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How can you calculate the total cost of ownership for an MES software solution?

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If you are considering investing in an MES software solution for your manufacturing operations, you need to evaluate not only the initial purchase price, but also the total cost of ownership (TCO) over the lifetime of the system. TCO is the sum of all direct and indirect costs associated with acquiring, implementing, operating, and maintaining an MES software solution. In this article, we will show you how to calculate the TCO for an MES software solution and what factors to consider in your analysis.

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1 Purchase price

The purchase price of an MES software solution is the most obvious and visible cost, but it is not the only one. Depending on the vendor, the pricing model, and the scope of the project, the purchase price may include the software license fee, the hardware and infrastructure costs, the installation and configuration costs, and the initial training and support costs. You should compare different options and negotiate the best deal for your specific needs and budget.

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2 Implementation costs

The implementation costs of an MES software solution are the expenses related to the planning, design, customization, integration, testing, and deployment of the system. These costs may vary depending on the complexity, scale, and duration of the project, as well as the availability and expertise of internal and external resources. You should estimate the implementation costs based on the project scope, timeline, and deliverables, and factor in any potential risks and contingencies.

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3 Operating costs

The operating costs of an MES software solution are the ongoing expenses related to the use and maintenance of the system. These costs may include the software license renewal fee, the hardware and infrastructure upgrades, the data storage and backup costs, the energy and utilities costs, the security and compliance costs, and the user support and troubleshooting costs. You should calculate the operating costs based on the expected lifespan, performance, and reliability of the system, and account for any future changes and requirements.

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Miguel Arredondo

Plant Manager | Operations Consultant | Manufacturing Process Improvement
(已编辑)
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Does the software require a "priesthood" (as in dedicated staff) with key users, super users, spiderman users, capturists and their managers? SAP, for example, is a Ferrari. But first, in order to work as intended you need several modules that may rise the licensing fee susbtantially, in addition to a dedicated staff to maange and make sure it runs smoothly. Epicor, requires a consultant on hand to tweak it as necessities arise. It's not prohibitive (specially an outside freelancer) but you need to factor it in. You may decide to compensate with manual labor for certain functions. Make sure you account for enough staff and high possibility of error.

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4 Maintenance costs

The maintenance costs of an MES software solution are the periodic expenses related to the improvement and optimization of the system. These costs may include the software updates and patches, the hardware and infrastructure repairs and replacements, the system audits and assessments, the user feedback and suggestions, and the training and development costs. You should anticipate the maintenance costs based on the frequency, quality, and scope of the system enhancements, and align them with your business goals and strategies.

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5 Hidden costs

The hidden costs of an MES software solution are the unforeseen and unplanned expenses that may arise from the system failures, errors, or inefficiencies. These costs may include the downtime and productivity losses, the quality and customer satisfaction issues, the warranty and liability claims, the regulatory and legal penalties, and the reputation and brand damage. You should avoid or minimize the hidden costs by choosing a reliable and reputable vendor, implementing a robust and scalable system, and monitoring and resolving any problems promptly.

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Miguel Arredondo

Plant Manager | Operations Consultant | Manufacturing Process Improvement
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If yours is cloud-based, what's your Plan B if your main internet connection blacks out? How much is a good-enough connection?

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6 TCO formula

The TCO formula for an MES software solution is a simple equation that sums up all the cost categories mentioned above. You can use this formula to compare different MES software solutions and determine which one offers the best value for your money. The formula is:

TCO = Purchase price + Implementation costs + Operating costs + Maintenance costs + Hidden costs

By calculating the TCO for an MES software solution, you can make a more informed and strategic decision that will benefit your manufacturing operations in the long run.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Miguel Arredondo

Plant Manager | Operations Consultant | Manufacturing Process Improvement
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Does it have ready-made solutions for connecting with your key Customers and Suppliers (Releases, ASNs, etc.) or is it going to be a one-time, special patch that requires an implementation schedule?

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How can you calculate the total cost of ownership for an MES software solution?

1

2

3

4

5

6

7

1 Purchase price

2 Implementation costs

3 Operating costs

4 Maintenance costs

5 Hidden costs

6 TCO formula

7 Here’s what else to consider

Manufacturing Operations

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How can you calculate the total cost of ownership for an MES software solution?

1

2

3

4

5

6

7

1 Purchase price

2 Implementation costs

3 Operating costs

4 Maintenance costs

5 Hidden costs

6 TCO formula

7 Here’s what else to consider

Manufacturing Operations

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