MESA unconference: ROI & Justification for Manufacturing IT Solutions
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1 MESA unconference: ROI & Justification for Manufacturing IT Solutions (Original presentation available on MESA site library) Co-Hosts Darren Riley Solution Consultant Apriso Chair, MESA ROI WG Scott Daugherty Sr. VP Business Development Cormetech Treasurer, MESA Int l Do you know MESA?
2 ROI Guidebook - Highlights 5/5/2014 Update Available on MESA Site Project Definition Defining the project Stakeholder ID Benefits ID and Analysis Issues & impact ID Business Impact Quantifying benefits Cost Components of ROI Equation Lifecycle Costs Cost outside MES/MOM Planning, prep and feasibility phase Project Development Phase Support Phase Other methods of Cost Definition Soft Costs Cost-benefit Analysis ROI Payback Time Value of Money Capital Structure Net Present Value IRR & Modified IRR Project go/no go criteria Mutually exclusive projects Real option method Capital budgeting process Organizational Alignment Sustained benefits IT Plan for evolution Copyright 2013, MESA International
3 Member Example MES ROI/Business Case Scott Daugherty Sr. VP Business Development, Cormetech Treasurer, MESA International ( ) Do you know MESA?
4 Cormetech, Inc. SCR Catalyst Design, Manufacturing and Testing for Gas, Coal, Diesel, Fuel Oil Applications in Stationary, Refinery/Process and Marine Industries
5 Justifying and Delivering an MES Project: Process Steps Baseline As is Performance and State Vision To Be: Keep it Simple and Efficient Charter Specifically Define the Problem, Measures, Deliverables, Boundaries Buy In Build a Sense of Urgency and Gain Appropriate High Level Support Team Get the Right Members Including End Users Scope LIMIT SCOPE DIGRESSION, DIVERSION: Develop Phased Approach Progress Reports Schedule Routine Updates to let the Team Members Shine Deliver Complete Phase 1 and Build Credibility
6 Cormetech s MES Purpose - Vision Develop and Install a Manufacturing Execution System to: Automate shop floor data collection Decrease plant labor time to manually record and enter data Improve the quality of data Decrease the time for production and defect tracking reports Increase Material Utilization% (Yield) Significantly reduce set up errors Create a more detailed genealogy for troubleshooting Provide linkage of the shop floor data to the corporate ERP for financial analysis for manufacturing metrics
7 Chartering Parts of a Charter Description Background/Baseline: Define the current situation Team Name: Team decides Stakeholders: Align organization with corporate management support Sponsor: Clears roadblocks for team Team Leader: Leads team Team Members: Perform team activities Support Team: Pulled in as needed, but not full time part of team Purpose/Mission Statement: Be specific Expected Deliverables Goals, objectives and dates a. Specific deliverable 1 b. Specific deliverable 2 Measures of Success What operations/financial will improve and when a. Specific operational / financial measure 1 b. Specific operational / financial measure 2 Boundaries / Scope Process Start: Process End: Must Meet: Tools: Constraints: Assumptions: Beginning of flow cart where team will have responsibility End of flow chart process where team will have responsibility End of flow chart process where team will have responsibility Flow charts, requirements documents, software, etc. resources, time, focus areas, equipment, software versions, etc. Team's members time availability, things assumed for success Keys: 1. Develop charter and gain stakeholder approval first 2. Be extremely specific on the definition of the purpose / mission 3. Diligently manage number of deliverables and project scope at start to ensure early success 4. Tie operational measures to financial results
8 Manufacturing Execution System - Team MES Steering Committee Responsibility Database Analyst Integrator Project Manager Plant Manager Director of IT Operations Manager Quality Engineer Process Engineering Supervisor Maintenance Supervisor Planning Coordinator Integrator Application Specialist Integrator Application Specialist Software Specialist Role MES Project Leader (internal owner) Integrator Project Leader (external consultant) Sponsor Sponsor Subject Matter Expert Subject Matter Expert Subject Matter Expert Subject Matter Expert Subject Matter Expert Programming Programming Software Keys: Get the right people on the team to ensure success
9 Project Scope Keys: Rigorously use phased approach to manage initial project size Get an early win to gain credibility by increasing probability of success of delivering a successful Phase 1 Then continue process to build out the system with future phases
10 Manufacturing Execution System - Example Progress Reports Project Milestone Chart Deliverable Scheduled Completion Requirements Document Dec 6, 2017 Project Kickoff Feb 3, 2018 Project Design Definition Feb 17, 2018 Final Design Review Apr 17, 2018 Development Apr - Jun Field Acceptance Test Jun 16, 2018 System Deployment Jun - Aug Site Acceptance Test Aug 7, 2018 Training Aug 13, 2018 System Start Up Aug 27, 2018 Keys: Set schedule and meet it Communicate with sponsor and stakeholders frequently on progress
11 Cormetech s MES Measures of Success Increase Material Utilization Yield by 2% Increase Operations Associate Labor Productivity by 3.75% Improve Work in Process Inventory Accuracy Streamline Capacity Scheduling Decreased Process Cycle Time Improve Data Quality Error Proofing Process Set Ups ERP Integration MES Scalability
12 Financial Tools Described in detail in ROI and Justification for MES Guidebook ROI Return on Investment: ROI = Payback time to recoup investment Monthly Payback Time = (Gain from Investment - Cost of Investment) Cost of Investment Total Cost of Project Monthly Gain Present Value Future year x value today = Future year value (1 + discount rate) x
13 Summary Be extremely specific on the mission / purpose of MES Sponsor and team leader develop the charter and gain stakeholder support before forming the team Team should include appropriate resources for success Relentlessly manage the phase 1 scope: move nice to have features to future phases Deliver on phase 1 to gain credibility Communicate milestones regularly to sponsor and stakeholders Tie operational measures of success to financial results
14 Join the discussion. Join MESA. As MESA sets off on its journey for the next 20 years, the only thing missing is YOU! Contact MESA Headquarters or visit mesa.org to join today.
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