Lean manufacturing with ERP: a basic guide

‘Lean manufacturing’, sometimes associated with the ‘Just-In-Time’ (JIT) production doctrine, has been extant in the manufacturing sector for many decades.

However, once ERP software systems emerged in the 80s, early attempts to integrate JIT with ERP tended to cause production friction between ERP’s original, but somewhat hierarchical constructs, versus still highly-flexible approaches offered by JIT’s intrinsically thin supply-chain doctrine (pull signals, small batches, and rapid feedback).

Initially, the two disciplines evolved separately, but over time, the need to integrate JIT with ERP grew. This led to the development of fully integrated methodologies and ERP-compliant tools like Six Sigma, TPM, value stream mapping, 5S, SMED, Kaizen, e-kanban, and shop-floor data capture solutions.

What is interesting is that each of these evolved methodologies, plus their follow-on products still represent JIT’s original business goals today, in the same way that they existed in the past. To wit:

• Avoid waste
• Reduce inventory wherever possible
• Optimize production velocities
• Act on market-demand
• Satisfy client needs
• Commit to perfect customer QA
• Trust the workforce
• Commit to change
• Trust suppliers
• Commit to continuous improvement

ERP and lean manufacturing today

"Committing to change and continuous improvement is often more challenging than people expect. Methodologies like JIT and Total Productive Maintenance (TPM) require organization-wide changes in mindset and workflow that truly test how agile your organization actually is." Bryan Christiansen, CEO of Limble CMMS.

Where ERP used to clash with lean, today's manufacturing ERPs can support lean, provided you configure them for pull-based replenishment, keep data accurate, and avoid workflows that turn supervisors into full-time data entry clerks.

Lean manufacturing ERP vs lean manufacturing software

When people say “lean manufacturing ERP” or “lean ERP,” they usually mean an ERP system configured to support pull-based planning (kanban/min-max), tight inventory control, and continuous improvement reporting; lean manufacturing software often extends beyond ERP to include MES, APS/scheduling, QMS, WMS, and CMMS because lean depends on fast, reliable signals from the shop floor and supply chain.

A lean manufacturing ERP should help you:

• Trigger replenishment from real demand signals (kanban/min-max) rather than pushing large batches
• Plan and schedule work with current constraints (materials, labour, machines) and update plans as conditions change
• Reduce WIP and excess inventory by connecting purchasing and production to what customers actually pull
• Contain quality issues quickly with traceability and clear nonconformance workflows
• Measure improvement with simple, visible metrics (lead time, on-time delivery, scrap, downtime)

Today, the goals of ERP and lean manufacturing are entirely compatible and particularly relevant for small and mid-sized enterprises. Each list element represents a direct value point that either creates revenue or reduces cost throughout the universal manufacturing chain.

Use this manufacturing ERP selection template to nail down key software requirements

This belief is becoming more accepted of late, including hosts of notable market research firms, including AMR Research.

According to the firm’s former VP and research fellow, Jim Shepherd, "…there is a 25-year history of people believing that lean and ERP were fundamentally incompatible," he said.

“But the reality is they are nowhere near as incompatible as people have tended to think. There is no mystical significance to these terms that make them incompatible with ERP," says Shepherd, “…though ERP stakeholders must be properly educated and trained to understand lean basics. It is important to know that lean production concepts can be implemented without manufacturing ERP (or other types of technology systems), just as ERP can be implemented without lean.

A useful way to think about this is simple: lean sets the rules for how work should flow; ERP keeps the plan, inventory, purchasing, and production signals consistent enough to run that flow at scale.

A history of misunderstanding

That is also where the misunderstanding sprang up that lean and ERP technology are mutually exclusive. Just because each can be used in the absence of the other does not mean they do not play nicely together. In fact, an increasing number of midmarket ERP software packages specifically target lean manufacturers and say their systems enable lean practices.

That is also where the misunderstanding sprang up that lean and ERP technology are mutually exclusive. Just because each can be used in the absence of the other, does not mean they do not play nicely together. In fact, an increasing number of midmarket ERP software packages specifically target lean manufacturers and say their systems enable lean practices.

QAD Inc., for example, has promoted lean for more than 20 years, making it one of the earliest enterprise software vendors to espouse lean-ERP,” he concluded.

According to QAD’s Phil Friedman, “…(manufacturers) have a huge need to be more effective and efficient. They need to maximize people and raw materials, (and) they need to maintain margin and quality…(in the past), you could do everything based on visual cues and kanban cards," he said.

"But it's a much different world now, especially with global supply chains. The truth is, you need an ERP system today."

Oddly enough, we think so too.