V•Sensei

A key concept behind lean manufacturing is moving from PUSH to PULL.  The results of this approach have been shown across many companies and industries.  As companies make that transition, the most common challenge is adapting their existing ERP systems to support this new way of working.

Does this transition to demand-driven manufacturing require a new ERP system or major modifications ?  The answer is no.  The key is to know how to configure these systems, to understand their strengths and weaknesses, and to understand the gaps that need to be bridged through complimentary tools.

While most companies have invested heavily in ERP systems, most production schedulers take data from their ERP system to build their own scheduling approach using Excel.  In fact, estimates show that up to 95% of all production planning is done in Excel. While some may argue with this number, it's a high number nonetheless.  The same is true for other applications within the ERP ambit, like purchasing. The volume of data in any business requires the use of enterprise systems, the common challenge is how best to apply these systems in support of your global lean initiatives.

A top down "total systems approach" provided through ERP systems have advantages because they act as a central data warehouse allowing  common business processes to be connected.  This includes activities such as inventory management, accounting, HR, and other standard corporate functions.  But their "one size fits all" approach has limitations as you drive deeper down and closer to the factory floor.

Current systems have evolved that can flow data between enterprise software packages much more easily, and systems can be "rented" if you like via the web, reducing IT capital costs typically associated with expensive ERP systems. The trend is to use web-based "best of breed" packages that can focus on specific business needs and models, such as make-to-order, sell-from-inventory, build-to-replenish, etc.  There are also applications that can focus on procurement and inventory management plus manage pull systems both intra-company and inter-company. The key is to develop a Lean system roadmap that incorporates the workflow and algorithms to support a lean environment focusing on customer service, quality, and total costs.  It is easy to achieve gains in 1 or 2 areas, but developing a good lean software roadmap is key to obtaining success in all 3.

There are 2 good examples of Lean Systems.  The first focuses on linking factories and suppliers through a web based portal, giving cross-site exposure to both parties inventory levels and demand while at the same time facilitating collaboration and pull system signaling  The system can support smooth transactions in a pull fashion to minimize inventory and cost while maximizing on-time delivery.

Another system works well in both make-to-order and build-to-replenish environments.  It is one that uses lean algorithms to calculate inventory needs at any end of the business, provides decision support for kanban and any other pull type approach to inventory movement, and can provide a lean approach to decision support and business intelligence for procurement staff and production schedulers.

Specific data is pulled from the ERP system, and domain specific algorithms are applied to identify quick-win inventory opportunities, prioritize next step lean actions, and support day-to-day lean execution.. The latter system, offered by LeanDNA,  is one that we have seen to reduce inventory levels dramatically plus provide more reliable pull system schedule.

Returning to the question of how to best leverage ERP and lean systems in support of an overall lean strategy ?  On their own, ERP systems are often too generic, but they do enable other best-of-breed or task specific systems to be integrated in order to provide a comprehensive solution for lean decision support. The key is to develop a clear roadmap and embrace approaches that compliment your existing ERP systems - not replace them.  Leverage and empower your existing IT investment - don't waste it.

Lean Manufacturing is fundamentally about continuous improvement.  The same applies to IT.  The first step is acknowledging the need to continuously improve this process in the same way we have focused on the shop floor.

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