Amplifying Value: The Significant Benefits of Connecting ERP and MES

Amplifying Value: The Significant Benefits of ERP and MES Integration in the Manufacturing Industry

As pressures on today's manufacturers continue to intensify, Enterprise Resource Planning (ERP) solutions alone are not robust enough to manage all of the modern-day manufacturer's daily tasks and strategic demands. Today's leading manufacturers harness the power of best-of-breed Manufacturing Execution/Operations System (MES) platforms together with Enterprise Resource Planning (ERP) systems. This combination enables them to access the business-critical data they need to address today's manufacturing pressures, tap into significant operational benefits, and ultimately become Smart Factories set apart by their level of success.

In this blog, we'll take a closer look at the role of the ERP and MES, quantify some of the benefits of the two systems working together, then examine six specific areas that can amplify value for today's manufacturers.

What is an ERP?

An ERP is often defined as a suite of integrated applications that an organization uses to collect, organize, manage, interpret, and store data from various areas of the enterprise. Capabilities of an ERP may include the integration of financial information, customer order information, business processes, customer order fulfillment, HR information, and customer service. ERP systems have traditionally provided manufacturers with the essential operational backbone to enhance efficiency, but there are drawbacks to having only an ERP in place without an MES. ERPs often do not align with the realities of the manufacturing plant floor. While some ERPs may offer capabilities for the plant floor, we usually see this use case in less demanding manufacturing environments. An ERP cannot typically support many of the requirements below often required in more complex assembly manufacturing environments, such as real-time IIoT data management, real-time factory floor material management, production control, and material & process traceability, to highlight a few.

What is an MES?

A manufacturing execution & operations system is usually a dynamic information system that powers the effective execution and management of complex manufacturing operations. It can be used to track, control, and monitor the entire manufacturing process in real-time. An MES provides critical information that helps manufacturers make smarter decisions based on current factory floor conditions, thus optimizing processes instantly and improving production output. Plant production processes are often manual and siloed without an MES solution, which doesn't allow for real-time adjustments, feedback measurements, and optimization. With an MES in place, manufacturers can achieve greater control and visibility at the factory floor level.

Making a case for ERP and MES

The alignment and integration of ERP and MES create an opportunity for manufacturers to leverage their joint capabilities to discover enhanced efficiency and visibility. The true value of ERP and MES together is demonstrated in the results. Findings from an Aberdeen Group survey show that today's manufacturers who are using ERP and MES integration along with other systems together in their factories realize many compelling benefits, including:

• 57% coordinate operations with customer service, logistics, and delivery, when only 26% of all others do the same.
• 53% standardize production planning and execution when only 27% of all others do the same.
• 41% produce variance reports when only 22% of all others do the same.

Let's explore some key areas where ERP and MES work together to achieve synergistic benefits:

1. Item Master and Bill of Material Management: Within an ERP environment, an organization's objective is to manage part master records for product definition, material planning and ordering, and product costing. Within the MES, the aim is to manage and validate part lists for manufacturing and affirm BOM integrity. These combined capabilities ultimately ensure accuracy, optimize inventory, and reduce waste.
2. Process Planning and Production Costing: Within an ERP environment, workers define the work centers and the routings that a product will flow through, and the material and labor costs needed for activity-based costing. The MES takes it to another level of detail by defining and managing the granular route with physical resources mapped to ERP cost centers and time standards for each operation performed. Together, these two systems accelerate time to value, improve quality, and ensure consistency.
3. Warehouse and Material Management: The ERP uses data to balance out demand and supply and manage material transactions with a financial lens. Within the ERP, workers will find inventory locations available to fulfill demand requirements. An MES enhances ERP by inverting the 'materials push' model to the lean, demand-driven 'pull' model. Leveraging Lean principles, the MES optimizes and enforces receiving and warehouse policies and procedures tracks materials, and minimizes excess stock. Together, they ensure the availability and usage of the right parts at the right time, minimizing material inventory & maximizing production uptime.
4. Production Planning and Scheduling: The ERP's goal is to take top-level demand from forecasts and actual customer sales orders and apply it to tactical planning and scheduling—which is where the MES comes in. An MES environment is designed to solve the daily/short-term scheduling challenges in a multitude of different circumstances. The MES provides accurate live modeling of material stock, including locations and consumption rates, together with hierarchical product knowledge, eliminating work-order cut-shorts, product starvation, and excess shop-floor material inventory. By leveraging the long-term capabilities of the ERP and the tactical capabilities of the MES, manufacturers can strategically cluster jobs, increase equipment utilization, and achieve unprecedented flexibility.
5. Production Tracking and Material Execution: Once production begins, a manufacturer starts accumulating costs against work orders, and an ERP then tracks production by cost center and kit or backflush inventory. An MES dynamically presents work instructions for operators, ensuring production units follow their planned—and unplanned—routes, capturing all events and transactions from operators and equipment, and providing evidence of the work performed as part of the unit's build history. The MES reduces inventory costs, mitigates errors, and enables continuous improvement.
6. Business and Manufacturing Intelligence: Within the ERP system, you can receive actionable messages about supply chain and order management data. Reports and information help drive greater profitability by highlighting things like costing variances between standards and actuals. The MES provides actionable data for production and overall manufacturing operations, with real-time alarms and dashboards offering up-to-the-minute information for changes and corrections during production. Additionally, the right MES should be including the product's genealogy, the route, the operators and machines and times the unit passed through them, test results, parametric data, quality data, rework and replaced component history, machine data, recipes, packaging records, tooling used, and even the personnel that approved the release of the production order to the floor. Having these two fundamental pillars working together drives valuable business and actionable manufacturing intelligence.

Amplify the Value of the ERP and MES Combination

Connecting an MES and ERP enables manufacturers to leverage their combined capabilities and transform into a true Smart Factory. Aegis' FactoryLogix® platform is key to this process, as a unique IIoT-based platform upon which Manufacturing Operations Management capabilities reside. The solution is designed for today's manufacturing reality and connects the entire enterprise to support and collaborate with ERPs. This uniquely adaptive ERP system and MES solution drives enterprise-wide compliance, quality, and enhances operational efficiency, helping manufacturers discover greater returns.

To learn more:
(1) Watch our on-demand webinar: MES & ERP: Better Together 
(2) View our Infographic: The Synergistic Role of MES and ERP in Modern Manufacturing Success