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MES ROI - Risk Aversion (1/2)

November 18, 2014

MES ROI - Risk Aversion (1/2)

So far in the last few articles, we have established that an MES application, when deployed, has immense potential where increasing profits and reducing process costs are of great concern. But what about risks faced by the manufacturing plants? Does the MES have any impact on the risk reduction or mitigation? If yes, how so, and is there a way of making a ROI case for the MES based on its ability to better manage risks?

Today, we will consider how our project team in the automobile plant from the last few articles attempts to do so, basing their case on actual findings and comparisons made between status quo with the pilot MES deployed and past information collected in the absence of the MES. The idea is to make a case where the MES application may be used to mitigate the future risks which caused disruption and loss for the plant in the past.

In the automotive industry the use of robotic devices and automated tools has gradually increased over time and now it encompasses a wide spectrum of activities, from carrying the vehicles from one area of the operation to the other to performing welding or painting operation. This kind of incremental and disassociated automation also allows for a whole range of legacy systems to exist in the same plant as separate and fully independent entities that lack the capability of being integrated with the other higher level IT applications.

Legacy systems being used in a plant pose a serious threat to its smooth operation and flexibility, which are paramount given the current global economic scenario.

The project team performing the justification study for the MES application needs to record the number of legacy systems currently operating in the plant and the cost being incurred to maintain them. Another important aspect to be explored is the risk which these applications pose, say in the event a staff member who handles them decides to move on, or if a vendor is no longer continuing to provide service for a particular application. The management also needs to consider the cost which may be incurred to retain an employee or vendor in order to just upgrade the equipment.

Optimized schedule can eliminate the risks of delay, downtime or loss of customer base, which would remain a threat if manual systems are allowed to persist

Our project team needs to show, with examples from the pilot project, how an MES application not only allows for cost reduction (by integrating the plant’s operation with its equipment and management), but also how it mitigates the risks posed by legacy applications. A report might be made, demonstrating how the MES application enables removal or reduced dependence on the current systems deployed in the plant’s operation and how it may help avoid future costs which may be incurred if a system or a group of legacy systems cease to function.

Similarly, manual systems pose a larger threat to a plant, as they are prone to errors and limited in their scope. A common aspect of plant operation which tends to be managed manually or is spread-sheet based is the plant’s scheduling activity. In that case our project team may prepare a case study of how manual scheduling has in the past caused delays or downtime, which has led to loss - both from monetary and customer/dealer retention perspective. The team may then present the improved performance of the scheduling operation based on dynamic MES data ranging from demand to machine availability. .

Minimizing downtime and risks associated is considered a vital part of the application’s overall functionality and it should be emphasized so by the project team working on its justification.

Of course, a combination of countless risk factors may contribute to a production downtime, including breakdowns, operators being unavailable, errors in scheduling and delay in material sourcing. However, many of them might be countered by the MES application. It is therefore important for the project team to prepare clear data of how much downtime has occurred in the past, due to what reasons and how each and every factor could have been countered by the MES, right from being able to predict a breakdown to enable proper material sourcing. It would also be critical for the project team to emphasize the speed and accuracy with which the MES system is able to provide the right information to the right person - the ability to report a possibility of breakdown directly to the maintenance manager or a third party vendor would make a strong qualitative case for the MES’ ROI as well.

In our next article we will continue to explore the ROI study for risk aversion and mitigation, where the costs associated with compliance are an important consideration for the plant and so is the mitigation of risks associated with cases of non-compliance. Also, we will pore over the risk of product recalls.

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