MANUFACTURING EXECUTION SYSTEMS VS. ERP/MRP

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1 %*(*5 "- &% *5*0/ The Global Assembly Journal for SMT and Advanced Packaging Professionals Volume 11 Number 9 September 2011 ISSN MANUFACTURING EXECUTION SYSTEMS VS. ERP/MRP 13&7&/5*/( (3"1*/( t 7"-*%"5*/( :063 $-&"/*/( 130$&44 t $0.10/&/5 "44&.#-: *446&4 45*-- 8"*5*/( 50 )"11&/ t 5)& 8*-% 803-% 0' *$ 1"$,"(*/( 015*0/4 "/% *54 *.1-*$"5*0/4 t , '03 ) Rob Boguski & Matt Holzmann Interview Inside

2 Manufacturing execution systems vs. ERP/MRP The myths and realities of coexistence in today s electronics manufacturing environment Bill Crowley, Optimal Electronics, Austin, Texas, USA Can manufacturers achieve greater management insight and control over all phases of the manufacturing production process through their enterprise resource planning (ERP) and manufacturing resource planning (MRP) systems alone or does it require the specialized functionality that only a manufacturing execution system (MES) can provide? This paper explores the key considerations and issues that surround this often-debated topic, in an attempt to dispel the myths, realities and misunderstandings regarding the roles each of these systems play in today s electronics manufacturing environment. Introduction In today s complex electronics assembly environment, plant managers have an ever-increasing need for greater management insight and control over all phases of the manufacturing production process. Manufacturers are constantly being challenged to find new and better ways to meet changing production demands and schedules, automate manual processes, reduce overhead costs, optimize production throughput and achieve new efficiencies that ultimately lead to greater profitability. Realizing these outcomes requires new technologies, tools and processes that can deliver significant new capabilities for production improvement, materials management, traceability, process enforcement and quality management. A comprehensive, integrated approach is crucial for providing real-time visibility and effective utilization of shop floor data for better planning, decision-making and execution across every aspect of the production process. The question is can manufacturers achieve these outcomes through their enterprise resource planning (ERP) and manufacturing resource planning (MRP) systems alone or does it require the specialized functionality that only a manufacturing execution system (MES) can provide? ERP and MRP: The operational backbone ERP and MRP systems have traditionally provided the essential operational backbone for manufacturing companies. While ERP systems are key for facilitating the flow of information between business functions inside the boundaries of the organization, as well as the company s connections to outside stakeholders, MRP systems provide the production planning and inventory control capabilities needed to effectively manage manufacturing-specific resources. These systems offer an array of capabilities for enabling companies to effectively and efficiently control many critical aspects of their operations, with significant inherent value for finance and supply chain departments. More specifically, ERP/ MRP systems typically help companies standardize and automate key business practices, gain visibility into mission-critical data, manage customer relationships, achieve compliance with financial reporting requirements, maintain better inventory control and more efficiently manage company resources. Companies typically implement ERP/ MRP systems to alleviate major business pressures, such as lowering operational costs, increasing scalability for accommodating growth, and improving customer service and satisfaction. More specifically, an ERP system effectively translates a customer order into a software roadmap for monitoring the various steps along the path to fulfilling that order while the MRP system helps the company plan and manage the manufacturing resources associated with that order, such as materials purchasing, bill of materials processing, and overall inventory control. By establishing standardized operational procedures and automated processes, manufacturing can be better integrated with logistics and delivery, and real-time visibility can be gained into the status of processes from quote to cash which in turn enables better management insight and decision-making. The following summary provides a high level snapshot of some of the main motivating factors that drive companies to implement ERP/MRP systems into their core operations: Integration of financial information: By providing a consolidated repository for all financial information, to be used by all 10 Global SMT & Packaging September

3 departments and functions, the company can establish what could be called a single version of the truth that cannot be questioned. Integration of customer order information: With a centralized place for customer orders to live, companies can more effectively track and manage an order from inception (when the customer service rep receives it) to fulfillment (when the loading dock ships the merchandise) to completion (when finance sends the invoice). This enables the effective coordination of manufacturing, inventory and shipping across multiple locations, simultaneously. Standardization and integration of manufacturing into business processes: The implementation of ERP/MRP systems provides some basic management controls, workflow capabilities, and visibility into the manufacturing processes especially as it relates to the integration of manufacturing with other business processes, such as finance, supply chain and inventory management functions. Reduced inventory: By improving the visibility into customer order fulfillment, plant managers can reduce the inventory of materials used to make products (workin-progress inventory) and improve planning for order delivery, thereby reducing finished goods inventory in the warehouse. Standardized collection