Value of MES in real dollars $15,000 per machine, every year.

Imagine increasing profit $15,000 per machine, sustained every year.  We can do it.

Modern Machine Shop’s “Top Shops” benchmarking survey, 2012 shows immense value for the use of an MES system.  Critical findings of the survey:

“The average gross sales for the Top Shops were 14 percent higher than the other shops.”

“The Top Shops achieve higher spindle utilization and faster setup times because they put a good deal of thought into optimizing shop floor processes and practices.”

“These shops are also more likely to implement continuous improvement strategies to become more effective as well as lean manufacturing concepts to become more efficient.”

Top Shops had a 12.6% better OEE metric than average shops.  A 10% improvement in OEE (capacity utilization) will increase IFO 22% (from the book: “Overall Equipment Effectiveness: A Powerful Production/Maintenance Tool for Increased Profits”, Robert C. Hansen, Pgs 47-56).

Memex’s MERLIN MES is a tool that allows your organization to achieve these results!

The value of MERLIN, using actual KPI measurements to your operation, is significant:

  • A +10%-20% increase in OEE is achieved by our customers following installation, typically within 12 weeks.
  • Using an average of $302,066 in annual revenue per machine and average profitability of 18.9% (Modern Machine Shop, Top Shops – Benchmark Your Machining Business, 2012, page 24*) a conservative 10% increase across 90 machines translates to +$2.7 Million per year increase in revenue and +$500,000 in profit.
  • This means, by machine, a +$30,206 increase in revenue and a $12,000 to $15,000 increase in profit.
  • At a conservative 10% increase in efficiency the breakeven is typically 3-5 months.
  • ROI of 100% in the first 12 months based on profit, or approaching 1,000% when factoring in increased revenue!

*Sponsored by AMT, the survey covered more than 500 manufacturing facilities.

MES is one of the best strategic drivers to obtain a competitive advantage in the manufacturing landscape improving profitability, reducing waste, and ensuring compliance with regulations.  The top 5 summary reasons are here.  For more detail, including ROI analysis tools and Lean Roadmap tools call Memex directly.

1) An MES system should be the highest priority project as it is more important than a capital equipment acquisition.  The value of an MES is significant to the stakeholders of a company far surpassing any other ROI.

2) Plant wide efficiency improvements greater than 10% are normal and drive a company to significant success.

3) Profitability is exponentially improved and sustained every year.

4) ROI typically of 100% in the first 12 months based on profit, a payback typically in the 3-5 months range.

5) Every day a company waits to implement an MES is lost profits that cannot be re-covered.

Manufacturing journalist TR Cutler profiles the OEE Calculator

Manufacturing journalist, TR Cutler, recently profiled the OEE Calculator by Memex Automation for Industrial Electronics Today.

The leading OEE (overall equipment effectiveness) Calculator, quantifies the increase in Income From Operations (IFO or EBITDA) for Same Sales Volume and Sell Everything scenarios for various improvement criteria. The OEE ROI calculator is a very preliminary ‘rough cut’ analysis tool for developing a business case (to engage real-time manufacturing performance data for shop floor machines in manufacturing plants). Part of the reason Calculator is ‘rough’ is because a Plant average is used for several important parameters such as OEE, shift output, and quality rate.

Much greater precision can be developed by using actual OEE data differentiated by product run and by work station. Future monitoring and proactive use of the information provided by an installed system significantly improves accuracy of alternatives; these data assists leadership teams in setting direction and focus to maximize results quickly. Rattray noted that, “First Look results are generated using Small, Medium and Large preselected productivity improvements to show the range of possible results.”

The current input values in the OEE Calculator, use hypothetical but realistic values for a machine tool plant. It is estimated that for most manufacturing plants, the Calculator results have a confidence level of eighty-five percent (85%), plus or minus three percent (3%.)

