Is Your MES Sunk Cost Software?

Want to improve production, increase profit and implement more efficient operations? We borrow tips from one of the top poker players in the world (and a cognitive psychologist) to show how you can deliver better business results quickly and easily.

 By David Oeters, Corporate Communications with CIMx Software

Is your old and dusty MES a disaster waiting to happen? Illustration by www.colourbox.com

Is your old and dusty MES a disaster waiting to happen? Illustration by http://www.colourbox.com

The other day we celebrated my brother’s birthday with a trip to his favorite restaurant.  The plan was a quick lunch, a trip to the movies, and then ice cream. Problem was, a horde of hungry people decided to get lunch at the same time. The lobby and waiting area was packed. “It can’t be that bad,” we told ourselves. “Let’s just wait it out. We have time before the movie.”

So we waited. And waited. And then waited some more. My brother and Dad spent time designing miniature houses with napkins and chopsticks. My Mom did a crossword, while my wife and I tried to keep two kids under the age of 6 amused. We waited almost three hours before we got a table, and ended up missing the movie. We were even too tired to get ice cream.

Why did we wait? It was completely irrational to sit in the lobby on an uncomfortable bench for 3 hours when we could have found another restaurant with good food in less than 15 minutes! We could have saved three hours of our day, gone to the movies and enjoyed ice cream, but we didn’t. We waited….

How Sunk Costs Can Sink You

Annie Duke, a former professional poker player and current Decision Coach, calls this irrational behavior a Sunk Cost. “We have a strong bias to take into account resources already invested in our decisions about whether to move forward,” she explains. By making the decision to go to the restaurant, and investing time (even a little time) in waiting, we are less likely to change our minds and go somewhere else. Even at the cost of missing the movie (we all wanted to see) and not getting ice cream (which was absolutely crushing for the kids).

Resources (like time, money, effort, etc.) already spent are a sunk cost, because you can never get them back. It’s a decision-making error when you consider sunk costs in making present and future decisions. Past investment is resources gone, and they won’t magically come back if you keep investing more. Rationally, you must consider ONLY the future return in the decision-making process.

Consider this… if someone had told me we were going to wait THREE hours for a table before I got to the restaurant, I would have gone somewhere else. I would have gone somewhere else if you had told me I was going to wait 15 minutes! But, because I invested time (which is a Sunk Cost , because I can never get that time back), I kept waiting.

Manufacturing Software and Sunk Costs

Clinging to past decisions can hurt your business and siphon profit. Illustration by www.colourbox.com

Clinging to past decisions can hurt your business and siphon profit. Illustration by http://www.colourbox.com

It was a completely irrational decision to wait that long, because the cost of lunch went from $20, to $20 plus a missed movie, no ice cream, boredom and pain sitting on the bench, frustration keeping hyper kids amused, and three hours of my precious time I will NEVER get back. In my effort NOT to waste 15 minutes, I wasted three hours.

Unfortunately, we are all guilty of faulty, sunk cost decision-making. How many times do we stay in a long line, reluctant to move even though there is a shorter line nearby? As Duke explains, how many poker players keep pushing a poor hand (bluffing) because they already have money in the pot?

What about your MES? How many companies keep struggling with old, inefficient and costly manufacturing software because of a past investment in the system? If the MES isn’t (or can’t) adequately support current manufacturing processes, and the only viable solution is expensive customization and upgrades, then keeping your current system because it offers limited useful functionality is irrational.

Today, there are low-cost, modern manufacturing software systems that can be installed in less than a week. You can easily import your current work plans and have digital work instructions on your shop floor a few weeks later. These agile and flexible systems are intuitive, with on-site training completed in less than a day. With inexpensive infrastructure costs and minimal maintenance, they are clearly superior to the aging two comma systems some manufacturers struggle with. Sure, some may be more comfortable with the older system, but “comfort” shouldn’t be a critical factor in a business decision.

Minimizing MES Risk

I can understand the fear and risk that has long been associated with implementing a new manufacturing system. Many cling to old software because they know the limitations. Installing a new MES exposes them to unknown risks and potentially crippling costs.

In the past, those were legitimate fears. Today you can mitigate risk with a low-cost, no-risk pilot program in a single area. You can quickly see if the software will work and determine any potential weaknesses while forecasting the Total Cost of Ownership. With a scalable and flexible solution, you can quickly roll it out everywhere when you’re ready.

Put simply – moving on from an inadequate MES to one that meets your needs and actually supports your operation is significantly less risky than waiting and continuing to throw money away.

Add Discipline and Logic to Decisions

When you are faced with a computer system or manufacturing system that isn’t meeting your needs, don’t let sunk costs influence your decisions. Decide on the path forward based solely on present and future returns, and consider the cost of adapting the faulty current system you have against the cost of installing a new, modern and flexible system.

Want to know more, or see how much you can save with a new system? Contact CIMx today, we’re happy to help.

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