The value of ERP in manufacturing has long been a subject of debate.
The anti-computer crowd tends to be those narrowly and totally focused on Lean
Enterprise techniques such as Kanban, one piece flow, and building to customer demand among other applications from the tool
box for creating a Lean Supply Chain. The extremists in that camp preach that ERP is totally non-value added and it should
be eliminated. This is not a very informed view point.
Clearly, there are some logic problems in ERP systems
especially in scheduling functionality that is driven by fixed lead times, predetermined queue times and
backward planning to create schedules for execution. Furthermore, many ERP advocates are not aware that the scheduling of
dependent demand with MRP shop floor control logic is more or less illogical once orders are released.
For example, think of a non-flow, batch and queue operation. In this type of unpredictable manufacturing, dependent
demand orders for parts from vendors and manufacturing are handled as if there were no dependence at all in the network of
orders for parts needed to make a finished product. What often happens is that some items arrive too soon and others too
late, as a result of the lack of dependent synchronization of material arrival that’s really needed.
However, with those problems negated in a high-performing Lean Enterprise, the above illogical MRP/ERP logic should be
turned-off for execution purposes. (MRP may still have useful application for initial development and maintenance of Kanban
or Pull systems.) Companies should also take a hard look at traditional approaches to cost accounting as they can drive
behavior that is undesirable (more about this some other time).
The truth be known, Information Technology is very valuable especially as supply chains become more global and complex
(another subject for a later time). There are many necessary tasks such as order-processing, billing, managing bills of
material, general accounting and the like which are performed well with ERP systems. In fact, we have yet to find a major
company that does not depend on an ERP system for managing these essential functions.
Operational Excellence efforts should focus on the two flows in manufacturing companies and their supply chains. The
first flow is information and the second is material. Most of the attention from a Lean perspective is too often on the
second flow – material. However, when the flow of information is slow, and even worse of poor quality, then the initiation
of material flow in production cannot be truly Lean, even when Lean principles have been applied to the production process.
Manufacturers that are aggressively pursuing Operational Excellence know that ensuring an information flow that is
relevant, accurate and timely is an absolute requirement for efficient and effective supply chain management. High
performance in this area is essential for measurable bottom line results. Those companies also know that Information
Technology alone is never the lone path to Operational Excellence. It all requires having the knowledge and skills to
achieve the necessary balance, synergy and performance manufacturers need and want.
Do you have a different opinion about the role of ERP in a Lean Supply Chain? Please visit our blog to add your comments
at Our Blog.
Interested in related topics in the area of Supply Chain Management? We invite you to
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