Manufacturing ERP

Manufacturing is the use of tools, machines, and labor to produce a type of goods. The ultimate goal of Manufacturing ERP, or manufacturing enterprise resource planning, is to create a flow of information between the operational functions of a manufacturing business, so as to organize that data into pragmatic reports that will prove beneficial to management and stakeholders alike. In essence, Manufacturing ERP software emphasizes the importance of data sharing across an entire business by connecting the disparate parts of a company and then providing all departments with accurate data and encouraging continuous collaboration between departments.

Lean Manufacturing is an operational strategy considered all the rage today.  The term "lean manufacturing" is coined to represent half the human effort in the company, half the manufacturing space, half the investment in tools, and half the engineering hours to develop a new product in half the time. The strategy is aimed at achieving the shortest possible cycle time by eliminating waste. The technique often decreases the time between a customer order and shipment, and it is designed to radically improve profitability, customer satisfaction, throughput time, and employee morale. There are many benefits to Lean Manufacturing, benefits such as: lower costs, higher quality, and shorter lead times.   

Up until recently, it was widely accepted that Manufacturing ERP and Lean Manufacturing were incompatible because Lean Manufacturing is in direct opposition to the more traditional manufacturing approach characterized by use of economic order quantities, high capacity utilization, and stockpiled inventory. In fact, the characteristics of lean manufacturing are: single-piece production; just-in-time pull scheduling; short cycle times; continuous flow work cells; collocated machines, equipment, tools, and people; multi-skilled employees; and high first-pass yields with major reductions in defects.

Choosing Manufacturing ERP for a business that is trying to put into practice the theories behind Lean Manufacturing can be difficult.  Agreed. For the most part, ERP software systems have been designed to be of service to traditional, non-lean, manufacturing plants.  ERP systems manage functional groups of the company, including sales, accounting, purchasing, manufacturing, inventory, planning, scheduling, shipping and receiving; and a basic component of an ERP system is material requirements planning, a decidedly non-lean activity focused on recommending procurement of materials based on a time-phased demand.

Still, according to Jim Shepherd, senior vice president at AMR Research Inc., a Boston-based market research firm, “… the reality is they are nowhere near as incompatible as people have tended to think." Mr. Shepherd continues, “The reality is, unless you’re running a fairly small or simple organization without a complex product, it’s not practical to run a manufacturing company without a dedicated business application. I could be running the leanest place around, but I’ll still need an ERP system, even if I don’t use it out on the shop floor.”

Manufacturing ERP is needed because a lack of integration means information is not being properly exchanged, and tasks are needlessly being performed more than once. All of this equals a waste of time and, of course, a waste of money. By streamlining the parts that make up the whole, the centralized system ends up increasing manufacturing efficiency. This, in turn, will cut costs and increase revenue.

The desirable byproducts of lean manufacturing, on the other hand, are on-time delivery, improved quality, and reduced inventory levels. The bottom line is to reduce waste in the manufacturing process by shortcutting the labor-intensive MRP component of the ERP software system. Thus, lean manufacturing is validated as a cost-effective alternative to MRP, and there are measurable issues that result from the lean campaign outside of MRP and within the ERP environment.

In light of this, the question becomes how well will lean manufacturing practices integrate with the host ERP system? And if lean doesn’t integrate well, how is an appropriate ERP system to be found?

For the long-term, the appropriate Manufacturing ERP software package should be evaluated based on its net corporate throughput and capability to balance the additional transactions incurred through the lean campaign. The ERP system would be designed for a lean company to assure that lean concepts and net throughput were integral to the system’s design consideration. This software would then result in a certain win-win solution. That is to say, a lean ERP software system would incorporate the extra transactions that come about from the efficiencies secured by a move towards lean manufacturing, such as gains in improved cash flow and freed up working capital. Later, a lean manufacturing ERP system will convert those manual interfaces between lean manufacturing and ERP back into an integrated auto procurement system with lean terminology and functionality. Ideally, the ERP system would still support MRP functionality although MRP is a non-lean function. MRP has value because it helps procure customer-specific material based on actual demand, meaning a perfect manufacturing ERP system is a hybrid of lean principles and management of material to be procured based on actual demand and customer ship dates.

Written by :

Amy Cruz