ERP Meets Lean Management

James M. Noblitt, CPIM, CIRM

Sr. Management Consultant

High-Tech meets No-Tech!

ERP Digital
Work Orders Push Data Entry Reports Security/Access Data Accuracy Complicated

Lean Visual
Spread Sheets
Flow Pull Kanban JIT Visual Empowerment Simplified

ERP & Lean Similarities and Differences

ERP
ERP is a set of business processes and methodologies, enabled by computer technology, designed to integrate all functional areas within an enterprise to optimize the use of resources used to accomplish tasks

Lean
A philosophy of work that focuses on the elimination of all waste and the minimization of the amount of resources used to accomplish tasks

Strives to minimize inventory

Strives to eliminate waste

Order based

Flow (JIT & Kanban)

Utilizes a computer

Primarily visual

It is a PUSH system

It is a PULL system

ERP II Next Generation of Total Integration

HTTP & XML EDI
To Supplier

HTTP & XML EDI

ERP is the core data base and transaction engine.

To Customer

Private Exchange

APS
e-Procurement

WMS ERP
MRP II DRP

FSS CRM TMS

Private Exchange

HR

Public Exchange

Public Exchange B2B B2C

MMS

MES

QMS

B2B

HTTP & XML

B2E
nAPS = Advanced Planning System nB2B = Business to Business nB2C = Business to Consumer nB2E = Business to Employee nCRM = Customer Relationship Management nDRP = Distribution Requirements Planning nEDI = Electronic Data Interchange nERP = Enterprise Resources Planning nFSS = Field Service System

nMES = Manufacturing Execution System nMMS = Maintenance Management System nMRP II = Manufacturing Resources Planning nQMS = Quality Management System nTMS = Transportation Management System nWMS = Warehouse Management System

ERP Processes
ERP
Planning
Demand Management Demand Management & Forecasting & Forecasting Business Planning Business Planning Sales and Operations Sales and Operations Planning Planning Rough Cut Capacity Rough Resource Cut Reqmts Capacity Planning Planning

Master Production Master Production Scheduling Scheduling

Rough Cut Capacity Rough Cut Capacity Planning Planning

Scheduling

Material Requirements Material Requirements Planning Planning

Capacity Requirements Capacity Requirements Planning Planning

LEAN
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Execution

Execution Execution

Lean Processes

5 Ss ABC / ABM ERP SMED Kaizen ISO 14001 PDCA Six Sigma QFD QS/ISO 9000 TPM Cellular TQC APQP JIT Kanban Benchmarking Poka-Yoke TQM
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Digital and Visual Environments

Getting Making

JIT

ERP

Planning Moving Scheduling Measuring Tracking Finishing Measuring Reporting

Planning

Execution

Computerized and Visual Environments

Getting Making

JIT

ERP

Planning Moving Scheduling Measuring Tracking Completing Finishing Measuring Reporting

Planning

Execution

Data and information is in the computer but access may be limited. Accuracy may also be questionable.
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Data and information tends to be visual but availability may be limited. Accuracy is typically not an issue.

Linking Sales/Marketing to Operations

Business Planning Business Planning

Demand Management Demand Management & Forecasting & Forecasting

Sales and Operations Sales and Operations Planning Planning

Rough Cut Capacity Rough Resource Cut Reqmts Capacity Planning Planning

S&OP
The critical link between Sales, Marketing, Forecasting and Operations

Master Production Master Production Scheduling Scheduling

Rough Cut Capacity Rough Cut Capacity Planning Planning

Material Requirements Material Requirements Planning Planning

Capacity Requirements Capacity Requirements Planning Planning

Execution Execution

Planning & Scheduling (ERP) Why Do It?

Lead time to procure raw materials and components is longer than the lead time presented to customers (internal & external) Lead time to manufacture products is longer than the lead time presented to customers (internal & external) We must have products in the incoming pipeline well before we have actual demand from customers (internal & external)

JIT and Kanban assume we can get what we need, on demand, when we need it

We must schedule long lead time items in order to be able to have or get them through the supply chain on demand when we need them

Therefore, we must find a way to merge the benefits of ERP and Lean to service our customers effectively and efficiently

Planning & Scheduling with Lean

Firm Orders Final Assembly Sub-Assembly Some Firm Orders Some Forecast Forecast Procure Raw Materials Procure Components

Cumulative Lead Time (Purchase part procurement through completed finished good)

JIT & Kanban

JIT & Kanban ERP

ERP JIT & Kanban

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The Dynamics of Planning & Scheduling

Firm Orders Forecast

Months

10

11

12

Forecast Accuracy 100%

0%

S&OP

Production Plan

Master Prod. Sched.

