The inevitable marriage of Lean principles and ERP solutions will have an interesting impact on both, says Conrad Steyn, co-founder of Barnstone. Barnstone has managed ERP value extraction for companies including Lonmin, Absa and Liberty.
For large companies, having an enterprise resource planning (ERP) solution has become almost mandatory. But most companies have implemented ERP in their 'back office', ie in finance, HR, sales, marketing, etc, and not on the actual manufacturing floor. While technology solutions are frequently used within a company's production function, these are different to ERP and generally integrate manually with the ERP system.
Many of these 'shadow systems' in production are firmly rooted in Lean principles, which include standardisation, simplification, elimination of unnecessary tools and waste, and a sustaining approach. The next frontier is for a company to integrate its ERP systems with a Lean manufacturing process, which will enable them to harness the benefits of both.
To date, ERP has been more focused on planning and scheduling, and Lean on scheduling and execution. Put them together and a company can benefit from better scheduling, improved on-time delivery, faster turnaround, improved inventory and a myriad of other benefits from having a fully-integrated system.
To realise these benefits, businesses will have to overcome a number of challenges. The first is that switching to an ERP-based solution on the manufacturing floor will require a major shift for the people running production. The current 'shadow systems' in use are sophisticated low-level technology and very visually-oriented, so significant training and change management will be necessary.
Secondly, as much as the marriage of Lean principles and ERP technology will affect production processes, there will be an inevitable impact of Lean principles on ERP. Because the implementation of an ERP solution is a major undertaking for an organisation, many lose sight of the fact that ERP is a journey, not a project. As Lean and ERP move closer together, some of the core Lean principles will inevitably be applied to a company's ERP system.
For example, a key Lean principle is standardisation. In many businesses, standardisation has not been applied across its ERP system and it is often the issue that causes the most internal resistance. To get around it, vendors will then customise the solution for each department.
While it is critical to recognise the key differentiators in each department and customise accordingly, there are many processes - eg, HR policies, invoicing, etc - that can be standardised and are not. Yet it is through standardisation that a company can truly realise the benefits of ERP, so this is a significant opportunity.
Often doing whatever it takes to get ERP implemented is the best initial solution. The implementation is a major undertaking, and companies need to be clear how much change their organisations can accommodate at one time.
However, there should be a pre-defined plan to take the implementation to the next level once the organisation has become accustomed to ERP. And here is where another Lean principle - that of sustaining - comes into play, encouraging businesses to see ERP as a long-term journey, rather than a short-term project to be implemented and then forgotten about.
Perhaps, then, it is the influence of Lean principles on ERP processes that will have the most significant impact in the inevitable marriage between the two. By applying the Lean principles to ERP implementations, companies position themselves to really take advantage of all the value ERP has to offer.
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