ERP systems and LEAN
Posted by Bethany Crease – 31 March 2017
Almost all manufacturing companies now view ERP systems (enterprise resource planning systems) as essential to the operation and efficiency of their business.
They also acknowledge the importance of LEAN. However, there are differences in the methodologies that ERP systems and LEAN introduce. In the past, businesses were focussed on and dependent upon process automation, and the digitisation of all their functions. The ability of LEAN to integrate with these principles and methodologies was hard.
Companies spent a fortune on shaping their ERP systems to their processes (sometimes vice versa) and there was little to no appetite to re-engineer this environment. There was also the issue of having to change business culture from one of almost unswerving obedience to the output of the forecast driven MRP process, to one of being driven by actual customer demand. The continuous improvement culture of LEAN, driven by the people doing the work, did not sit well with many organisations.
The main difference between ERP and LEAN is within materials planning and production scheduling. ERP systems rely on sales forecasts (mixed with historical data) for materials planning. Whereas LEAN utilises pull-based production scheduling, where inventory is kept to a minimum via a Kanban system, which demands and replenishes materials and parts as needed. It’s a typical example of push vs. pull! The flow principle of LEAN also demands that production is level loaded and balanced against customer demand, and LEAN is an advocate for one-piece flow (make one, move one) – so the ability to react to customer demand is improved.
LEAN and ERP systems working together
Despite the differences, it is possible to get the two methodologies working together for the benefit of the business. The visibility and value to the business of utilising each for their strengths, brings great value. ERP is the transaction engine – storing the orders processed, the material transactions, variances, financials, shipments etc. All the processes and their associated outcomes are delivered without the ERP system ‘touching’ the manufacturing floor.
Selecting the ERP system that has the capability to support a LEAN process, such as Kanban, means that the business can retain the benefit of transactional process automation – and the associated generation of data that can be fed into the continuous improvement LEAN environment.
ERP systems, like Microsoft Dynamics NAV, allows the configuration and customisation, achieving the above. In fact, industry standard tools and a proven deployment methodology result in ERP being a very valuable tool in a business’s journey to LEAN. Coupling an ERP system with a visual, dynamic scheduling tool (add-ons are available) means that the management of demand is greatly improved. The information generated by the transactions processed through the ERP is vital to the correct application of LEAN tools, such as Kanban calculators, Every Part Every Instance (EPEI) wheels, Plan For Every Part (PFEP) and A3 problem solving. The ability to automate processes speaks to the LEAN principal of removing waste, understanding customer demand and generating TAKT depends on order data.
All businesses have similar objectives at all levels. Be it inventory reduction, improvements in first pass yield or on time delivery. For example, neither ERP nor LEAN taken in isolation will deliver the best result.
So, despite the differences in LEAN and ERP processes and methodologies, they both work better together. Giving businesses the best of both worlds and drawing on the strengths that have improved manufacturing over the years.
Acora built a Kanban system for Power Panels that complimented the functionality of their ERP system, Microsoft Dynamics NAV. Click here to read the case study.