Getting your ERP ready for a lean manufacturing deployment

By Jean Thilmany, Contributor 24 Mar 2009 | SearchManufacturingERP.com

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According to F. Frank Chen, director of the Center for Advanced Manufacturing and Lean Systems at the University of Texas at San Antonio, you should begin by considering how quickly you'll be able to respond to supply and demand while improving customer service and reducing inventory levels. Chen suggests that manufacturers look at how they'll bring new products to market faster while collaborating with customers and suppliers, because that is the bedrock of a lean manufacturing deployment.

According to Chen, ERP bridges a manufacturing organization's supply chain, scheduling and accounting activities. He suggests that a manufacturer study those business processes -- and all business processes across the entire supply chain -- before implementing or re-architecting their ERP system.

Chen also recommends implementing the pull --or Kanban -- scheduling process at your plant before programming the ERP system to enable that process.

To ensure that the ERP system is running as efficiently as possible, you'll want to streamline the system by cleaning up part numbers, inventory balances, part locations, bills of materials and routings, says Chen.

And while you cannot leave any department out of the picture -- they're all interrelated -- you will need to decide which business processes you'll be tracking, says Jim Shepherd, senior vice president of research at AMR Research.

"You could use ERP to manage key data like cost accounting and other processes not addressed by lean," Shepherd says. "Management at most companies really wants to know what it costs to produce and develop products, so you'll capture all the costs associated with making those products like material issues, labor expended and machines used."

Although an ERP system can track these costs, lean principles don't necessarily take cost accounting into account, as it were. The question is, should you?

"The purists in lean would say I don't need to track that stuff," Shepherd says. "That may be true if you focus on throughput -- which is the main focus of lean -- but that can lead to managers who don't know the cost of individual products" (i.e., because they're not tracking costs in a dedicated and automated system).

Savvy companies advise striking a balance between lean principles and ERP functionality. "They take advantage of the things lean is good at, but they don't give up the things ERP is good at," says Shepherd.

Whether bringing in a new ERP system to support lean or re-architecting an existing system, you'll need to start on the small side, says Andrew Beck, vice president of global operations at Metaformers Inc., a provider of ERP consulting services.

You'll want to begin your lean pilot by studying the manufacturing plant to isolate the line or area that would benefit most from a lean implementation. Next, you'll want to bring lean principles to bear on this line. Finally, you'll need to deploy the ERP system to track and analyze business processes on this line.

"We recommend you evaluate all production areas of the factory and select one for a pilot based on attributes of the line being produced rather than look at software and say what parts of business fits into the software," Beck says. "We want to take on visible problems with the pilot, like inventory sitting idle or high number of reworks.

"You'll want to see how you can do that with ERP on a small scale first, with lean in mind," he adds.

You'll also want to measure key performance indicators (KPIs) so you can compare those numbers before and after implementation. This way, you'll be able to measure the improvements ERP makes to the line. You can then extrapolate those numbers to the entire factory, Beck says.

In the case of a lean implementation, those KPIs will reflect lean principles. For instance, say you reduce lot sizes for overall efficiency. "If you're spending time on set-up for those reduced lot sizes, you can get bottlenecks in the system," Beck says. "There's a fine balancing act you need to play when looking for those efficiencies. But ERP can be used to track these processes -- including set-up time -- for continuous improvement, which is a lean goal."

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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