Thursday, June 23, 2005
Kevin Reilly
AMR Research released a report today that found global Manufacturing Execution System (MES) market revenue reached an estimated $1.06B in 2004, a 50% increase since 2001. Compliance initiatives and ERP maturity are the two major drivers that have combined to create a perfect environment for MES market expansion.
“In 2001, the vast majority of the Fortune 1000 manufacturers AMR Research surveyed were in the throes of massive ERP rollouts,” said Alison Smith, senior research analyst at AMR Research. “As these draw to a close, manufacturers are realizing that their ability to effectively measure and manage the performance of their manufacturing assets hasn’t proportionately improved.”
AMR Research’s recent report identifies three main reasons for this imbalance:
- Focus on application rationalization: In the rush to rationalize ERP systems to support standardizing business initiatives during the dot-com era, manufacturing, inventory management, and plant scheduling played second fiddle.
- Lack of a real-time enterprise: ERP systems require production actuals to deliver the next level of benefit to an organization. In the absence of real-time manufacturing data, ERP will continue to drive business on a set of erroneous data.
- Myth of lower Total Cost of Ownership (TCO): While lower TCO and the prospect of maintaining a single, omnipotent application have been seductive selling points at the corporate level, reality is settling in at the plant level. If ERP has to be heavily customized to support manufacturing, as is often the case, lower TCO goes out the window.
Since 2001, an increasing number of companies have begun to use MES to make the connection between enterprise systems and manufacturing. Industry specific examples of this include:
- The A&D market for MES grew from an estimated $23M in 2001 to $57M in 2004 – an increase of nearly 150%.
- MES revenue from sales into the food, beverage, and consumer products segment more than doubled from $30M in 2001 to $61M in 2004. The increase is due to the need to rapidly and consistently manage production across a high mix of brands and globally distributed manufacturing facilities.
- Quality control and warranty cost recovery initiatives in the automotive industry caused MES revenue from sales into this segment to hit $52M in 2004, up from $21M in 2001.
- The computer, electronics, and semiconductor market grew 39%, from $201M in 2001 to $280M in 2004.
The AMR Research report found that despite consolidation in the last five years, the MES market continues to support a myriad of best-of-breed vendors; no single vendor dominates the market. AMR Research predicts large automation vendors such as GE Fanuc, Invensys, Rockwell, and Siemens will increase their footprints in specific vertical segments.
Automation and “pure-play” vendors saw the largest growth over the past three years. Automation vendor revenue grew $208M (75%) from 2001 to 2004 while pure-play vendors grew $140M (114%).
AMR Research first coined the term Manufacturing Execution Systems (MES) in November, 1990. The most recent report, “MES Market Rides Perfect Storm Through $1B Barrier,” provides detailed information on the market size, vendor coverage areas, and recommendations for users seeking to extend visibility into their production environments. For more information on the report, please contact AMR Research at 617-542-6600 or visit www.amrresearch.com.
About AMR Research:
AMR Research provides world class research and actionable advice for executives tasked with delivering enhanced business process performance and cost savings with the aid of technology. Five thousand leaders in the Global 1000 put their trust in AMR Research’s integrity, depth of industry expertise, and passion for customer service to support their most critical business initiatives, including supply chain transformation, new product introduction, customer profitability, compliance and governance, and IT benefit realization. More information is available at www.amrresearch.com.
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