The Total Economic Impact™
Of Plex Smart Manufacturing
Platform
Cost Savings And Business Benefits Enabled By The Plex Smart Manufacturing Platform
MAY 2021
THE TOTAL ECONOMIC IMPACT™ OF PLEX SMART MANUFACTURING PLATFORM
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Executive Summary
With its cloud-based Smart Manufacturing Platform, Plex transforms manufacturers’ understanding of their production processes and how to improve them. The product journey is captured on a transactional basis, permitting an in-depth analysis of the machine, people, and time that resources have utilized. The Plex Smart Manufacturing Platform puts warehousing, manufacturing, maintenance, and customer service on the same team in optimizing inventory management, production, and customer success.
Plex Systems commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying the Plex Smart Manufacturing Platform.1 The Plex Smart Manufacturing Platform includes applications for manufacturing execution system (MES), enterprise resource planning (ERP), quality, supply chain planning, the industrial internet of things, and analytics. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Plex on their organizations. Plex digitally transforms the operation and management of the manufacturing process in a cloud-based environment that highly integrates the organization to fully account for the transformation of raw material to the finished product.
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed an organization with experience using Plex. Forrester used this experience to project a three-year financial analysis.
Prior to using Plex, the customer had a highly customized and antiquated on-premises material requirements planning (MRP) platform. The basic account of raw material input to the finished product output was known for both ends of the manufacturing process; however, significant effort was required to both record the transformation and to operationalize any efficiencies on the shop floor. The customer did not have a robust forecast ability to plan for future
raw material needs around anticipated demand, creating costs in both inventory and late production. Even with the efforts to create and manage transactional data with manual input/manipulation, the customer had poor visibility into cost, waste, opportunities for operational improvement, and more timely and accurate decision-making. As such, the customer faced expenses and challenges in its older solution and manufacturing operation that affected its overall competitiveness.
After the investment in Plex, the customer was able to reduce or eliminate costs from IT, data/analysis, production waste, and late performance, which freed cash flow, permitted new investment, and ultimately lowered its production cost basis by 50%.
KEY FINDINGS
Quantified benefits. Risk-adjusted present value (PV) quantified benefits include:
Return on investment (ROI)
412%
Net present value (NPV)
$4.25M
KEY STATISTICS
EXECUTIVE SUMMARY
• Lower cost of IT administration via Plex. As a multitenant, cloud-based, and managed solution, Plex shifts administrative roles out of on-premises server support, backups, and desktop management while ensuring a contractually guaranteed 99.9% uptime. This was cited as saving two IT administration FTEs, which were redirected into analytical needs, and transforming the IT role into more of an active and more highly valued business analyst function. Over three years, lower IT administration costs were worth approximately $412,000 to the organization.
“The old system was limited. There was no transactional data on the actual manufacturing piece, no visibility to forecast what we needed or fix where we were inefficient. Now we have a strong handle on how to model our costs and win new business.”
VP of IT and ERP, food manufacturer
• Cost savings of paperless manufacturing process. The production process proceeds through a full paperless quality system. Operators and managers conduct their various quality checks from an electronic standpoint, rather than having production assistants track by clipboard and paper; this also minimizes manual data input. This innovation redirected the work of two staff FTEs and saved $223,000.
• Saved FTEs to create transaction reports. The electronic data acquisition afforded by Plex has also transformed the function of the existing business analyst group. Rather than spending time on data input and spreadsheet manipulation, the seven analyst FTEs were redirected to spend time on more valuable analytical tasks that: 1) improved operations and 2) created accurate
production cost models. The cost models have been instrumental in helping expand business development. This FTE savings was worth $1,058,000.
• Reduced inventory waste via improved production processes. Plex allocates a precise amount of stock to production output and monitors each step in batch production and labeling. This is fundamental to catching errors/manufacturing variances both at the outset of production and during production processes to fix mistakes and avoid wasting inventory and material. This eliminated the 10% inventory waste factor that was experienced prior to the implementation of Plex. Eliminating inventory waste saved $2,535,000 over the three-year period.
• Cost savings from lower chargebacks due to late production. The sequencing of customer production runs, including the planning and shipping of inventory was organized through Plex, resulting in 99% on-time rates. By dramatically reducing the chargebacks received for late production, $1,057,000 in costs were saved prior to the implementation.
“Plex has eliminated the silos of warehousing, manufacturing, maintenance and customer service. With total visibility for everyone in the operation, it makes our goals crystal clear, because the timing and interdependencies of inventory, production, [and] maintenance to customer success are right there. And we’ve been amazingly successful since Plex.”
