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  • Writer's picturePaul Hogendoorn

EVERYTHING YOU WANTED TO KNOW ABOUT MES AND ERP - BUT WAS AFRAID TO ASK!


Manufacturers are sometimes overwhelmed by the introduction of three and four-letter acronyms that describe things they are said to need to be adopting and incorporating to have any chance of surviving into the future. ERP, MES, IIoT, Industry 4.0, “Smart Manufacturing”, “Digital Transformation” – where did all these terms come from, and what do they mean to your company?



Let’s sort through that fog, but first things first: manufacturers deliver the goods every day and every week of every year; day in, day out; week in, week out. It’s on time, or its late. There is no “substantially complete”, or almost done, or nearly on time; its done or its not, its on time or its late. It works or it doesn’t. That’s the manufacturers’ world - a real, tangible, tactile world. They deliver a good product that does what its supposed to, on time, with a warranty, and for a competitive price. If they do all that, they stay in business and earn the opportunity of meeting their customers’ demands tomorrow. And if they don’t, they’re out of business. So, whenever a manufacturing company leader asks me about one of these new terms and technology topics, I start by reminding them the smartest person or people in the room is them. Whatever technology a they choose to adopt should be on their terms, to suit their purposes, and to fit their processes.


Many manufacturers I talk to don’t know what most of the new terminology means, or how it really applies to their business. They often feel at least a small level of insecurity because of that, which causes them to delegate critical investment of time and money decisions to people that know technology (or the new technology terminology) but not the actual processes or products made in their plants. Delegating the selection of new technology completely to technology knowledgeable people instead of manufacturing knowledgeable people usually costs the company not only money, but time.


So, here’s a “everything you wanted to know about technology but were afraid to ask” list of questions I get asked:


Q: What is the definition of ERP?


A: “enterprise resource planning” software, the management of all the information and resources involved in a company's operations by means of an integrated computer system.


Q: What is the definition of MES?


A: “manufacturing execution systems”, computerized systems used in manufacturing to track and document the transformation of raw materials to finished goods.

There seems to be a lot of overlap there.


Q: What is the difference between ERP and MES?


A: An MES tracks and collects information about each product through all stages of the production process. An ERP is an integrated suite of software applications that business managers can use to run almost every aspect of their organizations. An ERP may include an MES module, or an MES can be standalone software.


Confused yet? If you are a technology person, it probably makes sense, and the differentiation may be as simple as this: MES systems are typically connected to machines and measure processes while ERPs typically measure the activity of the jobs. MES systems measure against a fixed efficiency target (OEE for example) while ERP systems measure actual against planned time and targets for each job.


If you are a production focused person in a high mix, low volume operation, it usually comes down to getting jobs done according to what was planned. Did you deliver what was planned for, when it was planned? Success means being able to answer both of these questions with “yes”; failure is not being able to answer both questions with “yes”. Technology people suggest that you should use the ERP system to answer the two “yes-no” questions (did you deliver what was planned when it was planned?”) and an MES system to give you more insights and data to refine and optimize your processes to make sure you get “yes-yes” answers more often in the future.


But, why two different but heavily overlapping systems? And where should things like bills of materials, work instructions, production schedules and checklists reside? The biggest reason this ambiguity is a major concern for many manufacturers is the cost and time associated with deploying either an ERP system or an MES system. Its important to getting the deployment – whichever you choose to do first – right.


Q: why are there two different systems in the first place?


A: ERP systems evolved from MRP (material requirement planning), which was created more from an accounting and administration perspective than an actual machining and producing perspective. MES evolved from machine monitoring, which was driven from an engineering and machine efficiency measurement perspective. One started out as a tool for administration, procurement and planning, and the other started out as an engineering and maintenance tool for machine monitoring, process improvement, and downtime reduction. As they both continue to evolve and expand, there is now a lot of functional overlap.


Q: what should a manufacturer do first – ERP or MES?


A: there are a couple of significant differences worth clarifying. MES systems are generally far less expensive and far easier to implement than ERP systems and there is far less disruption and inconvenience to the day-to-day operation of the business. MES systems are generally priced in the 10’s of thousands of dollars range (2 year, SaaS contract) and can be fully deployed in weeks while ERP systems are often priced in the 100’s of thousands of dollars range and routinely take 6 months to a year to get fully deployed. MES systems typically deliver actionable insights within 60 to 90 days, and if those insights are acted upon, the return on investment is very short, sometimes within 90 days.


MES systems are great for engaging production personnel and feeding empirical information into a company’s CI (continuous improvement) team and process. Although the ERP investment is bigger, is often disruptive, and takes more time, it has one significant and important advantage (in my opinion): an ERP system can provide visibility on the primary metric that matters most, which is, is the work getting done when its supposed to be done at the cost at which it was expected to be done? An ERP should be able to answer that question for you, while MES systems provide (again, in my opinion) typically indirect metrics and measurements of success, such as uptime, runtime, OEE, and opportunities for process improvement (downtime).


So, which one should you do first? It depends on what you see as your biggest need in your business is. Some companies have adequate production planning and administration systems already in place so starting with an MES system would make sense. Others don’t have the financial visibility and accountability on a product by product or project by project basis, and that lack of certainty is affecting their ability to win business or know what part of their business they should grow (or let go). In that case, an ERP would make sense.

In short, ERPs place a focus on the products being produced and the costs and resources involved; MES on the other hand places a focus on the machines and various plant floor level processes, looking to improve efficiencies of the machines and processes. In a steady state production facility (where the same products are continuously run, processed or packaged), an MES system may be most beneficial investment to make. In a custom job shop, where the company produces single or low volumes of complex products, an ERP may be of more benefit. Some companies start with an MES because it’s the less expensive and easier to implement, use the visibility to drive engagement and productivity, and then use the data and insights to better focus and measure their continuous improvement efforts, while taking the extra time to make sure they make the right ERP decision.


The most important takeaway from all this ties back to the second paragraph: no one knows your business as well as you. As a LEAN colleague of mine always says: “people first, process second, and technology third”. Expensive technology doesn’t always make your business better, especially if it doesn’t fit your processes or doesn’t work for your people. From a LEAN perspective, whatever does not add value to your customer is considered waste, whether that’s in administration, engineering, or production.


Your technology choices should be focused on what delivers the most value to your customers – now, and in the future. What tools make your people better, your processes better, and your product better?


The question is not really about technology at all – its all about your business.


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