While no system is perfect unto itself, both enterprise
resource planning and lean manufacturing have their place in today's
When Henry Ford began using continuous flow manufacturing
back in 1913, Kiichiro Toyoda's term lean manufacturing
had not yet been developed. Both men, with their own dreams and leading-edge
ideas, were on similar paths as early pioneers in the realm of manufacturing
These days, the Internet abounds with discussions of best
practices, lean manufacturing and how these concepts fit in modern
manufacturing facilities. Of particular interest is the discussion of lean
manufacturing and the now-mainstream enterprise resource planning (ERP) system.
Consultants, industry experts and educational scholars continue to debate the
pros and cons of both systems, discuss the idea of the two working in tandem,
and question if such a marriage can ever succeed. As the debates continue, it
becomes increasingly clear that while no system is perfect unto itself, both
ERP and lean manufacturing have their place in today's manufacturing environment.
Lean Manufacturing vs. ERP Systems
Just as in any good partnership, both ERP and lean
manufacturing have strengths and weaknesses that need to be offset by a solid
partner. By themselves they can be a strong solution for the right company,
although organizations that neatly fit either solution are hard to come by.
Both systems focus on the elimination of waste through
value stream mapping; creating flow of process, goods and people; and a
continuous state of improvement. Without question, these principles are the
basis for any well-run manufacturing operation. Both systems require a
long-term commitment that takes a significant amount of time and resources, yet
offers many operational improvements and cost savings in return.
The two methodologies begin to conflict in relation to
planning and the idea of pull vs. push. Lean manufacturing focuses on pulling
demand directly from the customer and reacting to such requirements promptly
and efficiently. An ERP system, on the other hand, is a more holistic approach
that goes beyond the plant floor and focuses on the organization, efficient
movement of data and forward planning. Neither methodology is in itself wrong;
both certainly have their place in innovative operations.
Pros and Cons
The difference between the two concepts becomes
increasingly apparent when looking at industry types, manufacturing styles and
planning horizons. By nature, lean manufacturing is reaction based, highly
dependent on known customer demand, and geared toward individual products. Lean
manufacturing is tactical. Typically this can account for only short-term-based
decisions and, at best, can look at only one month of operational activity.
For some industry segments, a 30-day planning horizon is
ideal. For others, the idea of production based solely on short-term customer
demand is not feasible in day-to-day operations. Lean manufacturing becomes
even less advantageous for companies with long production cycles, reliance on
high-demand raw materials and components, or standard lead times of 90 days or
more. As an increasing number of North American-based companies purchase goods
from Europe and the Asian Pacific region,
solid long-term planning becomes even more critical.
These additional considerations require an extended
planning horizon and force companies to move past simple tactical planning.
Such considerations require a move to operational- and strategic-based
methodologies. Operational-based planning is generally performed at a product
group level and includes multiple departments, such as manufacturing, inventory
control and purchasing. A typical time span reaches well past the tactical
single month and runs as long as one year or more. This type of planning offers
greater visibility and generally better management decisions. However, as with
tactical-based planning, it is not for every company or industry.
Strategic planning reaches even further and gets more
generalized in scope. Such planning is performed at even higher levels of
product groupings and can reach out as far as five years. This type of planning
is utilized by a higher level of management for the purpose of achieving
long-term objectives and financial budgeting.
Both lean manufacturing and the average ERP system
provide tangible benefits, but in their own way and to different types of
operations. By design, both provide a separate set of obtainable results. Lean
manufacturing can be a great tool for short-term, manufacturing-based planning,
but it does not have the depth to move outside the plant floor or go beyond a
one-month period. If manufacturing is the focus and if the production style is
a discrete-based flow that molds well to lean manufacturing, the operations can
achieve substantial improvements through the adoption of such principles. If,
on the other hand, the production plant requires production batches, includes
high demand and long lead-time raw materials, or requires what if
manufacturing scenarios, then lean manufacturing will not offer a suitable
An additional obstacle to lean manufacturing is multiple
plant organizations with centralized purchasing. If one manufacturing plant
feeds raw materials or subcomponents to another plant, the simpler approach of
lean manufacturing is not going to be robust enough to help streamline material
flow between the facilities. In this situation, a full ERP system is needed.
Only a multi-facility ERP package is capable of reviewing all production and
raw material requirements across the enterprise to provide both streamlined
purchases and production. Without a solid ERP package, duplications in
processing, inventory, and transportation can and will occur.
A Hybrid Approach
Regardless of the organization or criteria involved, one
size generally does not fit all. Unless a company is simple in nature, lean
manufacturing alone is not the answer. In addition, an ERP system typically
cannot resolve all manufacturing and operational issues. A hybrid approach must
be utilized to capitalize on best practices from both methodologies.
Over the last few years, many companies have begun to see
these hybrid systems as the answer to their operational woes. They understand
that no software supplier can fulfill all their needs or wants, just as no
operational methodology can fix all their operational pains. Companies are
beginning to blend the two methods, using data and processes where they fit
This hybrid approach does not come easy, although the
benefits can be well worth the effort. No cookie-cutter implementation plan
exists for a hybrid of lean manufacturing and ERP adoption. The manner in which
the hybrid is implemented must be modified for each company. A hybrid approach
could include the following practices:
- Establishing ERP-based minimum/maximum levels
on the plant floor to mimic kanbans
- Utilizing actual orders in planning and
scheduling for items with short lead times, and default to forecast-based scheduling
for long lead time items
- Utilizing smaller batch sizes to reduce
- Allowing for partial batches to progress
through the workflow to increase throughput and reduce overall production
No simple answer exists for achieving optimized
manufacturing operations, and neither lean manufacturing nor ERP will change
this fact. However, savvy managers and executives recognize the advantages of
the hybrid model and are venturing into this new and relatively uncharted
territory. The end result offers suitable solutions for each company's unique
requirements and modifies these solutions so the organization will derive the
For more information regarding lean
manufacturing and ERP systems, call Technology Group International at (800) 837-0028
or visit www.tgiltd.com.