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MES ROI - Risk Aversion (2/2)

November 25, 2014

MES ROI - Risk Aversion (2/2)

In the first part of this post from last week on risk aversion and mitigation, we saw how minimizing downtime and risks associated is considered a vital part of the MES application’s overall functionality. Today we will focus on a diverse set of regulatory and other buyer/industry based compliance standards which any manufacturing plant is subjected to, and how they can affect the processes, efficiency and costs.

These standards may range from environmental to personnel or product safety. An automobile plant for example may have overall compliance standards and then separate standards to comply with within each subdivision (say for its engine manufacturing wing or its transmission assembly wing, a single plant may have multiple rules and regulations).

The costs related with compliance are an important consideration for the plant and so is the mitigation of risks associated with cases of non-compliance.

As the global concern for a more sustainable and eco-friendly manufacturing increases, so does the number of compliance criterion. The severity of damage when a non-compliance is detected is also growing and gets multiplied as any untoward finding in an audit or inspection may reach the global customer base faster than ever via social media.

The project team may establish an ROI case, demonstrating how the MES is sort of a one stop shop for all compliance activities, where all the required data is recorded with no manual intervention required. Also, compliance activities may be scheduled and any deviation from set standards may be reported immediately as events happen on the shop-floor. The dexterity with which the MES can handle this sort of activity is unparalleled and can’t be compared to any other way of handling compliance which, believe it or not, is still performed manually in many plants.

It is absolutely mission critical that the project team justifying the MES is able to present data which allows decision makers to understand how the application automates the compliance activity and how drastically it reduces both the costs and risks associated with non-compliance. One way to do that is preparing a report comparing current efforts and costs associated with compliance and the ones from the past, before the pilot MES was deployed.

The last risk we will take a closer look at is the risk of product recalls. For the automotive plant, which we are considering in this investigation, this risk is far greater as the impact of recall (irrespective of the reason for recall) garners global attention. The costs are huge, both in terms of reverse logistics and replacement, but also with regards to costs associated with potential loss of market share and negative sentiment in the customer base. An MES application, which is fully equipped with SPC and advanced data analytics, may be able to reduce the risk of recalls, as it can prevent any non-conformance in quality standards and ascertain that every finished product fully complies with the set norms.

Even when a non-conformance occurs, it may be detected and reported by the application, which would allow for a root cause analysis of the issue, preventing a faulty product being manufactured. The project team needs to perform a simulation based study in case past data for a recall situation is not present, to demonstrate the costs and impact of a recall. At the same time, they need to demonstrate the exact features of the MES application which allow it to prevent the situations leading to the production of faulty automobiles and thereby allowing it to mitigate the risk.

To sum up what we discussed in the last two posts about MES' ROI: risk aversion analysis would help make a crucial part of the MES justification endeavor. MES applications, due to their ability to control, record and report every single process activity as it happens in real-time and then further integrating the process to the enterprise, allow risk management that is better than any other manual or semi-automated option.

Sounds quite obvious, right? Well, for many decision makers it not necessarily is. Therefore have in mind that, when justifying the MES application for your plant, you should pay a great deal of attention to the topic of risk, besides considering profits and savings it may generate. All plants, irrespective of industry segment, products being manufactured or country/region of operation are subjected to a multitude of risks and the MES they choose to deploy might just be able to counter most of them.

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