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For the lean manufacturer, ERP plays a vital role

A manufacturing firm adopting the principles of lean manufacturing will need to leverage its ERP system during its transition to lean. But balancing an ERP system and lean principles may require some juggling skills.

In order to simplify manufacturing and reduce inventory levels, some proponents of the lean manufacturing enterprise recommend the elimination of the ERP system.

The rationale behind this philosophy is that lean and ERP have different goals. The purpose of lean manufacturing is to eliminate wasted time, wasted processes and wasted materials, while ERP is designed to track plan floor activities and materials.

However, nearly every large manufacturer that subscribes to lean principles has an ERP system. The ERP system should not be eliminated; at mist, it should be simplified.

"There's a huge part of your business that has go on, whether you're lean or not," says Jim Shepherd, senior vice president of research at AMR Research. "You still have to do general ledger and accounts payable, and you have to purchase and receive things and take customer orders."

According to Shepherd, "It's not practical to run a manufacturing company without a dedicated business application. I could be running the leanest place around, but I'll still need an ERP system, even if I don't use it out on the shop floor."

When an organization adopts lean manufacturing principles, it means retraining employees and laying out production lines anew. And such changes have nothing to do with an ERP system.

ERP analyzes business practices

But ERP does have play a key role in analyzing existing business practices and potentially restructuring them to operate in a lean manufacturing environment. After all, according to Shepherd, the only way to find areas that need improvement is by tracking and analyzing current manufacturing processes—which can be done in ERP.

The good news is that, beyond day-to-day business operations, lean principles such as continuous process improvement are also supported by ERP. "ERP organizes the information you need about products, production, facilities, resources and demand," Shepherd says. "You need this [information] to implement lean, so having it organized in a single place of reference is very valuable."

Manufacturers will find the best payoff from implementing lean manufacturing principles by combining the predictive capabilities of ERP with the streamlined productivity and enhanced customer service principles of lean, says F. Frank Chen, director of the Center for Advanced Manufacturing and Lean Systems at the University of Texas at San Antonio.

Today, it's not hard to find an ERP system that supports lean manufacturing principles isn't hard to do today. According to Chen, nearly all major ERP vendors have extended their applications to support the core lean principles such as value definition and specification, value stream mapping, uninterrupted flow, customer pull and the pursuit of perfection.

If you merely automate a process that is poor in the first place, ERP is not a magic tool that will fix this dilemma.
F. Frank Chen
Director, Center for Advanced Manufacturing and Lean SystemsUniversity of Texas at San Antonio

In most cases where lean manufacturing principles are adopted, the ERP system requires no customization. But that doesn't mean that standard manufacturing modules actually help implement lean. According to Chen, these modules support lean manufacturing but they don't necessarily drive it. A manufacturer will need to spend time studying business processes and implementing a lean environment before programming the ERP system and selecting modules to support a lean initiative.

Or as Chen puts it, "If you merely automate a process that is poor in the first place, ERP is not a magic tool that will fix this dilemma."

Collaboration between IT department, manufacturing engineers

Here's where a good IT department can help. Whether a manufacturer brings in a new ERP system or merely retools the existing system, the IT department needs to work with manufacturing engineers and consultants in selecting the ERP functions and features to implement for the lean environment, Chen says.

When reconfiguring or implementing a new ERP system to run lean, it would behoove manufacturers to follow the time-honored procedure known as KISS (Keep It Simple, Stupid), says Drew Locher, managing director for manufacturing consulting firm Change Management Associates. Locher is also a faculty member of the Lean Enterprise Institute and author of the book The Complete Lean Enterprise – Value Stream Mapping for Office and Administrative Processes.

"But a lot of people overcomplicate ERP by doing management tasks within the system," says Locher. "They're trying to have some sort of shop floor control module going to tell people what to make and to control the flow on a shop floor."

Manufacturers are also guilty of using ERP in a manner for which the system is unintended, such as collecting data against work orders. "What do you do with this data?" asks Locher. "You find out that it doesn't give you much of an answer and that you don't do much with the data."

According to Locher, there are simpler ways of doing those tasks and lean principles address them without the need for an information management system, he says. For instance, lean principles call for a visual management technique to control flow on the shop floor.

"I don't need a computer to say where product should go," says Locher. "Visual management is fine."

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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