5 Ways Erp

An Epicor White Paper

Five Ways ERP Can Help You

Implement Lean

By Dave A. Turbide, CFPIM,

CMfgE, CIRM

Five Ways ERP Can Help You Implement Lean i

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Table of Contents

It’s All About Value 1

Reducing Waste 2

Continuous Improvement 3

Sales and Customer Service Opportunities 4

Orderless Manufacturing and Kanban 4

Collaboration 5

The World is Getting Leaner 6

Five Ways ERP Can Help You Implement Lean 1

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It’s All About Value

Becoming Lean has been a goal of most companies over the last few years.

Why is Lean so popular? Lean delivers what companies really need in today’s

highly competitive world - shorter lead times, improved quality, reduced cost,

increased profit, improved productivity and better customer service.

But there are about as many definitions of Lean as there are companies trying

to get there. Before we enter into a discussion of how Enterprise Resource

Planning (ERP) can help in a Lean initiative, it might be helpful to put Lean in

perspective and agree on some basic definitions.

Lean is a western adaptation of what started out as the Toyota Production

System. Viewed by many as models of efficiency and productivity, Toyota has

achieved remarkable success through a singular focus on adding value. A

simple enough concept, indeed, but difficult in practice because it takes a

change in perception and focus that at times may seem counterintuitive.

To become Lean, a company must take a hard look at processes and

practices to identify those things that truly add value for the customer and

eliminate those that do not. The continuous pursuit of waste elimination is

the essence of Lean.

Production processes and production activities can be directly addressed

in this value vs. non-value campaign. What goes directly into the product,

and what doesn’t add directly to product value is fairly easy to see. But

Lean can and should extend beyond the plant. Indirect activities such as

logistics, administration, engineering, and warehousing, as well as other

non-manufacturing activities can benefit as much from Lean thinking.

So, eliminating waste and fostering continuous improvement are what Lean

is all about. But how does a company embark on a Lean transformation?

The first step is to make a firm commitment Trite as that may sound; Lean

projects seldom succeed without a high level of organizational commitment

and resolve. Next is to map out processes and identify value and non-value

components, with a focus on enhancing the former and eliminating

the latter.

Lean is not an overnight quick-fix; it is an unending commitment

Now that we’ve established what Lean is all about, it may be somewhat

difficult to envision how ERP supports Lean. In fact, early thinking on Lean

often dismissed ERP and other information systems as inconsequential or

even inappropriate in a Lean-focused company. Why?

As Lean thinking has evolved and the concepts broadened, Lean advocates

have come to recognize that ERP and Lean work together very well – each

supporting and enabling the most important objectives of the other.

Lean purists point to several basic ideas that are the foundation of Lean. The

5 lean principles of value definition and specification, value stream mapping,

uninterrupted flow, customer pull and the pursuit of perfection are all

supported and enhanced by comprehensive information control and the

management tools that an end-to-end enterprise software suite delivers.

Five Ways ERP Can Help You Implement Lean 2

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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.

The logic within planning and optimization subsystems can help minimize

inventory, make the most effective use of transportation and warehousing

facilities, properly size and time work activities to avoid waste and minimize

non-productive time (set-up, handling), and provide other assistance in

avoiding non-value-adding activities.

Enterprise systems are also the “local” link to trading partners that allow for

the elimination of waste and delays in the supply chain. Facilities, customers,

reps and distributors can help develop better forecast and coordinate

activities to ensure better service through collaboration. Likewise, through

optimal integration with supplier systems, miscommunication, delays and

confusion can be avoided – all of which contribute considerable waste in the

supply chain.

Distribution and transportation optimization logic helps make the most of the

facilities currently available, and can develop optimized plans for

reconfiguring these facilities for more effective and efficient operation.

Supply chain planning and management systems can ensure the right

inventory is in the right place at the right time – eliminating wasteful excess

inventory and avoiding costly shortages. Transportation management systems

select the most cost-effective mode and route consistent with inventory and

delivery objectives.

Embedded workflow and alert/warning systems speed communications and

coordination throughout the organization. These facilities greatly reduce

administrative burdens and avoid delays in reacting to changing situations

resulting in less waste and better customer service.

Overall, enterprise systems – ERP, Customer Relationship Planning (CRM),

Supplier Relationship Management (SRM), Supply Chain Management (SCM)

– provide a source of information for mapping out Lean strategies, a

mechanism for implementing new and more effective processes, and a

measurement system to track progress and document gains.

Five Ways ERP Can Help You Implement Lean 3

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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.

Enterprise systems, as previously mentioned, contain the definition and

documentation of processes and procedures – the “as-is” state before any

changes. As improvements are made and the changes entered into the

system’s files, these new definitions serve to enforce and perpetuate the

improvements. Comparative measurements document the effect of the

changes on lead-times, costs, and efficiency. After the initial objectives are

achieved, the system captures the input needed for the next round of

improvements; the definitions within the system identify current activities and

offer a place to start identifying and eliminating waste.

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.

In addition, BI provides powerful interactive analysis tools that can be used to

dig deep into data and mine for waste and elimination opportunities.

BI provides graphical views of information, including combinations of

data that are not available within individual applications of suites.

Oftentimes, this

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