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How lean production systems cut the fat out of manufacturing, ERP

From its introduction, the lean approach has influenced manufacturing efficiency, and ERP systems have incorporated its concepts to a greater and greater degree. Here's a look at how lean and ERP have grown increasingly intertwined.

Lean manufacturing first came to the attention of manufacturers in the West with the 1990 publication of The Machine...

That Changed the World, which reflected the findings of MIT's five-year, $5 million study on the future of the automobile.

The book detailed what the authors described as the "lean production system," and introduced readers to the Toyota Production System. It also taught them all about the seven wastes (now eight), standardized work, level production and a whole host of Japanese words, like kaizen, Kanban and heijunka.

In the ensuing quarter century, the lean approach has spread widely throughout the United States and Europe. Most manufacturers of all sizes have adopted some lean ideas and techniques, while some large -- and small -- corporations have instituted aggressive lean transformations at their plants across the globe.

In the early days of lean manufacturing implementations, lean and ERP (although we were still calling it MRP II back then) were widely considered to be incompatible. Lean is all about eliminating nonvalue adding activities. And transaction reporting, a key part of MRP/ERP procedures, does not add value to the product. In addition, Kanban and other physical signals seemed to eliminate the need for plans and schedules, which are the primary MRP/ERP outcomes. Over time, however, lean advocates came to understand that lean's focus on eliminating waste and efficient operations was fully in line with ERP's objectives, and that the two approaches can -- and should -- be used together to get the best results.

The way lean is practiced today is a little different from what has been in place over the last decade or more. Most lean plants use ERP to plan and schedule operations and engage in lean practices, such as Kanban, 5S, kaizen and Six Sigma. The two approaches come together in operations -- on the plant floor -- where companies often use Kanban to manage material movement and trigger replenishment production. Other waste reduction techniques, such as poka-yoke, kaizen and the 5S methodology, supplement ERP and Kanban processes without interference or conflict.

ERP has evolved to work better with lean techniques, especially in the case of Kanban, since it replaces some of ERP's inherent scheduling and shop floor control functionality. Most ERP systems now include a form of electronic Kanban that replaces the physical tags with electronic signals, emulating the physical process in the computer files.

Electronic Kanban overcomes two of the biggest drawbacks of physical signals: they are instantaneously delivered, or available, without the need to have people collect the tags and deliver them to the warehouse, supplier or production line; and the number of electronic Kanbans in circulation can be automatically adjusted to track changes in demand and production rates -- a process that is quite difficult with physical tags. Inherently, physical Kanbans only work well in a stable environment where there is sufficient, steady demand. Electronic Kanbans can be used effectively where there is a measure of demand fluctuation that would make the use of physical Kanbans impractical.

Another aspect of many lean programs is an emphasis on continuous production using cells and lines. Once again, most ERP systems now include planning and scheduling system capabilities that support this method of production, in addition to the traditional batch scheduling capabilities.

Although Kanbans and production lines are the most visible aspects of a lean plant, much of lean manufacturing is focused on the relentless pursuit of waste elimination, and this is where ERP can be invaluable. ERP tracks plant activity (thanks to that bothersome transaction reporting) and provides a comprehensive database of activities, times, costs and more that can be mined with modern analytical tools to help identify inefficient practices, inappropriate standards, unproductive variation and other opportunities for improvement. ERP can also track the progress of lean-oriented procedural changes to confirm whether the desired improvements are actually being realized.

And on the issue of transaction reporting, there's good news there for both ERP and lean. The rapid proliferation of the industrial internet of things sensors and smart devices reduce the burden of reporting by automating data collection, while, at the same time, reporting more details more accurately to the enterprise systems.

Another recent trend in enterprise systems is the evolving merger of ERP and manufacturing execution systems (MES). As these two systems become more completely integrated, detailed tracking of plant activity becomes more available to ERP, and ERP operational controls and directions are becoming more timely, more precise and more automated to provide a new level of control in the plant.

Next Steps

Bringing lean principles into ERP

MES will need additional capabilities for the internet of things

Why CFOs should care about lean principles

This was last published in January 2017

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