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Why Lean may need ERP?

The traditional thinking is that Lean and ERP are contrary to one another. Lean signifies a pull system and simplicity whereas ERP signifies a push-based complex environment that relies on innumerable transactions at every step to run smoothly. Lean is reality-oriented while ERP is data-in-the-system-oriented. One can argue forever on these lines…

If one scratches the surface, however, it does not seem so contrarian after all.

Consider some real-life examples below from my consulting experience where an ERP system assisted the lean philosophy of an enterprise.

 

Kanbans: The simplest form of Kanban relies on containers with a card number. An empty container can imply either movement of material, in a lot size equal to the Kanban size, from another location in the plant such as the warehouse (Intra-plant Kanban), production of an assembly (Production Kanban), purchase of material from a supplier (Purchase Kanban) or purchase of material from another plant of your company (Inter-plant Kanban).  While the movement of an empty container as a physical indicator may be feasible over small distances, it is not necessarily possible over long distances particularly when the container is not part of a reverse logistics system.  In such cases, an ERP system’s Kanban functionality can help achieve some of the same simplicity of operations using an electronic signal rather than a physical one. A board of bar-coded Kanban cards and a handheld device to scan an empty card can be used to trigger either a move order, a work order, a PO or an internal PO. This helps alleviate distances and cards lost in transit.
Another situation where an ERP can assist in a Kanban environment is to identify uneven demands. To function successfully, a Kanban system assumes an even level of demand. Placing a Kanban item on MRP to monitor future demand can be a good idea to identify bumps in demand. The replenishment still happens on visual cues and not from MRP; a planner simply sees the MRP horizontal plan to make sure there are no surprises ahead.

Most ERP systems do Kanban calculations for Kard size or the number of cards based on historical or forecasted usage.

Backflushing: Most ERP systems support backflushing of components during manufacture. By having components on the shopfloor rather than stacked high in warehouses, you can ensure a lean operation as it reduces the overheads associated with kitting from the warehouse for an individual job and carrying each kit to the shopfloor. ERP systems assist in this Lean initiative by directly backflushing material on completion. A Kanban system can then be used for the movement of inventory between the warehouse and shopfloor either based on physical movement of cards/containers or electronic signals

Cellular/flow manufacturing:  ERP packages assist cellular manufacturing (self contained units with material in close proximity of the operator) and flow manufacturing by providing work order-less completions wherein a single unit of an assembly can be completed and the corresponding quantities of raw material backflushed at the press of a button. This is extensively used in organizations to reduce batch sizes to the point that a single unit is completed each time. This obviously requires flatter bills of materials or use of phantom levels.

Electronic communication with supply chain partners: Using supplier and customer portals can eliminate wastes such as paper-based communication and most ERPs support such portals. Suppliers can receive POs, send acknowledgements and invoices electronically. Similarly, customers can place their orders electronically and check the status online.

Workflow: Workflow-based processing, a standard feature of most ERP systems, is another step in the direction of Lean as it promotes a sequential flow of process in manufacturing and order management.
The above cited examples do signal reconciliation between the ERP and Lean way of thinking. Finally, the two don’t seem mutually exclusive.

Comments

Gaurav,

I am not very sure why you mentioned that lean might require ERP...Taichii ohno helped Toyota with lean during the 80's and nothing much has changed in the basic concept...Probably kanbans are now e-kanbans...

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