How ERP Improves Lean Manufacturing
We should start with a quick definition of lean manufacturing for the uninitiated. Lean manufacturing, also referred to as “lean”, is a commitment to minimizing waste of any kind during the manufacturing process. This includes wasted time, materials, and capital. in total, there are seven sources of waste in lean manufacturing, referred to as the “7 Mudas”. ERP improves lean manufacturing by providing visibility and tools to identify wasteful processes and how your organization can continually improve processes to ensure that waste is eliminated wherever possible. Here are a few examples of how ERP improves lean manufacturing operations.
1. Reduced Transport Waste
This form of waste occurs when goods and materials are moved from one location to another, be it to a staging area, warehouse racks, or shipping docks. These activities utilize machinery, operators, and time to complete operations, all of which cost money. Bringing no added value to the manufacturer or customer, this is a non-revenue generating activity. As such, fewer hours spent in material handling phases of operation means fewer resources wasted. ERP improves lean manufacturing in this case by providing tools that enable more intelligent means of production and efficient logistics activities. Scheduling and monitoring capabilities, as well as equipment utilization visibility and inventory tracking, give teams the insight they need to see where resources are being committed and which steps in a process can be expedited or cut out of the equation entirely.
2. Reduced Inventory Waste
If you’re a Make-to-Stock (MTS) or Mixed-Mode manufacturing business, chances are you expect to have a certain level of raw materials and product maintained in inventory. Make-to-Order (MTO) operations, not so much. However, at any level, having raw materials and semi-finished/finished product tied up in inventory means capital is tied up in inventory. Unless you’re stockpiling for a doomsday scenario, too much inventory is a bad sign. ERP systems provide the framework for achieving maximum efficiency, such as with Just-in-Time (JIT) manufacturing. Just as supermarkets have refined the optimal replenishment cycles for produce, so too can manufacturers remove these sub-par production planning and distribution practices to keep production constantly moving. ERP improves lean manufacturing in this case by providing tools for forecasting accuracy, historical data for sales and products, setting min/max stock levels, and even allowing for automated reordering directives.
3. Less Motion Waste
Motion waste applies to equipment and personnel and occurs in cases where any type of motion or effort occurs in a process that does not add value. Plant layout is the biggest culprit in contributing to motion waste. This is especially so if it impacts material handling activities due to traffic bottlenecks or excessive wear on machinery like forklifts. While it’s not generally feasible to redesign a production floor without halting production, ERP improves lean manufacturing in this case by providing data on machinery utilization and job planning and scheduling on the production floor. With visibility into what processes are taking more time or what machines are working at less-than-optimum efficiency, manufacturers can collaborate with engineers and suppliers to ensure their facilities are achieving maximum efficiency.
4. Less Time Wasted Waiting
If nothing is happening, time is being wasted. This can be the result of production bottlenecks, machine downtime, production teams not in sync or waiting on decision-critical data. Fortunately, ERP improves lean manufacturing in this case by providing teams with one source of data that everyone can rely on and retrieve when necessary. It helps to identify bottlenecks, plan jobs and schedule more efficiently, as well as facilitate decision making with the data needed to execute on mission-critical strategies.
5. Avoiding Over-production
The Big One when it comes to the 7 wastes, overproduction contributes to all other forms of waste in lean manufacturing. In short, it means you are making more of a product than consumers require or goods are produced before they are needed, leaving them to sit in inventory. Supply chain management, procurement, and demand planning are both the cause and solution of overproduction. Fortunately, ERP improves lean manufacturing in this case by delivering purpose-built tools to enable better supply chain management, automating the procurement process and accurately forecasting demand based on historical data and industry trends.
6. Avoiding Over-processing
In the case of over processing, you are putting in work that has no value. For example, on the production floor, you’re painting the inside of a car fender that will never be seen by anyone by a mechanic. This activity adds no value for the customer and serves only to take more valuable time away from your production team. Not to mention, paint ain’t free. Over-processing carries over to your field service and sales teams, too. Time wasted with manual entry can cost you valuable time. It can even cost you a customer if that manual entry results in order errors. Fortunately, ERP improves lean manufacturing in this case by automating such processes. You can click a single button and have a quote automatically turned into a Bill of Materials (BOM). Further insights deliver critical information on your production goals and sales KPIs.
7. Avoiding Defects
Defects don’t just waste time and materials, they waste your customers’ time and patience. Going even further, defective products that make it off the shop floor and into those customers’ homes or facilities reduces your industry reputation. For these reasons, defects are a high-priority waste that needs to be tackled. Unfortunately, it’s not always an easy task. ERP improves lean manufacturing in this case by completing checks and aligning production against standards you’ve set in the system. Products and processes that don’t conform raise flags so that your teams can address these instances before they become issues.
About Encompass Solutions
Encompass Solutions, Inc. is an ERP consulting firm, NetSuite Solution Provider and Epicor Platinum Partner that offers professional services in business consulting, project management, and software implementation. Whether undertaking full-scale implementation, integration, and renovation of existing systems or addressing the emerging challenges in corporate and operational growth, Encompass provides a specialized approach to every client’s needs. As experts in identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.