Role of ERP In Lean /Just-in-Time Manufacturing (JIT) – An Overview
Manufacturing has undergone changes twice within the last 100 years – Craft to mass production in early 20th century and again from mass to lean production during 1960s. Lean is an adaptation of what started out as the Toyota Production System (TPS)
Lean manufacturing seeks to eliminate waste in all the aspects of production, which, in turn, leads to cost savings and cycle time reduction. Lean systems are a direct response by manufacturers to develop a competitive edge in the prevailing environment of tough market conditions.
An ERP does have a vital role to play in analyzing existing business practices for inefficiencies and restructuring them to operate in a lean environment. After all, the only way to find areas that are wasteful and then make those lean or wasteless is by tracking and analyzing current manufacturing performance, which can be done very efficiently with an ERP.“Lean” advocates have come to recognize that ERP and Lean can support and enable the most important objectives of each other and can work together very well. Since manufacturing units – whether lean or not – need some type of ERP to manage their commercial activities, it is worthwhile to use a manufacturing oriented ERP and take advantage of its lean capabilities. Use of any type of ERP readily contributes to lean initiatives by eliminating duplicate data entries and automating routine office processes, such as providing common updated information to all the departments or instantly generating reports from transaction records.
However, lean definition of waste – eliminating any activity that doesn’t add value – allows plenty of opportunity for specially built manufacturing oriented ERP system to contribute to the cause. Timely and reliable information from multiple areas of the shop floor through the special ERP helps to identify areas of waste, improve decision making, improve agility to respond to customer needs and to ensure defect-free output. Reports can be drilled down to the source of information so that root causes of waste can be analyzed accurately and immediately which is indispensable for measuring & reducing/ eliminating waste.
Following types of wastes are encountered in typical manufacturing operations – wastage of capacity due to overproduction, direct wastage of materials, wastage of time due to waiting by labour/ machines, wastage of capacity and money due to idle material, wastage due to defective production, wastage due to unnecessary transportation etc. These factors are interlinked and eliminating a single cause can provide multiple benefits. For e.g. eliminating overproduction can also reduce wastage of man, material, money etc.
Sometimes, due to sub-optimum measures of performance such as output or capacity utilization of a single department, its personnel tend to produce unwanted output. People will perform so as to maximize their measurement. Most traditional measurements encourage the wrong behaviour (activities). Incorrect measures encourage the production of “something” whether it is needed or not! This type of behaviour weakens the business and needs to be identified and eliminated
Similarly enhancing the output from a non constrained resource of a system does not contribute to the throughput of the manufacturing unit but only leads to accumulation of WIP at constrained resource. Focus on optimizing each operation, instead of the total plant is another problem faced in a unit. To optimize the “whole” we will typically, at least temporarily, sub-optimize some of the “pieces”. Bottleneck operations must be treated differently than non-bottleneck operations. Since in-process inventory levels correlate directly with cycle time through the factory, WIP must be minimized. Since we want some “just-in-case” (safety) inventory in front of the bottleneck resources, little or no inventory can be allowed in front of non bottleneck operations. The net effect is that some of the departmental measurements will look worse, while at the same time, the overall company measurements improve.
The amount of data flow in today’s production environment is so large that a proper information management system is vital to control it. Good software is flexible and can be re-configured to meet the changing needs of an evolving company. An investment on manufacturing oriented ERP software is an investment for company’s future.