Finished Goods

Finished Goods

Finished Goods

Material Requirements Planning

Subassembly

Subassembly Raw Materials Components

Material Requirements Planning

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Work Orders Versus Kanban

SFC
Work Order Work Order Part Number Work Order Part Number
Quantity Quantity Part Number Start Date Start Quantity Due Date Date Start Date Due Date Due Date

Kanban
Production Schedule
Rate Based Single piece flow Production reporting not required Good for repetitive or flow manufacturing

Pull Pull Pull

Order Based Batch Orientated Requires production reporting Good for discrete manufacturing

Push Push Push

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ERP Performance Feedback

ERP
Demand Financial Systems

Planning Scheduling

Execution
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Lean Performance Feedback

ERP
Demand Financial Systems

Planning Scheduling Lean Execution

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Tracking & Reporting Mfg. Cost

Financials

ERP
Reporting
Work Order

Overhead Labor Material

Kanban
Schedule

Product Master

Routing

Bill of Material

Work Center

Kanban does not provide shop floor data reporting.

Standards

Purchase Order

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Applying Lean Principles (5-Ss) to ERP

The 5 Ss Lean
Eliminate unnecessary tools, parts, instructions, et. By red -tagging them and disposing of them after final disposition of need A place for everything and everything in its place

ERP
Use only parts of ERP that benefit the enterprise. Eliminate redundant or unnecessary programs, reports, d a t a- entry, processes, etc. Use ERP to enable straight forward business processes integrated with Lean principles, e.g. b a c k f l u s h i n g Ensure all data is always accurate and up to date Documented rules for maintaining and using the ERP system Business processes enabled by ERP executed on a timely basis, minimizing waste

Sort Simplify Shine Standardize Sustain

Clean everything daily

Documented rules for maintaining the first three Ss Operations safely carried out in the optimum sequence, minimizing waste

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Applying Lean Principles (8 wastes) to ERP

Overproduction
Schedule only what is needed based on MPS & MRP

Motion
Minimize the scheduling effort Minimize or eliminate labor and production reporting

Waiting
Reduce the scheduling cycle plan and schedule daily or by shift

Processing
Eliminate the use of SFC in lieu of JIT and kanban

Stocks & Inventory

Eliminate safety stock Become make-to-order

Defects
Accurate database

Transportation
Use lean techniques not SFC

Information
Efficient and effective planning and scheduling

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Applying Lean Principles (JIT) to ERP

Lean & JIT
Single piece flow Quality at the source never pass on a known defect Kanban Pull system Make parts only when needed Visual workplace i n f o r m a t i o n a v a i l a b l e w h e n n e e d e d P o k a-yok ( m i s t a k e-proofing) Employee empowerment Zero defects Team concept & Collaboration

JIT Applied to ERP

O n -line, real-time data collection Transactions and data input are done accurately Zero safety stock o r d e r p a r t s o n l y w h e n n e e d e d Open access to system I/O devices where needed O n -line data editing / Automatic Data Collection ERP empowers the users Accurate data Integration & Collaboration

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Integration Without Collaboration

Integrated System
Sales
Data Transactions Reports

Planning
Data Transactions Reports

Inventory
Data Transactions Reports

Cost Acct.
Data Transactions Reports

Information Flow

Information Flow

Information Flow

Process Shadow System

Process Shadow System

Process Shadow System

Process Shadow System

Information Flow

Information Flow

Information Flow

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Information Flow

Collaboration Without Integration

U n-integrated System
Sales
Data Transactions Reports

Planning
Data Transactions Reports

Inventory
Data Transactions Reports

Cost Acct.
Data Transactions Reports

Information Flow

Information Flow

Information Flow

Process Shadow System

Process Shadow System

Process Shadow System

Process Shadow System

Information Flow

Information Flow

Information Flow

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Information Flow

Collaboration + Integration = Synergy

Integrated System
Sales
Data Transactions Reports

Planning
Data Transactions Reports

Inventory
Data Transactions Reports

Cost Acct.
Data Transactions Reports

Information Flow

Information Flow

Information Flow

There are no shadow systems everyone is using the same systems and data.

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Information Flow

Does ERP & Lean Really Work?

Doing the right thing:
ERP Lean JIT SMED Kanban TQM TQA TOC ABC TLA

Doing things right:

Accurate Timely Consistently Change only when needed and always when needed

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Putting Together the ERP/Lean Puzzle

Kaizen for ERP
Shop Floor Control

Use Kaizen events to:

Determine when, where, and how to use ERP Set- up and clean up the data base

Planning & Scheduling

Tracking & Reporting JIT & K a n b a n

Use value stream mapping to design the optimum application of ERP methods Use ERP data editing to Pokayok processes Use ERP integration to enable collaboration and empower everyone

Financial Systems

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Thank You!
NOTICE: Proprietary and Confidential This material is proprietary to The Pantologic Group, Inc. It contains trade secrets and confidential information which is solely the propert y of The Pantologic Group, Inc. This material is solely for the Clients internal use. This material shall not be used, reproduced, copied, disclosed, transmitted, in whole or in part, without the express consent of The Pantologic Group, Inc. 2003 The Pantologic Group, Inc. All rights reserved

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