Tuesday, March 15, 2011

Applying "Monkeynomics" To Manufacturing Solutions

Once again I am involved with a company that is being steered by the “ERP is all you need” approach. I thought that by now we have come to peace with the fact that different systems provide solution to different problems. That ERP has found its place and made peace with MES and other shop floor systems. Maybe it is just human nature and we cannot stop ourselves from making the same mistakes over again. I was just watching one of the TED talks about "Monkeynomics" (see embedded video below). It seems that we as humans have something called “Loss Aversion”, i.e. we will take risks in order to avoid loss rather than play it safe.  This is an interesting observation that in retrospect explains a few of the odd behaviors that I have seen from companies in the past.

Another phenomenon that I find intriguing is the flawed notion that general economic methods are universally applicable. In other words the perception from people with business (or more precisely financial) background that it applies in all domains and all situations, specifically when applied to Manufacturing Systems solution. This means that everything that is in the past is money already spent and that we have to consider future state with no regard to what we currently have. Never mind the sweat and tears that where shed in putting a solution in, the extra hours, the training, etc. The current solution may not be perfect (but who or what is?) but it works, people are trained, they are using it, the company knows how to maintain it, in fact it adds value!  Yet, from a business perspective, which I equate to “the accounting or CFOs perspective”, we should disregard all of this; it is all water under the bridge. Just imaging the disruptions that will occur when the solution is gutted and a new one put in place, time, money, sweat, and tears – I just do not get it? We are slaves to this economic theory, investment planning only looks to the future and all that we have done in the past is irrelevant – I guess I will go out and get my memory erased - problem solved.

Monday, March 14, 2011

The Difference Between Accountants and Production Managers

This is an excerpt from a white paper that I authored a while back. I was helping a company with selecting an MES where ERP (SAP in this case, before SAP ME) was included in the mix as if it would be able to provide MES functionality with no constraints. It prompted me to write about the differences between MES and ERP.

ERP systems are designed to be very effective accounting systems. MES systems are designed to aid in shop floor management. It is naive and risky to assume that one of these systems can be extended to effectively do the other’s job. Similarly, one would not assign an accountant to be a production manager, or vice versa. Each might be an expert in his own field, yet it takes a completely different set of skills, expertise and knowledge to effectively tackle each task.  
Industry experience and best practices, as well as academic literature, strongly suggest integration of ERP and MES rather than the extension of either. The best approach is to implement a best-of-breed MES that is easily integrated into ERP. The benefits that can be gained are immense. They are in fact what will truly and finally allow organizations to realize some return on the large ERP investment.
I wrote this back in 2004 and the reason I came back to it now, since a customer that I am currently helping is doing it again. Well it seem that history repeats itself, and I can only say here we go again....