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Avoiding the pitfalls of configuring your ERP system for a lean environment

Configuring ERP software to work in a lean manufacturing environment can be tricky. Learn how to avoid common lean manufacturing mistakes and find ERP configuration tips to help you merge ERP and lean.

As you merge ERP and lean manufacturing, you need not agonize over the bottom line integrity of your lean implementation,...

says Jim Shepherd, senior vice president of research at AMR Research.

"A lot of lean activities--and the Kanban pull signals are a classic example--are traditionally done with [signal] cards and visual signals," he says. "There's a certain purity to that, but a lot of times it's just more efficient to have an automated system in place to track goods."

Lean manufacturing and ERP: How to leverage ERP to get lean
Getting your ERP ready for a lean manufacturing deployment

For the lean manufacturer, ERP plays a vital role

Many companies accept the tradeoffs of pre-configured ERP software templates in the hopes of deploying the ERP system faster and meeting their budget goals, says Salvatore Ganino, president of the manufacturing consultancy Manufacturing ETC.

Here are eight tips from Ganino and Shepherd to help manufacturers configure their ERP systems for a lean environment.

  • Wherever possible, couple two or more operations so that work does not accumulate between work stations. By using this pull technique, work will flow one piece at a time through the cell. Never make more product than you need to satisfy the current demand for the product.
  • Consider incorporating backflushing into the supply chain. Backflushing is a single step inventory process that occurs and the end of a production line. It uses RFID tags or bar code technology to trigger a work order or a kanban card that, in deducts the materials used form the raw material inventory. Backflushing simplifies costing and inventory transactions because it ignores both labor variances and work-in-progress.
  • See if your vendors will deliver smaller quantities in more frequent deliveries. This will enable you to reduce the re-order lot size to your suppliers, as well as the amount of inventory you carry.
  • Enable the lot-for-lot sizing function in your ERP system. When you do this, lots will not be generated in sizes greater than the quantity actually needed to satisfy requirements, resulting in a zero base inventory. At the finished goods level, this would result in either a zero-based or safer stock-based inventory.
  • Schedule machine maintenance. Don't wait for the equipment to fail. Planning for repair and maintenance gives the maintenance department time to receive any repair parts and materials needed. It also allows the planning department time to work around the problem of not having that piece of equipment.
  • Review your bills of materials, work center files and routings. Your ERP system requires accurate data. If a bill of materials has the wrong quantity of parts needed to make a certain item, that will guarantee an assembly problem, which will lead to inventory problems.
  • Spend one production cycle physically counting your inventory. This provides fresh data regarding inventory errors. Annual physical inventories are never accurate and provide no information as to when, where and how inventory errors occurred.
  • Figure out why non-productive time dedicated to queue, wait, and move times is happening. Reduce those times, and you'll see a reduction in lead-times and inventory levels.

Should you be searching for a new ERP system as part of your lean initiative, Eric Kimberling president of the Panorama Consulting Group LLC, suggests you define your business process inefficiencies upfront with lean in mind.

"Think lean as you're looking," he says. "A lot of times a company will say, 'Here's what we know and how we'd like to do it and evaluate software against that.'" But, says Kimberling, they need to go a step further and ask themselves if they change their requirements to go leaner, could the vendor adjust to that change?

As always, a manufacturer should quantify and measure all business operations before and after employing lean and implementing ERP. "If you think you're inefficient now, quantify and measure and find targets for improvement, because that will drive what does or doesn't get implemented, such as additional modules," Kimberling says.

According to Kimberling, running the numbers you find will help you run a cost/benefit analysis to determine whether you need a particular ERP module.

About the author: Jean Thilmany is a freelance writer living in St. Paul, Minn., who writes frequently about ERP and lean manufacturing. Her work has appeared in trade magazines devoted to manufacturing trade magazines and websites.

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