The OEE Calculator does not apply the Theory of Constraints (TOC) therefore, if the proper application of tools and OEE improvement is not achieved at the constraint, then the increase to IFO is also limited. The quality factor usually has more impact than Availability or Speed Factor for bottom line improvement. When waste or scrap is improved, OEE improves; the result, less material needed. It is important to apply Lean Six Sigma techniques to your manufacturing operations, so as to achieve significant results. Memex offers services in this area, as documented in our website.

Memex suggests that users of the OEE Calculator, “Closely account for the change in material since it determines the new amount of total units made and applies the base case unit material cost to the total number of new units required to make the good units for the associated scenario.” The Calculator zeroes all of the improvement parameters and individually examines what one (1) OEE point improvement is worth for Availability, Speed Rate, and Quality. This data provides the user an approximation of financial impact on IFO for types of improvement activities.

Rules for Manufacturing Efficiency

Your company’s success is increasingly tied to improving manufacturing performance and improving it quickly.
Manufacturers are increasing their focus on the bottom line. This scrutiny is leading to renewed attention on manufacturing, where the most significant assets (plant and equipment) and costs are.  Manufacturers need to cut costs, increase cash flow and become more responsive to changing market conditions.

The following are 17 rules to pay attention to that will drive profitability to the bottom line.

Enhance Asset Utilization and Efficiency
Improving manufacturing efficiency is a pre-requisite to better profitability and corporate success. Enhancing manufacturing performance yields huge advantages – from cost reductions to a stronger competitive position – which can be passed on to shareholders or customers.  The trick is to be highly efficient while improving quality, expanding your product portfolio, and becoming more demand driven.

Flexibility Improves Efficiency
Being efficient while responsive to shifting customer demand requires an enterprise-wide manufacturing transformation: moving from Manufacturing-to-Forecast (MTF) to Build-to-Order (BTO) which can create a dramatic payoff.  Greater flexibility lets you allocate production across plants, shifts or suppliers, resulting in a faster response to changing conditions and improved overall plant utilization. Greater efficiency reduces Work in Process (WIP), labor, scrap and rework, saving both time and money.

Culture of Continuous Improvement
Having an enterprise platform for manufacturing operations real-time Key Performance Metrics such as OEE provides global visibility, across your operations.  These capabilities let you easily identify and replicate best practices across your global operations while instilling a culture of continuous improvement across production, warehouse, quality, maintenance and labor activities.
Standardized best-practices reduce cycle and takt times across your operations, helping to ensure On Time Delivery (OTD). Global, real-time visibility that is actionable on a 24/7 basis enables immediate resolution to operational disruptions.

Synchronize Material with Production
Reduce idle inventories and execute Lean initiatives to achieve operational excellence.  By synchronizing material flows across production, warehouse and quality operations you can reduce costs and improve cash flow – get the right materials to the right plant at the right time.  Material synchronization means your material flows are in tight coordination with actual demand – finished goods roll off the line based on customer demand, and WIP is “pulled” through the plant to meet sequenced final assembly demands.  Cash flow improves from reduced inventory levels.  Waste from obsolescence is reduced and facility requirements for storage are minimized.

Enhance Lean Initiatives Globally
Lean, demand-driven manufacturers can further reduce idle WIP and inventory buffers while gaining agility to respond faster and more accurately to customer demand. Electronic replenishment and e-Kanban sizing, triggered by actual demand and consumption can help optimize global operations. Costs go down, efficiency goes up and customer satisfaction escalates.

Just-In-Time, Sequenced Operations
Applying material synchronization one step further, Just-In-Time, sequenced production can further reduce excess inventories, for a truly demand driven production.  Track, view and coordinate the flow of goods from supplier to customer shipment.  You’ll need real time visibility and actionable control of your entire material flow – in-transit, landed, WIP and finished goods inventories – to enable precise synchronization of material and production demand.

Improve Quality
Best-in-Class quality means building your product “right the first time,” resulting in reduced waste, fewer returned items, lower warranty costs and higher customer satisfaction.  Implementing a platform for continuous quality improvement is a way to ensure profitability, achieve regulatory compliance, maintain brand integrity and provide sustainable competitive advantage.

