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What are the main reasons to adopt a Lean ERP?
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 AX2012.
Lean vs. MRP "ERP":
- Lean major objective is to eliminate waste and to bring the inventory level to as minimum as zero. The JIT Just In Time concept of lean seamlessly synchronize supply across the supply network, a lead time preciously calculated to receive materials directly to production line practiced in US Toyota factory where no warehouse exists to keep materials or components it just receives them in time to work centers. This is not a simple practice it requires the whole markets channels to work on the JIT clock.
- In MRP the major point is to schedule the production based on planned orders and forecasted sales, it means warehousing and Min-Max inventory level, finite/infinite capacity planning, backward/forward time fence, etc.
ERP is not contradicting lean unless functions and features doesn’t comply with the lean concepts, practically JIT and Lean can be adopted within most of tire one ERP, we can eliminate MRP and work with one piece batch flow, an automated sourcing and supplier network can be integrated to dispatch and receive material components and products just in time a model widely adopted by DELL.