and delivery of human relations (HR) information: By establishing a simple, unified method for tracking employee time and delivering information regarding benefits and company-provided services, an organization can establish valuable standardized HR processes and data access for all employees. MES: The manufacturing execution foundation for electronic assembly Also known as shop floor control systems or plant-side IT solutions, manufacturing execution systems (MES) can be defined as dynamic information systems that drive effective execution of manufacturing operations. Without the specialized capabilities of an MES solution, plant production processes are often manual and open loop to the company s ERP/MRP systems, which is inherently a sub-optimal approach. In most manufacturing environments, an MES is essential for providing the manufacturing-specific functionality companies need to gain greater control and visibility at the shop floor level far beyond the functionality that ERP/MRP systems provide. However, some of the larger ERP/MRP solution providers have identified this gap in their offering and have incorporated MES-related capabilities in an attempt to Funcitonality MES ERP/MRP Comments Inventory Control Warehouse management Serialization MSD control Shop floor material tracking Pre-production Control Kitting Online/offline setup verification Feeder management Production control Scheduling Programming Optimization Machine control and setup Manual production control Material/Component Traceability Component traceability to the reference designator for each circuit Process Traceability & Control Process routing, control verification & traceability Quality Management Quality & defect data collection Repair & RMA support Analysis Table 1. ERP/MRP vs. MES comparative summary ERP/MRP systems can be used to manage the warehouse; however, adequate capabilities are not provided for effectively tracking materials on the production floor. For example, while these systems can serialize materials, they provide only aggregate materials data (i.e., 20,000 total parts vs. 10,000 parts on two reels each). ERP/MRP systems support basic kitting operations for work orders; however, no additional capabilities are provided for other important preproduction activities. MES capabilities are needed to provide machine interfaces for facilitating online/offline setup verification processes. MES provides a centralized system for programming multi-smt environments, machine control, and optimized production scheduling achieved via direct machine interfaces on the production line. ERP/MRP systems only provide the ability to release work orders in an ordered sequence. No actual production control is provided (operators are free to ignore). MES provides a centralized system for programming multi-smt environments, machine control, and optimized production scheduling achieved via direct machine interfaces on the production line. ERP/MRP systems only provide the ability to release work orders in an ordered sequence. No actual production control is provided (operators are free to ignore). MES includes functionality that models the production routing, enables control for machines or manual scan stations, and data capture to verify completion of each step. ERP/MRP systems provide no capabilities. MES enables the integration to machines (paste, testers, AOI, oven, etc.) and automatically collects process, quality and defect data. MES provides receiving and processing loops for both internal repair and returned product. ERP/MRP systems provide no capabilities. Legend: = full functionality, = partial functionality, No = no functionality Global SMT & Packaging September

4 offer this specialized functionality. ERP/ MRP companies have generally added these capabilities by acquiring successful MES solutions and integrating those solutions into their existing systems. While these integrated capabilities provide significant value for electronics assembly companies, securing this functionality from the ERP/MRP provider often requires an investment level that is only afforded by the industry s largest manufacturers. Securing manufacturing execution capabilities from a third party MES solution provider offers a variety of key advantages: MES functionality is most often provided in a modular fashion, which allows manufacturers to purchase and implement these capabilities incrementally over time. This not only reduces the need for major upfront capital expenditures, it also reduces the transition barriers that can be created by a comprehensive, all-in-one system exchange. The integration of MES and ERP/MRP systems can be a relatively straightforward process; therefore, the required information can be easily shared across the systems, resulting in significantly lower overall investment levels. MES providers are focused exclusively on creating and delivering manufacturing execution capabilities; therefore these companies are better positioned to offer the precise functionality required to meet the unique needs of specific manufacturing verticals. As a result, MES-specific solutions often provide an added level of value that ERP/MRP solutions simply cannot provide. Utilizing a centralized database, the foundational capabilities delivered by a quality MES system include the full range of integrated functionality manufacturers need to effectively control, monitor and manage all phases of the electronics assembly process: Materials management including inventory and warehouse management, materials tracking throughout the plant, and materials serialization, and MSD control, bar code and RFID data collection. Pre-production control including kitting, offline and online setup verification, feeder management and work-in-process tracking. Production control including scheduling, programming, optimization, single component library, assembly modeling, production line monitoring, finished goods tracking, scrap reporting, materials issues, manual assembly processes, machine