Q

Can an ERP system support lean and traditional manufacturing practices?

Can an ERP system support lean manufacturing and traditional manufacturing practices? Find out in this expert response.

Can an ERP system support lean and traditional manufacturing practices? Can you give an example?
A single ERP system should be able to support lean and traditional manufacturing practices, especially since many firms require both approaches. For example, a company might introduce lean practices into a specific product line or into the final assembly area, while other areas employ traditional production orders. As another example, lean manufacturers may employ visible signals such as kanban tickets to coordinate replenishment of a specific item and inventory location, but still use planning calculations for delivery promises, and to calculate the kanban quantity and number of kanban tickets for an item.

ERP software vendors have taken different approaches for incorporating lean manufacturing functionality into a single system. My experience has focused on Microsoft's ERP solutions, especially the Microsoft Dynamics AX package. In this case, an independent software vendor developed an add-on module that has been purchased by Microsoft, and the functionality is being integrated into the normal software releases from Microsoft. The Microsoft...

example helps to illustrate the variations in lean manufacturing environments that need to be supported by a single ERP system. The following discussion focuses on the variations in kanban tickets to coordinate item replenishment.

The variations in kanban replenishment policies within Microsoft's Dynamics AX reflect the item origin (purchased, manufactured or transferred), and the differences between stocked material (termed a replenishing kanban) and make-to-order material (termed a non-replenishing kanban).

- Item Origin. The origin determines the nature of replenishment policies and the nature of kanban ticket transactions. The replenishment policies specify a blanket purchase order for a purchased origin, and the material receipt reflects a release (and receipt) against the blanket purchase order. The replenishment policies for a transfer origin specify the transfer-from location, while the policies for a manufactured item specify the work cell that produces the item. An outside operation for a manufactured item requires additional information such as the blanket purchase order for the outside operation.

- Replenishing kanban tickets for stocked material. The kanban quantity and the number of kanban tickets represent basic replenishment policies. For example, a fixed number of kanbans, such as three, would result in three kanban tickets for the specified kanban quantity. A newly created kanban ticket represents an empty container that requires replenishment. The number of kanban tickets can be fixed or variable. A fixed number of kanbans represents a stable demand pattern and a variation of min-max replenishment logic (that is, the kanban quantity reflects an order multiple with separate orders for the fixed number of kanban tickets). Variable kanban approaches can be used to handle changing or seasonal demand patterns, and Dynamics AX supports several approaches to variable kanbans. For example, the number of kanban tickets can be automatically increased or decreased to align with the backlog of sales order demands, a phased approach can be used to handle inventory build-up in anticipation of seasonal demand, or temporary kankan tickets can be created for handling periods of higher demand.

- Nonreplenishing kanban tickets. A non-replenishing kanban ticket can be for the sum of several sales order line items, or linked to a single sales order line item.

The basic information for a kanban ticket includes a unique identifier, the item number and description, the quantity and unit of measure, the required date, and the "to location" for placing the completed material. Basic information also includes the vendor for a purchased kanban and the work cell for a manufactured kanban. Component information may also be displayed on the ticket for a manufactured kanban. A kanban ticket can be printed or displayed electronically.

The example of Microsoft Dynamics AX provides one illustration of handling lean and traditional manufacturing practices in a single ERP system. Other examples could be cited for the ERP packages from Oracle, SAP or other software vendors, but a detailed explanation should be made by the relevant expert.

This was first published in September 2008

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