New reporting requirements: MES solutions help to meet them credibly

Green Deal, sustainability reports, Supply Chain Act: reporting obligations for companies are increasing – especially for SMEs.

The following applies to the manufacturing industry: regulatory requirements can only be credibly met with software support. This is why MES (Manufacturing Execution System) solutions are experiencing a renaissance. With MES software, companies can significantly increase resource efficiency in factories, reduce costs and document sustainable management in a traceable manner.

The political driver in Europe is the EU’s “Green Deal”. The aim of “Europe’s new growth strategy” is to make Europe the first climate-neutral continent by 2050.

Companies have to fulfill more and more reporting requirements – for example, annual sustainability reports. The big goal: less CO2 emissions. Sustainability information should be just as reliable as financial information – Photo: Freepik / Link: https://bit.ly/48ECyPS

More reporting obligations for SMEs too

In fact, companies in Europe are facing a series of new reporting obligations. The number of companies in the EU that have to submit an annual sustainability report is being significantly expanded in stages.

This is provided for in the new EU directive “Corporate Sustainability Reporting Directive” (CSRD). Among other things, companies must explain how they are reducing CO2 emissions step by step. This sustainability information should be just as reliable as financial information.

New reporting obligations for financial years 2024 and 2025

Under the CSRD, capital market-oriented companies that were already required to report must submit their sustainability report for the 2024 financial year (with a reporting obligation in 2025) in accordance with the new standards.

From the 2025 financial year (with mandatory reporting in 2026), non-capital-market-oriented companies with more than 250 employees and a net turnover of more than 40 million euros will also have to submit a sustainability report. Around 15,000 companies in Germany are expected to be affected.

Digitally controlled production ensures simpler, more flexible and more sustainable processes in production and planning. Manufacturing Execution Systems (MES) offer such control functions

Supply Chain Act: Responsibility from the raw material to the finished product

The “Supply Chain Due Diligence Act” (LkSG) has been in force in Germany since the beginning of 2023. “The aim is to improve the protection of human rights in global supply chains,” explains the Federal Ministry for Economic Cooperation and Development (BMZ). “Companies in Germany also bear responsibility for this.”

The due diligence obligations of companies “generally extend to the entire supply chain – from the raw material to the finished sales product”. The law initially applies to companies with more than 3,000 employees (around 700 companies), and from 2024 also to companies with more than 1,000 employees (around 2,900 companies).

On the way to the ‘digital enterprise’

In recent decades, the IT industry has created solutions for sustainability and ESG reporting. They are designed to make it easier for companies to meet the latest ecological requirements in a synchronized and credible manner, in addition to economic ones.

IT concepts for higher profitability now incorporate environmental sustainability and are being used more and more in factories. No sustainability without IT: Siemens summarized the development of the SPS in autumn 2022 as follows: “Simpler, more open, more flexible and more sustainable production and planning processes – all this is possible through end-to-end automation and digitalization towards a digital enterprise.”

IT industry develops suitable toolkits

SAP offers “cloud-based sustainability solutions that enable you to manage your carbon footprint, reduce material waste and become a socially responsible company”.

Specialized IT management programs such as the SAP Profitability and Performance Management (PaPM) solution are designed to enable companies to analyse and optimize their business processes. This involves reconciling economic and ecological performance: “Align sustainability and profitability models and gain the in-depth insights you need to achieve healthy performance targets.”

MES solutions remain the central data hub in manufacturing companies. Modern MES offer a wide range of apps and functions in 2D or 3D – from performance analysis with overall equipment effectiveness (OEE) to energy monitoring and traceability (track and trace)

Renaissance of manufacturing execution systems

Economically and ecologically sustainable production in the digital age is only possible with modern IT solutions. The proven formula attributed to Lord Kelvin applies: I can only improve what I measure.

In manufacturing, value creation takes place in the factory. This is why a tried-and-tested IT solution is experiencing a renaissance: Manufacturing Execution Systems (MES). With the introduction of the term “Industry 4.0” in 2011 and the Industrial Internet of Things (IIoT), more and more companies are taking advantage of the opportunities offered by data-supported production, so-called smart manufacturing. Accordingly, manufacturing companies are rediscovering manufacturing execution systems as central data hubs for production.

Excursus: MES vs. IIoT – a distinction

The terms MES and IIoT are often treated as competing approaches. However, the two solutions complement each other perfectly. This is because they both have a common goal: to help companies produce more efficiently in manufacturing.

Both concepts are about using digitally recorded data in production to enable analyses, minimize errors, draw conclusions and optimize products and processes.

MES remains ‘single point of truth’

But there is also a significant difference between the Manufacturing Execution System MES and IIoT. In its white paper “MES and Industrial IoT – Requirements for shop floor IT for successful smart manufacturing”, the German Engineering Federation VDMA states: “The MES remains the ‘single point of truth’ across the entire value chain on the shop floor.