VP of IT and ERP, food manufacturer
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THE TOTAL ECONOMIC IMPACT™ OF PLEX SMART MANUFACTURING PLATFORM
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EXECUTIVE SUMMARY
Unquantified benefits. Benefits that are not
quantified for this study include:
• Lean inventories. The implementation of Plex DemandCaster Supply Chain Planning — to drive order lead time, production schedules, and batch lot allocation of inventory — permitted the customer to reduce its inventory allocation by 50% or $13 million. This freed operating cash and reduced debt, which was not quantified as a benefit in the economic model, but it was nonetheless significantly positive for the pre-cash flow to be invested in plant improvements and potential acquisitions.
• Organize and scale across different plants. The forecast capability of DemandCaster allowed the customer to not only order inventory for different plants as one entity but to also apportion production to different plants as the shipment point. As such, the customer benefited from not having to order and manage inventory at separate sites, allowing it to realize economies of scale from ordering in larger quantities. This was also cited as making integration of future acquisitions easier.
“Plex gave us the ability to help drive product improvement. As a large food manufacturer, that is fundamentally important to our process and was a huge hole with our previous MRP.”
VP of IT and ERP, food manufacturer
• Accurate cost models help expand profitable business. A newfound understanding of the cost basis to production permitted the creation of accurate cost models for an array of different products where the organization had less experience; this facilitated new business wins among large retailers.
• Break down silos across warehousing, manufacturing, maintenance, and customer service. New standard operating procedures (SOPs) were created and implemented as part of training done across departments. Additionally, the improved visibility of the manufacturing operation across the organization removed barriers and showcased the interdependency of these roles in efficient and on-time product delivery.
Costs. Risk-adjusted PV costs include:
• Subscription cost of $675,200 over a three-year period. The Plex subscription model scales with the revenue growth that the customer experiences following implementation. Plex’s standard pricing includes unlimited users (including customers and partners), and thus the number of users is not tied to cost. In this instance, the customer’s subscription cost rose 50% over the three-year period. Also, following implementation, there was a 50% decline in the customer’s manufacturing cost.
• Implementation cost of $357,000 over a three-year period. These costs included adding electronic data interchange (EDI) trading partners, the acquisition of supporting hardware, and the training and development of SOPs that utilized the Plex Smart Manufacturing Platform.
The interview and financial analysis found that this customer experiences benefits of $5.29M over three years versus costs of $1.03M, adding up to a net present value (NPV) of $4.25M and an ROI of 412%.
experience; this facilitated new business wins among large retailers.
EXECUTIVE SUMMARY
ROI 412%
BENEFITS PV $5.29M
NPV $4.25M
PAYBACK <6 months
Benefits (Three-Year)
Lower cost of IT administration via Plex
$411.8K
Cost savings of paperless manufacturing process
$223.8K
Automatic transaction reports saved FTEs
$1.1M
Reduced inventory waste via improved production processes
$2.5M
Cost savings from lower chargebacks due to late production
$1.1M
There was a broad array of measurable benefits following the implementation of Plex.
Cost savings from the reduction of manufacturing waste and on-time production represent 68% of the total benefits.
THE TOTAL ECONOMIC IMPACT™ OF PLEX SMART MANUFACTURING PLATFORM
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EXECUTIVE SUMMARY
TEI FRAMEWORK AND METHODOLOGY
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment in Plex.
The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision. Forrester took a multistep approach to evaluate the impact that Plex can have on an organization.
DUE DILIGENCE
Interviewed Plex stakeholders and Forrester analysts to gather data relative to Plex.
CUSTOMER INTERVIEW
Interviewed one decision-maker at an organization using Plex to obtain data with respect to costs, benefits, and risks.
FINANCIAL MODEL FRAMEWORK
Constructed a financial model representative of the interview using the TEI methodology and risk-adjusted the financial model based on issues and concerns of the interviewed organization.
CASE STUDY
Employed four fundamental elements of TEI in modeling the investment impact: benefits, costs, flexibility, and risks. Given the increasing sophistication of ROI analyses related to IT investments, Forrester’s TEI methodology provides a complete picture of the total economic impact of purchase decisions.
DISCLOSURES
Readers should be aware of the following: This study is commissioned by Plex Systems and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis. Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the study to determine the appropriateness of an investment in the Plex Smart Manufacturing Platform. Plex reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study. Plex provided the customer name for the interview but did not participate in the interview.
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