setup and downtime, electronic setup instructions and routing control. Materials traceability from the work order level to the circuit level. Process traceability and control including process definition and enforcement, multi-level routing, full process traceability, verification and data collection across the production facility. Quality management from quality and defect data collection for automated equipment and manual processes, to support for repair and returns processing. Visibility including real-time information access and visibility across the production process, as well as historical reporting. does each play? Since ERP/MRP and MES systems offer varying types of functions and features, their most basic functionality differences and overlap should be clarified. At a high level, it is important to note that ERP/MRP systems generally do not provide some of the most critical capabilities needed for effectively managing key manufacturing processes, data and activities. For example, typical ERP/MRP systems lack the machine interfaces needed to enable data collection from manufacturing equipment; they offer no traceability, process control, or quality management functionality; and they provide no modeling capabilities for plant equipment or processes. The ERP/MRP vs. MES comparative summary shown in Table 1 provides a more detailed view into the specific role that these solutions play in the overall production process. A closer look at MES capabilities The following overview provides a more in-depth look at the key functionality and additional layers of value that an MES solution offers, beyond the basic capabilities delivered by traditional ERP/MRP systems. Production scheduling In many production environments, the critical task of production scheduling is done in a manual fashion using a whiteboard or a simple spreadsheet. This is due to the fact that companies who rely solely on ERP/MRP systems do not have the ability to automate and optimize the overall scheduling process, since these systems deliver work orders into the production process on a one-by-one basis. Given the myriad variables and data involved, scheduling is an inherently complex challenge one that cannot be effectively managed with a manual approach. The primary issue that manufacturers need to address in the scheduling phase is how can machine utilization be fully maximized? The key is to shift the production paradigm away from the manual one-byone work order model and toward an automated job clustering approach that aims to Snapshot: Rockwell Automation Case Study Metrics Reduced setup time by 65% Slashed total setups by 80% Nominated for Chairman s Award Before MES implementation 23% machine utilization 20 to 30 changeovers per day 1 hour avg. setup time After MES implementation 40% machine utilization 3 to 6 changeovers per day 20 minute avg. setup time 12 Global SMT & Packaging September

5 extract maximum equipment capacity. The clustering capabilities provided by an MES solution enable manufacturers to increase utilization by automatically grouping as many work orders as possible into a single production run, based on the maximum capacity the line equipment can support. By creating larger work-order groupings, the clustering approach enables production lines to run longer, drastically reducing the number of changeovers and minimizing machine downtime, as well as streamlining and reducing kitting requirements. New dynamic scheduling optimization technology takes this approach one step further by allowing the production schedule to be dynamically adjusted and re-optimized as new work orders enter the production stream. By optimizing the fixed feeder setup, rather than just the groups, the range of assemblies that can be included in a group is much broader, further increasing production and flexibility. This new automated dynamic optimization approach enables manufacturers to maximize production capacity far beyond the gains that can be achieved with basic work order grouping approaches. Kitting With traditional ERP/MRP-centric approaches, the kitting process is initiated by the plant s production control department, based on the shop floor order as generated by the ERP/MRP system. The production control department verifies the materials availability for each part number and orders additional parts when shortages are identified. The kit is then released to the stockroom for picking and is typically routed to the offline setup area within 48 hours. The primary issue with this approach is that ERP/MRP systems are ineffective at maintaining accurate and real-time inventory information, as materials move throughout the shop floor during kitting and restocking. In most cases, a plant s ERP/ MRP system only contains data regarding the total quantity of a part type, and does not capture how the material is delivered (i.e., 20,000 total components vs. four reels of 5,000 components). This lack of granularity, combined with frequent stockroom errors, leads to kitting problems such as insufficient or excess component quantities, wrong components, incomplete kits, insufficient quantities of component packages (quantity of reels for split parts, for example). Manufacturers can utilize the automated capabilities of an MES solution to dramatically reduce, or eliminate, kitting inefficiencies. The materials management capabilities provided by an MES solution streamlines the kitting process by identifying components that can be left on the shop floor for the next production run, and directing kitting personnel to only pick Snapshot: Automotive Contract Manufacturer A major auto manufacturer was experiencing costly machine downtime due to lack of offline setup capabilities. The manufacturer addressed this challenge by implementing an MES which provided fully automated offline setup and verification capabilities. Before MES implementation 1 hour average setup time 9 changeovers per day Wrong reels/parts loading After MES implementation Average setup