April 28, 2013

The integration of ERP System and Lean Manufacturing

Lean manufacturing encourages the production efficiency through eliminating waste and ERP helps to integrate the business process and also to provide some real-time information that will support the managerial decision-making. However, in the lean manufacturing, ERP might be identified as a source of waste because it can create the excess inventory, slow production and less flexibility. Furthermore, ERP system usually requires data, which is not used to control or improve the business process and also sometimes the gap between the actual business process and the ERP system is too big. It is therefore there is on-going debate whether ERP system can support Lean manufacturing or not.

The major conflicts lies within production scheduling and material planning. ERP system depends on the forecast demand for planning the material whilst lean manufacturing encourages ‘pull’ system in which the production scheduling is driven by the customer demand. Consequently the inventory will be kept as minimum as possible possibly through kanban card and any other lean manufacturing tools.

Despite this argument, lean concept requires high data quality and accuracy in which ERP system does support. The quality of data helps the company in solving the problem and sustaining the continuous improvement if data is managed properly. Furthermore, The ERP system that doesn’t involve directly with the production/outside the factory plant does support the Lean manufacturing very good, for example ERP can help the decision whether to accept or reject the order by calculating the capacity in which the ordering can be processed faster. Consequently it helps the company to reduce the lead-time in overall and this is aligned with the one of lean manufacturing concept, which is to shorten the lead-time.

However, the biggest impact in determining the lead-time lies in the production line. Setup and cycle time can bring impact to the lead-time and these are tracked in the ERP system so that the wasted time in those processes can be eliminated gradually. In addition to that, The Business Intelligence, which is part of the ERP, helps the company to monitor their performance.

It is therefore important for the company that adopt lean practices to select which ERP systems that suitable for their business process especially if it involves the production line and subsequently adjust that ERP system in accordance with their need so that the gaps between the actual business process and ERP system model can be reduced. Nowadays, there are some ERP software firms that make their product support lean manufacturing. One example of those is Microsoft Dynamics AX 2012.

Source:

Daryl Powell, Jan Riezebos & Jan Ola Strandhagen (2013): Lean production and ERP systems in smalland medium-sized enterprises: ERP support for pull production, International Journal of Production Research, 51:2, 395-409

Lean manufacturing and ERP: How to leverage ERP to get lean. Available online at<http://www.iqms.com/products/brochures/eBook_LeverageToLean.pdf> [Accessed on 1 April 2013]

Can Lean and ERP Work Together. Available online at <http://www.industryweek.com/systems-integration/can-lean-and-erp-work-together> [Accessed on 1 April 2013]


- One comment Not publicly viewable

  1. Sourabh Bajaj

    Your argument about the conflict between ERP and Lean Manufacturing sounds logical. However, there are a lot of companies which practice Lean methodology or companies in the automotive sector who still implement ERP systems, more specifically SAP. Toyota, Mercedes, Ford are some of the companies which have implemented SAP. An argument maybe made that they implement modules such as HR or FICO, which have no conflict. However, it will be interesting to analyse the use of SAP by these companies. We may find that SAP and other big ERP players have customised even modules such as PP,MM,SD etc., to cater to demands of various organisations, including the ones which practice LEAN methods and processes.

    29 Apr 2013, 14:39


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