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Improve operations with lean manufacturing techniques, ERP

Users want lean manufacturing, but they won't give up ERP in favor of it. This gives software developers ample opportunity to bring lean, and other methodologies, into ERP.

When lean manufacturing first gained attention, it generally was perceived to be incompatible with manufacturing...

resource planning (MRP) and ERP. Lean manufacturing emphasizes physical signals and controls, and works to reduce inventory, work in progress (WIP) and lead times, all common characteristics of an MRP/ERP environment. Nonproduction activities like reporting transactions are anathema to lean.

In the 25 years since The Machine That Changed the World was first published, extolling the wonders of the Toyota production system to a struggling automotive industry, lean manufacturing has spread throughout the world and thrived inside and outside the auto industry. During that time, we have come to understand that lean is all about operations, or execution, and does not offer much, if anything, to supplant the planning functions in ERP. We also have learned that lean manufacturing techniques can be incorporated successfully into traditional job shop and batch production plants, as well as high-volume continuous and cellular production environments.

ERP software developers recognize that although lean manufacturing is something their customers want, those customers won't abandon ERP in favor of lean. This gives developers plenty of opportunity to adapt ERP systems to better support the combination of ERP and lean manufacturing techniques, along with other improvement programs that have evolved in recent years. Let's look at some examples.

ERP and the integration of lean manufacturing

Lean manufacturing techniques focus on execution -- material movement and replenishment, production, and efficient operations. Many companies use lean manufacturing techniques like Kanban as a supplement to or replacement for ERP shop activity control functions. Kanban uses physical triggers (tags, empty bins, etc.) to initiate replacement of an item after it is consumed.

Marrying ERP systems with lean techniques gives manufacturers the best of both.

The planning functions in ERP, along with customer order processing, purchasing, engineering and so on are not greatly affected by the implementation of lean manufacturing techniques in the plant. ERP developers may incorporate some minor changes to calculations or processes to accommodate the lean processes but remain intact otherwise.

ERP's shop floor activity -- production activity control -- may partially replace lean manual and visual triggers. ERP software often contains an electronic Kanban system -- a contradiction in terms, perhaps, but an effective facility nonetheless. Traditional Kanban uses tags, empty bins and the like to trigger replenishment; electronic Kanban also triggers replacement of an item when it is used but it has the advantage of electronic communications. A physical tag must be collected and transferred to the supplying location whereas an electronic replenishment signal can be delivered instantaneously across the plant or to a supplier or feeder plant anywhere around the globe.

One problem with physical Kanbans is that the number of actual Kanbans in circulation is set according to the volume of usage and the lead time for replenishment. If either varies, there is a risk of either too much inventory or shortages. In electronic Kanban, the number of virtual electronic tags can be adjusted dynamically according to the forecast and production plan.

Additional lean manufacturing techniques generally are fully compatible with MRP and traditional shop floor control. It's really quite simple to incorporate mistake-proofing (i.e., poka-yoke), standard work, level production, reduced lead time and changeover, workplace organization (through 5S), and other lean ideas within the traditional MRP/ERP environment to benefit from the efficiencies and visual controls that lean brings to the plant floor.

ERP and the theory of constraints

Another execution strategy, theory of constraints (ToC), was at first thought to be incompatible with traditional MRP/ERP. Once again, though, it became evident that ToC and its physical implementation, known as drum-buffer-rope (DBR), can slip easily into place as the production activity control function within an ERP environment. It can be done without additional software, using manual controls and management, or special ToC production control software can be incorporated into an ERP stack to manage work order release and buffer management that are key to ToC and DBR.

ERP and demand-driven MRP

Another execution approach gaining traction is demand-driven MRP (DDMRP), as explained and promoted by the Demand-Driven Institute. In this case, DDMRP was intended from the beginning to work with traditional MRP/ERP.

MRP was created in a world of DDMRP that uses an innovative WIP and material control approach that overcomes the primary difficulties MRP users struggle with.

As you can see, ERP systems can benefit from integration with lean manufacturing methodologies and other improvement programs. By combining lean and ERP, and taking advantage of other methodologies, organizations can streamline and improve operations.

Next Steps

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This was last published in December 2015

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