Many lean practitioners believe that a company that fully embraces lean manufacturing principles must forgo the use of ERP. Their belief that ERP processes are cumbersome and add an unnecessary layer of waste to business processes is short-sighted.
In fact, every company, regardless of its size or the productivity improvement philosophy it has embraced, requires an ERP system even if only for its long-range planning capabilities and ability to improve communication and collaboration—not to mention to act as the memory and conscience of a company.
Even such lean paragons as Toyota Motor Company use an ERP system for planning long lead-time items and for communicating with suppliers and customers. While they may not use every aspect of their ERP system, most companies find that modern ERP systems co-exist quite nicely with lean.
Speed
Up-to-date ERP systems running on modern hardware process transactions and long-range planning runs faster than earlier generations were able to. The days of MRP runs taking multiple days are long gone. Most ERP suppliers have improved the efficiency of their systems to the point where even processing intensive programs run nimbly.
Simplicity
In its infancy, ERP output consisted of reams of green bar reports that required hours or days to work through, tying up planners and buyers in a never-ending cycle of drudgery. Over time, ERP systems have enabled more exception processing and workflow alerts, so that buyers and planners need only review items that require near term action, while the alerts ensure that the process avoids becoming bogged down in red tape or overlooked in a pile of less urgent items.
Accuracy
While we all know it’s entirely possible to run a plant using statistical inventory planning methods or Kanban cards, the reality is that many vital components have long lead times and suppliers require time to process materials through their own plants. A conscientious company doesn’t just ensure that its own plant is able to embrace lean principles; it also works with its partners and suppliers to ensure that they too can enjoy the benefits of lean. This requires constant communication and accurate forecasts.
No spreadsheet can calculate material requirements as quickly or as accurately as the MRP processor in an ERP system. Even most automotive companies, including OEMs and Tier 1 suppliers, use ERP systems to calculate and communicate their mid and long-term forecasts to their entire supply chain to ensure the suppliers have adequate time to plan and manufacture the necessary components and procure the required materials without incurring unnecessary costs.
Agility
The one thing you can rely on in manufacturing, as in life, is that things change. The best-laid plans go awry and customers change their minds. In order to respond quickly to these changes, companies need the ability to re-plan requirements rapidly and to communicate the necessary changes to suppliers and shop floor personnel. ERP systems excel at this ability to communicate changes quickly and accurately.
Collaboration
Modern ERP systems enable far-flung teams and global supply chains to communicate and work together to ensure that plans are synchronized and that they have selected the best global sources of quality materials for their products.
Traceability
Nearly every industry is now regulated to some degree in virtually every country in the world. Using ERP enables companies to track and trace components to ensure simple reporting or to minimize the impact of recalls if one should prove necessary. In addition, ERP systems include compliance reporting that enforces and simplifies reporting.
Lean is an admirable philosophy, and every company should strive to avoid waste and improve its processes. However, being a lean organization doesn’t mean that the company should shun the tremendous benefits that an ERP system brings.
