The Growing Importance of Cloud Technology in Supply Chain and Manufacturing

Companies are recognizing the opportunity of using an advanced manufacturing execution system in the cloud.

Srivats Ramaswami
Srivats Ramaswami

The manufacturing execution system (MES) industry has been maturing rapidly over the past two decades. The term MES was first used by AMR Research (now part of Gartner) in the 1990s and was the heir apparent to the computer integrated manufacturing (CIM) term first coined in the late 1980s. This era was well before many industry standards were established and before enterprise resource planning (ERP) took root as the main IT backbone for most global manufacturing companies.

Because of market conditions, many early MES systems were closed, lacking the configurability and flexibility needed to adapt to changing business needs. This caused many early implementations to have a very high service-to-software ratio and often created an implementation process that seemed to have no end. For these reasons, MES earned a reputation early on as an expensive and risky endeavor that often did not deliver on initial return-on-investment (ROI) goals.

During the late 1990s and early 2000s, the growth and consolidation in the ERP market was unprecedented. Market conditions gave rise to a number of vendors wishing to rebrand and differentiate themselves from the products of the past, namely MES. Many of these vendors took up the term manufacturing operations management (MOM), and referred to their offerings as a MOM solution or a MOM platform.

Cloud Software and Solutions Become Mainstream

Over the past decade, there have been several notable examples of major software solutions being provided as cloud solutions. This includes offerings from Salesforce, Netsuite, Workday and others. These successes helped bring the cloud to the forefront of enterprise discussions.

Companies in the manufacturing industry are recognizing the opportunity of offering an advanced, proven MES/MOMS solution in the cloud. Gartner noted that there is a growing market for cloud technology throughout the supply chain of large original equipment manufacturers (OEMs), as well as in plants and divisions of larger companies.

According to Gartner:

As manufacturers move to make their plants more visible in their supply chains, cloud-based MES capability becomes more of a necessity. The inherent benefits of multitenant cloud implementation include lower IT costs, faster implementation and increased data visibility. These represent a strong competitive advantage for any company offering cloud-based MES. In turn, the availability of cloud-based manufacturing data is a competitive advantage to manufacturers looking to improve supply chain performance through manufacturing/supply chain collaboration.

Implementing a Cloud Solution

With today’s cloud technologies, new systems can be implemented in a matter of weeks—and later updated without delay or major disruption. At the same time, cloud MES solutions give businesses the flexibility to pay for what they need, when they need it. Consider this example from 42Q, a cloud MES with a strong presence in electronics manufacturing: This 42Q customer’s analysis of potential MES solutions found on-premise deployment would incur high up-front costs and take up to a year to implement, with no guarantee regarding fit or function. This company’s product is complex, involving intricate subassemblies that require advanced processing at multiple plant locations. To accommodate growth and new production lines, it needed a flexible, easy-to-use MES that would enhance visibility across plants.

The operations team began the procurement process by reviewing on-premise solutions, but quickly gave up upon discovering that, with traditional MES solutions:

  • Initial costs would exceed $1 million, and require at least one year of configuration and customization work.
  • Ongoing maintenance would also involve substantial recurring costs. The IT team would have to be called for each change or realignment.
  • Factory managers estimated productivity losses of 80 percent due to configuration disruptions.
  • The high levels of expenditure and risk would require months of product evaluations before deployment could begin.

Based on its analysis, this company chose to deploy 42Q’s cloud-based solution on five production lines. The lines were up and running within eight weeks, and to this point, the customer only spent $50,000. It was able to use this initial, right-sized deployment to prove the value and fit of the solution within its production environment. The operations team and factory managers reported minimal disruption to productivity, and were surprised by how simple it was to integrate lifecycle management and ERP systems.

The Time to Consider Cloud Solutions for Manufacturing Is Here

For many manufacturers, change equals risk. Disrupting their factories can cost millions. Given this, many manufacturers are reluctant to embrace far-reaching changes to industrial infrastructures and processes. However, manufacturers can start down this path by resetting expectations and asking their personnel to think differently.

Andrew Hughes at LNS Research sums it up nicely:

Only 20 percent of manufacturing facilities currently have an integrated MES solution installed and, in the past, the thought of implementing a large-scale MES solution has been daunting. An easy-to-deploy, cloud-based solution with the right applications and shop floor connectivity for discrete manufacturing can help many to overcome the difficulties of getting started.