The realities of modern business mean that lean manufacturing and ERP software initiatives usually start in different parts of a company, and often for quite different reasons. The lean manufacturing camp wants to strip out elements from the process, whether that is excess stock, parts inventory or labour. The proponents of ERP, for their part, are concerned with using automation to improve operational efficiency.
As a result, the connections between ERP software initiatives and lean manufacturing are not always obvious; sometimes the two processes even seem at odds. But with companies under pressure to cut unnecessary costs from their production processes and respond better to customers, it could be time for the two camps to move closer together.
In some of the UK’s competitor marketplaces, this process is already well underway. And, as manufacturing experts with experience of Asia point out, the question of whether to embrace ERP software or to adopt lean practices arise there far less often.
According to Andy Richards Taylor, a manufacturing consultant at Cap Gemini Ernst & Young, Japanese and US companies are more likely than their European counterparts to combine lean and ERP techniques. The long-standing Japanese experience of lean manufacturing in particular has affected the way Japanese companies have introduced business automation such as ERP software . “In Europe, lean manufacturing is often an initiative, in response to business issues. But in Japan, they have been doing this for 40 or 50 years,” he says.
For Japanese companies, this means that ERP software is more likely to be introduced on top of an established lean process, especially in industries such as car manufacturing or consumer elec-tronics. So Japanese companies are less likely to face the need to rebuild ERP software or even MRP systems to support new manufacturing techniques.
In Europe and the UK, however, the picture is different. The drive to automate businesses through ERP software peaked in the early to mid 90s. Although there had been a burst of interest in lean manufacturing in the 1980s, ERP software has been adopted far more widely than lean.
This can cause problems for companies that need to update the way they make their products and make significant changes to the IT systems that support the business.
“ERP software can pour very heavy concrete around your systems,” cautions Richards Taylor. “The danger is that you automate some of your inefficient processes rather than sorting out those processes. Think about the process environment before applying ERP. Going back to change it later is much harder, and value wasted.”
He advises companies to look at how their manufacturing operates before considering business process automation through ERPsoftware . If a company wants to move to both lean manufacturing and to update or extend its ERP software capabilities, time spent looking at the processes first will benefit both the lean and the ERP software initiatives.
In fact, failing to consider the manufacturing process is one reason companies sometimes fail to see the return they expect from investments in ERPsoftware.
Le Roux Cilliers, head of manufacturing at Deloitte Consulting, points out that many ERP software projects concentrate on business support functions such as finance, sales or human resources, rather than extending into the core manufacturing area. This offers one explanation for the lack of co-ordination between ERP software and lean manufacturing initiatives.
“Lean in itself is focused on optimising the core manufacturing operations. ERP software has an oppor-tunity to work with or co-operate with lean manufacturing but only when you extend ERP software to incorporate the manufacturing process. Then you will see added benefits,” he says.
However, manufacturers able to extend ERP software into their manufacturing core are most often those that have a mature ERP software implementation in the first place. This creates a paradox: companies should be wary of implementing ERP software if they plan to move to lean manufacturing but have not yet done so. But applying lean manufacturing to ERP software requires a mature ERP backbone.
“You do have to be far enough down the ERP software route to be able to extend it into the core manufacturing business,” says Cilliers. “But when people start off with a lean project they don’t necessarily think about the role ERP software can play in enhancing their lean objectives.”
Cilliers points out that ERP software becomes fundamental to the process once companies start to look at production efficiencies together with procurement, warehousing and the supply chain. “ERP is not only for back office - it is about the business as well. If ERP software is only applied to finance and HR or back office functions then your lean and ERP initiatives are far apart,” he says.
But attempting to implement both ERP software and lean initiatives together carries its own risks. As yet, there are relatively few tools that specifically address the needs of companies that want to bring the disciplines of lean to bear on ERP software , or indeed automate lean processes.
Among the ERP software companies, Oracle does have some tools that are designed with lean in mind, as does Factory Logic. However, it is not strictly necessary to use a lean tool for an ERP software implementation. The key is to have everyone in the project, not least senior manage-ment, thinking in lean terms.
The difference comes down to how production is organised. “Most ERP software systems are forecast driven, but lean is about responding to orders, a pull system,” says Lee Bamber, supply chain consultant at enterprise software company SAP. “There was a suggestion that the two were in conflict, but there are a number of companies, especially automotive, that have implemented ERP software with lean production.”
Max Kittsteiner, head of IT at BMW said: “We went through all our business processes and continuously fine-tuned them to ensure that they were effective without any bottlenecks. And we used well-tried manufacturing software from BMW Group as we were a car manufacturing company not a software company.”
“Lean manufacturing quite often works by simplifying the processes,” says Bamber. Usually, an ERP software implementation will be easier if lean operating procedures have been put in place first. At least then manufacturers will not be trying to automate unnecessary complexity.
As Bamber points out: “Otherwise, you may have to reconfigure your ERP software to reflect lean.” Not an impossible task by any means, but a duplication of effort and an avoidable use of resources, both problems that lean programmes set out to avoid in the first place.