THE drive towards lean manufacturing has been the goal of many companies in recent years. This is unsurprising considering the promise of enhanced market competitiveness through benefits including reduced lead times, lower production costs, better productivity and improved customer service, to name a few.
In today’s highly competitive global markets, companies ignore lean at their peril. Combined with the rapid advent of the Internet, customers have more influence than ever, demanding greater product flexibility, smaller, more frequent deliveries and higher product quality— all of course, at a lower price.
Before any investigation into the role ERP plays in lean manufacturing, it is worthwhile first establishing an understanding of what lean actually is.
Toyota is largely recognised as the pioneer of lean with its Toyota Production System (TPS), elements of which were evident in Toyota’s textile business as far back as the turn of the 20th century.
It was not until 1950 however, when a delegation from Toyota was invited to tour Henry Ford’s Detroit-based mass manufacturing plants, that the TPS in its present form was conceived.
Unimpressed with Ford’s production processes and particularly the excess inventory, the delegation instead turned to the local supermarket, drawing inspiration from the way stock was only replenished when items were purchased.
Toyota went on to become arguably the most admired, and certainly most copied, manufacturer in the world.
The main goals of the TPS are to eliminate overburden, inconsistency and eliminate waste. Waste is especially important and is further broken down into seven categories:
• Over production;
• Carriage or conveyance;
• Inventory; and
In lean terms, the definition of waste is broadly anything that does not add value.
Given an ERP systems role as an organisation’s central nervous system, it provides the ability to clearly map and measure processes, therefore helping to identify where improvements can be made.
ERP systems can also help provide the ability to measure the progress of waste elimination, in addition to facilitating modelling of different processes.
Having processes and procedures embedded within an ERP system’s workflows allows executives to see precisely what is happening and makes it far easier to identify areas for improvement.
Lean is a continual process, not a one-off exercise. Although a project may begin with initial objectives, achieving these is not the end goal. The systematic elimination of waste is continual.
This point is well illustrated with a story from another well-regarded Japanese company, Sony.
The company’s engineers had just created a new super-compact Handycam, which they proudly presented to their department head.
On viewing the new device, the head called for a bucket of water in which, to the horror of the engineers, he immersed the new camera.
He called upon the engineers to observe the air bubbles rising in the water. Air bubbles means there’s excess spaces inside the device, hence scope to make it smaller still. This is the essence of continuous improvement or, ‘Kaizen’.
ERP’s role in defining processes and procedures allows organisations to map improvements over time and also helps identify key areas where improvements can be made, or where they have maximum impact. As improvements are made and entered into the system as new procedural definitions, these serve to enforce and perpetuate the improvements.
Enterprise systems with Business Intelligence (BI) capability can also play a key role in continuous improvement.
Through integration with various sub-systems such as CRM, ERP, finance, supply chain and fulfilment, BI can analyse performance against set KPIs. This information can point to areas that are falling short and that need additional analysis in order to identify where wastage is occurring.
A lean world
In today’s society, lean is all around us. Technology plays a key role in this, be it from GPS equipped taxis to provide the most efficient routing, to feature rich enterprise software systems that help manufacturers identify and eliminate waste.
Whilst fundamentally, lean principles are very simple, when applied to complex processes associated with today’s manufacturing environments, the benefits of having a comprehensive view of these processes via a suite of enterprise software tools is clear.
Lean practices are paying dividends for manufacturers all over the globe. Companies are transforming yesterday’s waste-ridden processes with new ways of doing business. If you look under the hood of any lean initiative today, you’ll find a powerful and effective enterprise reporting system at its core.
* Craig Charlton is VP of Epicor’s operations in Australia/NZ.