“The IIoT generally collects technical real-time data (…) from a machine or system. (…) An MES, on the other hand, brings the recorded technical data (…) into an overall business context. Both the ERP (Enterprise Resource Planning) planning level on the one hand and the automation level with IIoT solutions on the other can be integrated into a modern MES system.”

The IT concepts of MES and IIoT are often seen as competing approaches. However, the two solutions complement each other perfectly. help companies to produce more efficiently

MES, IIoT, ERP: three out of four pillars are IT systems for greater efficiency

MES solutions therefore enable optimization from the shop floor to the top floor – a key prerequisite for greater competitiveness. To this end, the VDMA defines four pillars for (resource) efficiency and competitiveness in modern production:

• IIoT – provides technical data and optimization at the level of machines and process steps
• MES – a Manufacturing Execution System puts the data in a business context to optimize entire process chains and production areas
• ERP system – supports business processes such as purchasing, sales, material and production planning or warehousing
• The Lean Production management concept – it benefits from the transparency provided by MES with a focus on organization and efficient processes

The VDMA summarizes: “Ultimately, the four-pronged combination of ERP, MES, IIoT and lean production ensures that industrial production remains competitive and continues to be accepted as an important pillar of society in the future.”

Manufacturing Execution Systems as a central data hub

MES solutions are the central data hub: companies can precisely measure important consumption and resources in production such as electricity, water, pressure, waste heat, etc. and optimize planning processes throughout the company.

Three MES functions play an important role in practice when it comes to optimizing and documenting environmental sustainability:

• MES energy monitoring module
• MES performance analysis module (with the key figure overall equipment effectiveness OEE)
• MES traceability module (Track and Trace)

Less power consumption thanks to MES software

There is a particularly good example of the measurably sustainable benefits of MES solutions in the automotive sector: a globally active supplier group aims to achieve CO2-neutral production by 2035. The subsidiaries are responsible for its implementation. The factory team of a subsidiary in Baden-Württemberg, Germany initially connected the most important factory machines digitally as a measure for greater energy efficiency.

The team then began to correlate the performance data of the machines with their energy data using the MES software. The result: since then, the machines with the lowest energy consumption can be used for each order. Measurable result: Energy consumption has been reduced by more than 20 percent over several years, while processes have remained the same and production volumes have increased.

Dashboard example with current and historical performance analyses along the overall equipment effectiveness OEE. Correlating performance data with energy monitoring can significantly reduce energy costs

Reduce costs with the OEE key figure

The importance of a modern Manufacturing Execution System is demonstrated by the cost efficiency alone: by using an MES performance analysis, companies can increase the degree of utilization of machines, measured in terms of Overall Equipment Effectiveness (OEE), by significantly more than ten percent even in the pilot phase.

A further rollout to an entire machine park has been proven to increase efficiency by more than 20 percent. Assuming a realistic hourly rate of, for example, 2 euros per minute for certain production processes, it is conceivable what financial benefits a company can derive from the increased degree of utilization.

Minimize material waste with the MES Track & Trace function

The traceability function (Track and Trace) in a Manufacturing Execution System MES is also an important prerequisite for both commercially successful and ecologically sustainable management.

Today, buyers and the public expect manufacturing companies and suppliers to be able to document the location, time and method of processing materials, parts, ingredients and end products with complete transparency.

Minimize compensation risks

The use of an MES Track & Trace solution pays off in several ways: From a production perspective, companies can conserve resources and reduce their ecological footprint. Track & Trace data from entire process chains can be used to determine where and why rejects are produced at which workstation. The quality rate can be significantly increased accordingly.

There is also an important commercial-legal advantage of a Track & Trace module in a Manufacturing Execution System: the risk of claims for damages can be significantly minimized in advance if it can be precisely proven that the cause of the claim for damages cannot be found in your own company.

IT solutions for energy and resource efficiency are promoted

In Germany, the use of IT solutions for energy and resource efficiency in factories is promoted at many levels. The Federal Office of Economics and Export Control (BAFA) maintains a list of eligible energy management software for the federal government. The corresponding solutions from our FORCAM ENISCO group of companies are also subsidized.

Overview of the MES solutions from FORCAM ENISCO:

• MES LITE for standard analyses that can be started quickly
• MES FLEX for flexible planning and real-time analyses
• E-MES for partially to fully automated production types

Summary: MES most important IT toolbox

In manufacturing companies, IT solutions ensure modern shop floor management that can significantly increase resource efficiency, reduce costs and credibly implement and document ecologically sustainable business practices.

As a data hub between IIoT solutions, ERP and the lean management approach, modern MES software enables the sustainable optimization of complete manufacturing processes and supply chains. All in all, manufacturing execution systems offer the most important toolbox for achieving the overall social goal of ecological sustainability.