets of a manufacturing company – machinery, tooling and materials – lie in the plants, and the buildings themselves are often specially-built, expensive assets. Everything about how those assets are used can directly affect the company’s success. Such as:

• Productivity and efficiency of those assets and the employees in the plant clearly can impact return on net assets. Initiatives such as Lean and Operational Effectiveness often focus on this lever.

• In addition to the efficiency of the actual production process, the overall end-to-end cycle time through the plant has a major impact on inventory levels and order-to-delivery as well as cash-to-cash cycle time.

"Pinpointing the exact location and nature of the problem causing a recurring defect is critical."

• The quality and reliability of the processes the assets in a plant perform determines not only the quality of the products, but also the amount of assets required to churn out a product ready to sell, or cost of goods sold. Scrap and rework are nearly universal in production environments but they actually add cost in achieving the same output. Problems not caught in the plant can result in very expensive warranty claims or recalls.

• Production plants house critical performance hurdles for suppliers. Checkpoints at inbound receiving have metrics such as on-time arrival of inbound materials and meeting order expectations on quantities and specifications. During production, supplied direct materials are evaluated for performance in the company’s process and as part of the end product. Indirect materials must also perform in the environment.

• The production process is also where the product design team’s work is tested. An innovative new product may never pay off if it does not move effectively through the factory.

• The commitments sales and customer service teams make to customers often rest on the ability of these plants to meet orders on time and to specification. Even for companies that ship from stock, the plants must replenish those stocks as planned or a customer will be disappointed.

However, these are not the levers that the company can manipulate to change outcomes. Within each of these major areas, many individual levers all combine to create those plant-level results.

For example, the efficiency of any one machine may be irrelevant to overall throughput and cycle time if the next operation runs significantly more slowly. The business gain will come only from improving the speed of the slower operation – not the faster one. Similarly, quality relies on each stage of production handing the next one materials that are ready to be processed. Pinpointing the exact location and nature of the problem causing a recurring defect is critical, as is creating a new process to prevent the problem from re-occurring.

GUIDING SYSTEM

In short, a plant-level view may seem detailed to the CFO, but many companies don’t have easy access to all of this information at an enterprise level. Even if it were available, that would not help employees solve the problems that diminish performance. Only a detailed view of each operation, shown in the context of its impact on the entire plant or the entire enterprise, can do that.

That is the role of a Manufacturing Execution System (MES), a dynamic information system that drives effective execution of manufacturing operations. Using current and accurate data, MES guides, triggers, and reports on plant activities as events occur, from point of order release into manufacturing to point of product delivery into finished goods.

We often depict MES as a layer of software between the enterprise or ERP system and the plant automation and process controls systems. The jagged lines between each layer represent functionality that may be configured differently depending on the implementation.

That is, depending on what software is already in place and what type of production is taking place, some of the functions may reside in either MES or ERP at one end and other functions may reside either in MES or Controls at the other end.

The MES layer of software provides:

• Accurate and timely information on the detailed production levers that plant employees need to identify and correct – or possibly prevent – problems.

• Historical data on the production process and product output to leverage in analysis for troubleshooting or for improvement efforts such as Six Sigma.

• Data to use for regulatory or customer compliance about the product and its history as well as the process by which it was produced.

• Guidance for operators that illustrates, or in some cases, enforces best practice processes. These processes can improve throughput, quality, plant safety, and efficiency.

• Current, plant-wide information for any other system to use, such as for customer order promising, supplier negotiations, engineering evaluations of design changes, materials planning, and cost calculations.

If MES is standardised across the enterprise, it can also provide comparative views of plant operating performance so best practices can be extracted, shared, and become the basis of sound decisions about where to produce and how. It can also help set expectations when outsourcing production and setting up new facilities.

MES provides visibility about operations that many companies lack today. Most companies use piecemeal systems in their production plants for specific functions or production areas.

Without the comprehensive view of production MES provides, companies risk making poor decisions across the rest of the enterprise, from sales to engineering to procurement to service.

Beyond management visibility, MES is a system that production personnel use to ensure that activities match best practices. It helps with improvement programs as well as making compliance to government and customer regulations much more time- and cost-effective. With so many of the levers of profitability in the plant, it only makes sense to use the best available tool to manage production effectively – MES.