How Management by Exception Can Improve Manufacturing Performance

How management by exception improves performance

Talk about being stuck between a rock and a hard place. Manufacturers face growing pressure to shrink their time to delivery, but with interest rates at their highest in years, few companies today can afford to add machinery. More effective management of processes using existing equipment can significantly ease the pressure. However, with the continued shortage of experienced technicians and supervisors, adding skilled people to directly manage these processes can range from impractical to nearly impossible.

To truly alleviate the pressure on their business, manufacturers need to start letting go of established management practices based on rote inspection and direct supervision and instead move toward management by exception by leveraging automated alerts triggered by real-time data. Let’s look at the concept of management by exception and how it is being applied in manufacturing businesses today to increase productivity and agility while improving the bottom line.

How Management by Exception Works

Management by exception focuses on identifying and resolving situations that deviate from normal or expected outcomes. It represents a conscious decision to emphasize trust in teams and systems to alert management of issues requiring attention. Typically, manufacturers rely on management by exception to help achieve one or more of the following objectives:

  • Make sure current operations are running on plan.
  • Spend as little time as possible inspecting what’s already working.
  • Address problems immediately before they create bigger issues.
  • Dedicate more time to planning and executing future improvements.

In adopting management by exception, manufacturers need to go beyond physical automation (i.e., assembly lines, robotics) and process automation (i.e., accounts payable, procurement) and step into an area that can best be described as management automation. For this reason, management by exception in these environments is typically implemented by using enterprise resource planning (ERP) and manufacturing execution system (MES) software as the eyes and ears of the operation. These systems of operation are overlaid with mechanisms of workflows, alerts, and intelligence that guide actions and monitor information streams and production processes. So, automated queries can continuously run in the background probing for the next steps and identifying situations that require management intervention.

Many manufacturers have the technology in place to implement management by exception, since alerts and workflows are standard features of modern MES and manufacturing ERP platforms. At their core, they provide configurable systems of rules and routings that management establishes to guide the workflows of the business and trigger alerts when bottlenecks, missed steps, or issues arise.  Most management teams start with a simple set of workflows and alerts. Then, as their confidence and proficiency in the practice grow, they build upon these initial rules until they have comprehensive rule-based management by exception program in place.

There are countless ways management by exception can be applied, but let’s focus on a few examples of how manufacturers have adopted it on the shop floor and in the back office to improve their performance.

 Management by Exception on the Shop Floor

 On the shop floor, management by exception is most commonly applied to production and process monitoring, automated work centers, quality inspection, and maintenance and repair.

 Manufacturers can remove the need for an operator to manually monitor a job with automated, real-time production and process monitoring of data from machines and sensors. If the monitoring software detects an issue, it immediately notifies (i.e., alerts) the proper supervisory personnel so the problem can be addressed.

It’s also possible to automate repetitive production work centers by combining production and process monitoring combined with simple robotics. Here, sensors monitor all the job particulars, and alerts monitor the sensors. Unless an issue is detected, the bulk of the job can run labor free.

Additionally, manufacturers can ensure that quality inspection is more consistent and accurate—without intermediate supervision—through the use of automated workflows and alerts. In this scenario:

  • A workflow in the MES can notify an operator logging onto a job of any periodic measurements required.
  • The workstation operator screen provides a tool to input test results, and it time-stamps the entries.
  • The rules engine alerts supervision if measurements are not occurring or are outside specified limits, ensuring a correctly run job.

Meanwhile, maintenance and repair can be timed more strategically by relying on MES software to record the run time on a given tool along with specifications that document the tool’s maintenance intervals. Alerts set between the two data points can automatically advise scheduling, maintenance and production workers to perform required maintenance when the tool. By avoiding unnecessary set-up and tear-down time, as well as machinery breakdowns during production runs, manufacturers can get more products to customers faster.

Management by Exception In the Back Office

Similarly, manufacturers can adopt management by exception to gain greater control over finances, inventory, and staffing.

Manufacturers can apply management by exception to financial management by setting up dashboards and alerts that immediately notify the financial team when key performance indicators (KPIs) are trending out of established ranges. This eliminates the need to manually review ERP-generated reports on a daily basis while enabling the management team to respond faster to issues.

Moreover, automated workflows and alerts can extend the value of inventory management. A typical example is relying on the ERP system to issue an inventory alert when there are not enough raw materials available to fulfill a new order. Additional alerts and workflows can then push an expedited materials purchase to the top of the purchasing department’s to-do list.

Finally, management by exception can help managers to back-fill an important role. Imagine a scenario where a quality inspector calls in sick. With production processes and assigned responsibility for each step already codified, the manager in charge can proactively reassign the quality inspector’s tasks to another employee. The worker is now responsible will be automatically advised of the when, where, and what of these new tasks. And any missed inspection or validation steps will trigger alerts, so the worker or manager can take remedial action and ensure the company’s standard quality processes remain in place.


 Global economic, business, and supply chain dynamics are driving the need for manufacturers to increasingly move from continuous oversight and tribal knowledge to management systems based on ordered processes that are recorded, institutionalized, and implemented by automated systems. By leveraging the features of modern ERP and MES solutions to automate the management of key processes, manufacturers can improve their resiliency, financial outlook, and operational performance.

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Steve Bieszczat, DELMIAworks (IQMS) Chief Marketing Officer, is responsible for all aspects of DELMIAworks' (IQMS) brand management, demand generation, and product marketing. Prior to DELMIAworks (IQMS), Steve held senior marketing roles at ERP companies Epicor, Activant and CCI-Triad. Steve holds an engineering degree from the University of Kansas and an MBA from Rockhurst University.