Get it Right the First Time
Directed manufacturing and real-time decision support systems can enforce best practices and Poka Yoke to prevent errors, a minimum requirement for Six Sigma.  Quality processes based on real-time data validation can greatly improve first time yields.  Automated, paperless processes eliminate manual data entry errors.  Automated alerts can quarantine materials or even halt production for out of spec materials to cut costs.  An approach to automated data collection with real-time metrics across all manufacturing operations can greatly improve the likelihood your product will be built right, the first time, and every time.

Traceability and Containment
A comprehensive application across manufacturing operations managing materials, labor, equipment, tooling, processes and suppliers insures “interlocking traceability” of all product and process data. The precise interactions of all manufacturing elements can be used to identify and contain quality problems before they reach the customer. Automated traceability and containment processes can greatly reduce manufacturing, warranty and recall claim costs.

Accelerate New Product Introductions
Introduce new products faster by synchronizing engineering with production. Real-time integration of production specifications with engineering design helps evaluate how product components or processes can be modified to improve output, increase quality or enhance product performance.
In today’s “digital” world with rapid data dissemination surrounding global product launches, manufacturers must respond faster to market changes while flawlessly executing new product introductions.

Real-time Visibility to Operational and Design Data
With the growing complexity of new product designs, manufacturers are increasingly turning to virtual design programs to model product performance.  Establishing a continuous, real-time feedback loop between production and design applications can provide critical visibility to better product design, improved quality and an overall compressed timeframe for new product introductions.  Furthermore, sufficient flexibility can be maintained to perform ad hoc changes as often as needed when converting digital designs into physical products, thereby staying ahead of the competition.

Reduce Manufacturing IT Costs
Complexity, process integration and systems disparity may be a reality, but are an unnecessary evil that can hurt production performance, force unnecessary training, waste resources and limit your ability to respond quickly to changing market conditions. Multiple, redundant systems across the plant can lead to unnecessary implementation, maintenance and upgrade costs.

Single Platform Enables IT Rationalization
Leading companies seek to consolidate and rationalize disparate applications – ideally into a strategic platform across manufacturing operations.  Integration, maintenance and support costs can be reduced significantly.  Linking a manufacturing system platform to ERP and the Automation layer creates a comprehensive solution for manufacturing operational excellence.

Core Deployment Program
Create a “Center of Excellence” of best practice manufacturing processes within a central ‘lab’ or ‘testing environment,’ which can then be rolled out to other locations as a “Core” deployment program for your manufacturing processes.  Up to 80 percent of these processes can typically be standardized, helping to accelerate multi-location deployments and simplify future updates as new best practices are identified.

Leverage ERP for What it Does Best
Many manufacturers have invested heavily in an ERP system to improve operations and have been successful within Finance, HR and other corporate departments. ERP implementations have struggled, or worse, in gaining acceptance in the plant.  Instead, industry leaders are leveraging ERP by connecting it to a manufacturing system to enable real-time visibility, control and synchronization across manufacturing operations, corporate planning and scheduling.

Focus on Planning in ERP, not Execution
Many attempts to directly extend ERP to the plant floor have ended in budget overruns, reduced functionality from what was originally conceived, or even complete failure. Corporate financial planning tools were simply not designed to manage complex, dynamic 24/7 real-time environments.

Let Manufacturing Shop Floor System Drive Production
This approach can provide real-time visibility, control and synchronization across your operations, while letting you truly leverage existing planning systems to effectively deliver value to the plant floor while reducing ERP customization. Benefits from such an approach include improved operational performance, accelerated ERP connectivity to the plants, minimized project risks and an overall reduction in IT costs.

Memex continues its tradition of serving the discrete manufacturing sector, supplying component hardware, memory upgrades, and visionary shop floor communication technology. Memex products allow a manufacturer to realize the impact of OEE Profitability.