How
ERP Can Help in Lean Implementation
By
Robert Clarke
News
reports over the last several months continue to paint a gloomy picture for
today’s economy. Rising material
and labor costs, weak consumer spending, and the collapsing housing market are
hammering businesses nationwide.
Many are looking for ways to re-engineer
themselves in order to compensate for flattening growth. To survive, one must do more with
the resources they currently have; they must do it more efficiently and with
less error. Thus, Lean
manufacturing has emerged as a viable method for ensuring continued
prosperity.
Becoming Lean
has been a goal of most companies over the last several years. Why is Lean so popular? Lean delivers what companies really need
in today’s highly competitive world.
Shorter lead times, improved quality, reduced
cost, increased profit, improved productivity and better customer service.
Generally, the problem is that these companies don’t know
where to begin to realize these gains in efficiency.
To become Lean, a company
must take a hard look at processes and practices to identify those things that
truly add value for the customer and they must eliminate those that do
not. The continuous pursuit of
waste elimination is the essence of Lean.
Reducing
Waste
The nebulous
Lean definition of waste (anything that doesn’t add value) allows plenty of
opportunity for ERP systems to contribute.
In the most general sense, it is difficult to act on or improve what you
don’t know or can’t see. ERP
systems are the nervous system of the organization. They carry the definitions, the data, a
record of the activities of the organization, and provide the measurement
systems for determining where opportunities for improvement lie.
More
specifically, processes and procedures are embedded within the ERP system’s
routings and workflows. This “documentation” allows organizations to
clearly see what is happening in their organization and provides the mechanisms
to implementing new and more efficient procedures. Sometimes, although the proof is
in the data, managers don’t “see” the inefficiencies. Managers must “learn to see” with a new eyes;
they must be able to look at the documentation generated from the ERP system, analyze
it, identify potential waste, and then implement the appropriate Lean
methodologies to kill these inefficiencies.
The logic within planning and optimization subsystems can
help minimize inventory, make the most effective use of transportation and
warehousing facilities, properly size and time work activities to avoid waste,
and minimize set-up and handling times. Supply chain
planning and management systems can ensure the right inventory is in the right
place at the right time, thus eliminating wasteful excess inventory and avoiding
costly shortages.
Workflows and event management systems (such
as Exact
e-Synergy)
speed communications and coordination throughout the
organization, allowing the critical information to reach just in time rather
than just too late. These systems
greatly reduce administrative burdens and avoid delays in reacting to changing
situations; which subsequently results in less waste and better customer
service.
Continuous
Improvement
Lean is not a
one-time project, nor is it ever complete.
It is common practice to set initial goals when entering a Lean
transformation project, but it is also essential that achieving those goals is
not seen as an end point;
or worse, the improvements in place revert back to “the way that it has always
been done”. There’s
always more to do, more improvements to attain, and more efficiencies to
discover.
ERP systems
contain the definition and documentation of processes and procedures for the
current state. As improvements are
made and the changes are entered into the system’s files, these new definitions
serve to enforce and perpetuate the improvements. Comparative measurements document the
effect on the changes to lead-times, costs, and efficiency. After the initial objectives are
achieved, the ERP system captures the input needed for the next round of
improvements; the definitions within the system recognize current activities and
offer a place to start identifying and eliminating new
waste.
Most ERP systems today have a tool called Event Manager
. One
such tool, offered by Exact Software, has the capability
of monitoring key performance
indicators and can automatically alert management to any changes (good or bad)
in any of the hundreds of measurement areas. This tool alerts management to
impending problems before waste is generated.
These warnings can also point to areas in need of
improvement.
In addition, Business Analytic
tools provide powerful interactive analysis that can be used
to dig deep into data and mine for waste and elimination opportunities. Business Analytics provides graphical
views of information, including combinations of data. Often times this broader view can
provide insight into how different parts of the business interact and influence
each other. With this new insight,
businesses can avoid changes in one area that may negatively affect other parts
of the business. All too often, an
improvement in one area will trigger additional non-value-adding activities in
other departments, leading to higher waste overall.
Sales and
Customer Service Opportunities
Customer
service has to be a focus of any organization. Lean efforts not only strive to remove
waste from customer-facing processes, but also can deliver better customer
service at the same time. When
waste is removed from customer service processes, delays, inconveniences,
mistakes, and costs are also eliminated.
The resulting streamlined processes inevitably make it easier and more
rewarding for the customer to do business with the
company.
Most ERP
systems today give as much focus to customer relationship management (CRM) as to
internal operations. CRM
capabilities simplify the order management process by aggregating information
from across the business and making it readily available to customers and
customer service agents.
Workflow
management speeds the order process (eliminating delays in hand-offs to all
affected departments.) As soon as
the order is captured, inventory, accounting, planning, production, and shipping
are immediately notified and can start fulfilling customer’ requests. All participant activities are
synchronized to work effectively toward fulfilling the customer request.
The World is
Getting Leaner
Today, ERP
systems have made Lean techniques practical and valuable in all kinds of
manufacturing businesses and beyond them into distribution, retail, service
industries, and general businesses.
While Lean ideals are based on simple manual techniques and procedures,
ERP systems are an important mechanism for extending the basic procedures into
complex situations, demanding environments, and the wider world of constant
changing requirement needs.
The cultural
and managerial elements of Lean are well supported by the functions and
facilities within ERP systems.
Above all else, ERP systems are communication vehicles, making
information available throughout the enterprise and coordinating activities to
avoid wasteful overlap, omissions, and miscommunications.
The best time to get Lean is today while the economy is weak. Not only will it help you to survive in the short term, but it will also help you thrive in the long term by providing shorter lead times, improved quality, reduced costs, increased profit, improved productivity, better customer service, etc. So the decision is yours to make. Do nothing, conserve cash, and hope for the best, OR start your Lean transformation today. An old friend once told me (and I certainly believe this to be true) “Hope is NOT a strategy”.
Mr. Clarke’s leadership experience began while serving as a Platoon
Leader with the
Contact him
at clarkerw@xonitek.com.
XONITEK
Corporation is a management and technologies consulting firm with a world
wide presence and a reputation for excelling in the optimization of
business synchronization