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Saturday, July 25, 2009

Is Your ERP System Working For You?

I have never really been an Enterprise Resource Planning (ERP) or a Material Resource Planning (MRP) fan since they are really push systems based on sales forecasts. Some recent failures of our system have made me re-visit Lean vs ERP solutions.

With traditional manufacturing resource planning (MRP II, the planning engine in most ERP systems today), manufacturers base production levels on sales forecasts. In contrast, lean manufacturing -- also called flow -- ties production levels to actual customer demand.

Nor does the conflict end with production levels. Lean emphasizes getting the manufacturing process right and then continually improving it; with ERP the emphasis is on planning. The former has the goal of eliminating all wasted time, movement, and materials; the latter seeks to track every activity and every piece of material on the plant floor. Lean is action-oriented; ERP is data-dependent. One has workers doing only things that add value to the product; the other has them recording data and bar-coding to keep track of inventory and labor.

I believe that ERP and Lean are compatible and beneficial if done correctly. The problem is we often let the ERP solution run our business instead of making the software suit our business needs.

How is your ERP solution helping you meet today's challenges of rising material costs, increasing competition, and ever-changing customer requirements?

A colleague recently sent me an interesting article which describes the warning signs that an ERP system is killing a business, causing bottlenecks, excess cost.

Check these 10 warning signs to see if your ERP system is killing your business.
1. The ERP system can’t integrate mission-critical business data.
2. Changes to the system are costly and time-consuming.

3. Your disaster-recovery plan involves tapes.
4. Beefy PCs or “fat clients” are needed to run the system.
5. Maintenance fees are high.
6. You can’t access the data easily if you are traveling.
7. Upgrades are disruptive to the business.
8. Trading partners can’t easily interact with the system.

9. New employees need time to learn the system.
10. Globalization is too difficult.

Your company may experience some of these issues and you might decide to find a new ERP solution or upgrade that would resolve these challenges so you can get back to innovating and manufacturing products. But before you do that you may want to review CIO.com's brief and semi-chronological history of 10 famous ERP disasters, dustups and disappointments as a warning. Whatever you do make your system work for you and not the other way around. Taichi Ohno often said “Never put the solution or tool in front of the problem…follow the scientific method and you’ll come out better in the long run.”

1 comment:

  1. You have highlighted one of my biggest hates, ERP and MRP.. I worked as a consultant in the UK for several years, during this time I lost count of the number of times that myself and my collegues told companies to stop scheduling their work through these systems! Used wrongly these systems add weeks to lead times and huge amounts of inventory and subsequent added cost. Companies seem to stop thinking when they use these systems! Better to use simple "manual" systems for production and maintain they system for BOMs and some purchasing.
    how to implement lean manufacturing