ROI vs. the Need to Meet Business Objectives- A Key Part of Manufacturing Intelligence

Business metrics are important in any industry, and this is especially true when it comes to manufacturing. ROI is a very important yardstick to keep in mind, and if you hit this one it’ll most likely increase both customer and management satisfaction.

So often while working with clients and prospects, we hear them speak about having to provide ROI to management. This perspective became even more evident at the 2011 MESA Conference – a national conference focused on operations excellence through the effective application of technology solutions and best practices. A challenge of proving ROI is the number of variables vs. KPIs (Key Performance Indicators) – they are often difficult to nail down and gain alignment. Another hurdle to this approach is that the initiative is often being driven by those in manufacturing, rather than management – those responsible to meet commitments to the business. These commitments usually fall into one of a few categories:

increase production to meet demand
reduce waste due to defect, or
scrap, or reduce production costs.

During a round-table discussion at the MESA Conference it was brought out, and agreed by many, that the matter of fact is manufacturing systems and manufacturing information systems are not only a case of Return on Investment. Rather, they are the tools an organization must have in place to meet commitments to the business and its customers.

This thinking can transform the way those investing in systems view the expense. Rather than the demand of ROI, we as manufacturing professionals ought to be driving the value to the business and it enabling our ability to meet the commitments made. For one organization this may mean how to best leverage unused capacity at other alternate plants. For another it could be the rescheduling of certain batches and staff to better meet a demand about to exceed capacity. And for yet another the challenge could be how to maximize energy usage and minimize energy costs.

While it’s true that an ROI could be realized for each of these, the business usually does not say “show me the return on mission critical applications and procedures.” What we often hear the business say is, “provide me the best method to accomplish what we’ve committed, or been committed to.”