Lean ERP

Despite any claims to the contrary, the supply chain and sales/distribution modules in most ERP systems do not seamlessly facilitate lean manufacturing. However, that is not to say they prohibit lean manufacturing either. Generally, there is enough flexibility built in so that with some tinkering, you can make your ERP system behave in a lean fashion – sort of.

Arguably however, the decision to implement lean ERP is not so much a technological question as a philosophical one. The closer you move toward lean as a religion, the less patience - and need - you have for computerized systems. Forecasting? You don’t need it, it’s always wrong, and you’re always making the wrong thing. Inventory? If you have so much inventory that you have to count it, and manage it, then you’re making (or buying) the wrong thing. Production schedule? Who needs one? You know what you need to make: just spin the scheduling wheel.

Traditional planning and scheduling approaches, on the other hand, view ERP as a big improvement in communications and accountability. For the first time, inventory inaccuracies matter to finance as well as planning. Everybody sees and talks about a common set of numbers. Customer service can see what is happening on the factory floor. Sales and operations planning often take a stair-step improvement in effectiveness.

No Easy Answer

So if your Vice President of Manufacturing asks you if ERP will support lean, what do you say? Unfortunately, the answer is, “it depends”. Obviously, one of the dependencies is the specific ERP software you have in mind; different systems have different degrees of lean ERP sophistication, especially if they are focused on a specific industry segment. The other critical dependency, though, is how well you operate in, and adhere to, lean manufacturing principals. And this is the tricky – and critical – part of the answer you give your Vice President. Because if your company runs lean very well, pulling production through the plant at high velocity and low inventories, you probably want a minimalist approach to ERP supply chain functions, because even with tinkering, a lean ERP system will be more cumbersome than a well executed lean process. However, – and this requires a lot of brutal self honesty – if your efforts in lean manufacturing are timid, or poorly executed, then you are better off with a strong ERP/supply chain package. Said again, well-executed lean is better than well executed traditional planning and scheduling, but poorly executed lean is worse than poorly executed traditional planning and scheduling.

Free Research: Understanding Landed Costs

The performance limitations on lean manufacturing normally involve the quality and quantity of thinking applied to it: a thorough understanding of how the business really runs, having the data to accurately calculate the underlying math around external demand, and astute judgment in figuring out how to apply that math intelligently to the operation.

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Phil Marshall

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Phil Marshall