MES Investment and ROI

How to build a solid business case

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.

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).

Benefit calculation: Value of the Yield improvement x Volume

PRODUCT PERFORMANCE - increased through:

Analysis of process and equipment data as well as benchmarking.

Benefit calculation: 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.

Benefit calculation: 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.

Benefit calculation: Value of customer satisfaction for delivering on time

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.

Benefit calculation: Value of additional volume

WIP - reduced through:

Increased degree of automation;

Scheduling and dispatching;

Real time status and visibility;

Industrial engineering data analysis, benchmarking.

Benefit calculation: 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.

Benefit calculation: 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.

Benefit calculation: Cost savings

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;

Benefit calculation: Cost of compliance without using MES

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.

Rapid personnel training via intuitive user interface screens.

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

The costs

Recurring cost (not incurred if hardware is not renewed at the end of depreciation period).

Cost incurred one time, during the project implementation.
Other licensing models are typically also available based on a monthly/yearly fee or pay per usage model.

Recurring cost, after project implementation.
Typically includes access to new software versions and product support.

Cost incurred one time, during the project implementation.
However, most of the MES implementations truly never end with new requirements and capabilities being required as the company evolves. Still, the bulk of the work is associated with the MES introduction.

Cost incurred one time, during the project implementation.
This is considering that the operational MES utilization is part of the daily job of the internal employees.
For a MES implementation, it’s essential to secure the availability of key users to support the project.

Recurring cost. It consists of the costs related with operation and administration of the MES system.

Given the environment today with growing global competition in terms of innovation, cost and time to market (given by short product cycles) as well as with increasing regulatory demands, the answer to the question “can you afford not to invest in an MES?” is turning into a clear “No”.


Download Test Report:

Affordable MES. Performance and Scalability for Time-Critical Industry Environments.
by Critical Manufacturing

When selecting a system for applications that can potentially expand, manufacturers need assurance that their system can cope with all flow changes, automation levels, complexity or volume growth.

Critical Manufacturing conducted studies using hardware typical of that found in a working factory to prove MES performance and scalability.

New performance benchmark tests show that even on relatively inexpensive standard hardware, Critical Manufacturing MES can manage well over 400 transactions per second. These tests also show that adding application servers delivers linear performance improvements, indicating that and further increases in performance are available by adding application servers and by scaling up the database server.

Click below to download the document. (12 pages, 1411 KB)

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