How ERP helps implementing Lean

• Reducing Waste: The nebulous Lean definition of waste – anything that doesn’t add value – allows plenty of opportunity for enterprise systems to contribute to the cause. In the most general sense, it is difficult to act on or improve what you don’t know or can’t see. ERP systems are the central nervous system of the organization. They carry the definitions, the data, a record of the activities of the organization, and provide the measurement systems for determining where opportunities for improvement lie – and for measuring progress of efforts to reduce and eliminate waste. In addition, most ERP systems also provide the ability to model and test alternatives – so-called ‘what-if?’ scenarios – that help focus efforts on the highest payback activities. More specifically, processes and procedures are embedded within the ERP system’s routings and workflows. This existing “documentation” allows organizations to clearly see what happens today and provides the mechanism for implementing new and more efficient procedures.

• Continuous Improvement: Lean is not a one-time project, nor is it ever “complete”. It is common practice to set initial goals when first entering a Lean transformation project, but it is essential that achieving those goals is not seen as an end point. There’s always more to do – more improvements to attain, more efficiencies to discover, more refinement of processes and procedures to eliminate waste and improve return on Lean investments. Most enterprise systems today offer Business Intelligence capabilities as either a standard feature or as an optional add-on. Business Intelligence (BI), also called Business Performance Management or Operations Performance Management, or any number of other variations of that phrase, gathers information from throughout the enterprise (from ERP, CRM, procurement systems, supply chain systems, etc.) into a central analytic workspace. Tools within the BI applications monitor key performance indicators and can automatically alert management to any changes (good or bad) in any of the hundreds of measurement areas. This alerts management to impending problems early – before waste is generated. These warnings can also point to areas needing improvement.

• Sales and Customer Service Opportunities: Most enterprise systems today give as much focus to customer relationship management (CRM) as to internal operations. Some actually go as far as to embed CRM functionality within the ERP solution. CRM capabilities simplify the order management process by aggregating information from across the business and making it readily available to customers and customer service agents. Integrated pricing, configuration, order validation, availability checking, credit checking, and the smooth the order handling process -- delighting the customer and saving time and effort on the part of customer service agents, engineers, warehouse personnel, and accounting personnel.

• Orderless Manufacturing and Kanban: While Lean principles can certainly be applied and are very valuable throughout the organization, most people think of Lean in the context of the plant floor. The most vivid examples (at least to date) come from the factory where work is made to flow smoothly through the plant with absolute minimum delays, handling, inventory, downtime, scrap, and rework. The stereotypical Lean plant uses Flow Production and Kanbans to achieve this result. Flow manufacturing (continuous flow, demand-based flow) is characterized by production lines and/or cells in which work moves piece-by-piece through the process, not in batches. The flow of work is controlled through physical signals called Kanbans that can be tags, labels, containers, or electronic signals. It ensures minimum delays, better handled inventory and higher quality at a lower cost.

• Collaboration: On the demand side, the better the forecast, the better you are able to plan and produce what customers want, when they want it, with minimal inventory and expediting. The key to a better forecast is to mine the information and knowledge that resides with sales people, distributors, agents, representatives and, yes, with customers. On the supply side, vendors benefit from tighter ties to suppliers. It starts with electronic communication of purchase orders, changes, releases, and payments which is faster, more detailed, and not subject to human errors from manual entry, messy or illegible faxes, or lost paperwork. In simple words we try to match demand and supply factors more efficiently.

This is how ERP is helpful in implementing LEAN.