time decreased 33% Wrong part placement eliminated $1.03M annual cost reduction the remaining components required. This approach provides additional production efficiencies. For example, with material counts on the line being displayed in realtime in the stockroom, part outages on the production floor can be eliminated. Also, automated part usage counting on the line can totally eliminate the need for manual part counting after reels are returned to the stockroom. Setup verification With the implementation of an MES, manufacturers can achieve new levels of production efficiency by streamlining offline and online setup verification processes. Automated setup and verification enables materials traceability data to be collected in real-time, machine setup time dramatically reduced, and component tracking significantly improved. Additionally, the possibility of wrong component placement can be eliminated and advanced part outage warnings can further reduce machine downtime. Offline setup: Offline setup capabilities are used in the stockroom or the point-of-use setup area to associate materials license plates to the feeders for each setup. Offline setup functionality that can be provided by an MES includes such capabilities as parts and substitute parts verification and feeder unloading and checking. Online Setup: An MES enables online setup verification to be automatically performed on the assembly machine, at assembly time. The system verifies that the assembly machine programming matches the specified materials and their designated slot locations. Online setup capabilities provided by the system include such functions as initial setup and feeder changeover verification, setup and component moving, splicing, print setup configuration, setup and materials history viewing, feeder unloading history, machine status and scanned panels listing. Process traceability and quality management A comprehensive MES provides process enforcement and traceability capabilities for the electronic assembly line portion of the manufacturing operation from PCB and panel serialization through shipment. Assembly line process enforcement is enabled by placing electronic scanners at strategic points along the assembly line to scan serial numbers of board assemblies 14 Global SMT & Packaging September

6 and panels, allowing specific activities to be tied to the assemblies and their work orders. The overall system goals for this aspect of the production process include not only process enforcement, validation and verification, but also complete traceability for capturing and reporting process parameters for each routing step for each panel or serial number circuit assembly. These capabilities are key for minimizing defects, improving quality consistency and certifying process conformance. With regard to quality management, MES solutions can deliver significant functionality that enables manufacturers to effectively capture and manage defect information, address repair conditions, manage defect codes, and view quality metrics reporting including the identification of boards with frequent defects. An MES typically provides for defect inputs from quality inspections and repair, as well as for defect tracking. Defect data collection is integrated with work order routing and typically includes such information as status, defect, component part number, reference designator, operation, quantity, log time and component placement on the board. ERP/MRP meets MES: From coexistence to integration Until recently, it could be said that what happened on the plant floor, stayed on the plant floor. While the company s MES managed the manufacturing planning, processes and information at the plant level, ERP/MRP systems hummed along, operating independently, back on the corporate side of the world. However, as a rapidly growing number of companies have realized, to be profitable in today s competitive environment, a manufacturing organization must not only leverage the strengths of each system, they should be tightly integrated. Through the integration of these systems, manufacturers can establish a more powerful, holistic view across all the key functions of the organization from overall business operations to the myriad manufacturing-specific aspects. This provides much greater agility and better data to aid in decision making and forecasting, from sales and purchasing to asset utilization, hiring and manufacturing planning. However, it is important to note that while both MES and ERP/MRP systems can provide a view into what is happening within a the specific aspects of the business, ERP/MRP systems can only provide a snapshot. An MES is essential for providing management a way to utilize, react to and control the manufacturing processes and events being tracked. While ERP/MRP systems are essentially a reporting technology, an MES provides real-time visibility into shop floor operations, so that manufacturers can respond and monitor the immediate results that occur from adjustments. MES systems can feed accurate, timely information in the ERP/MRP system, such as production levels, work-in-process status, and part and serial numbers for tracking purposes. For example, using industry-standard database protocols, an MES can provide effective synchronization with MRP/ ERP systems by importing and exporting such information as inventory and BOM data, storage locations, customer and work order data, finished goods inventory, usage and scrap reporting. These integrated capabilities are especially valuable in today s competitive environment, where the marketplace demands faster and leaner manufacturing response times and where visibility into the plant floor system is increasingly important for responding to customer questions regarding delivery times and parameters. Also, the return on an ERP/MRP investment can be significantly increased by integrating it with the accurate, real-time, plant level information that an MES provides. 16 Global SMT & Packaging September