| This article is also available on our | | | | What "They" Hate About Traditional ERP |
| website: PROACTION - Generating Best | | | | Those who badmouth ERP raise some valid |
| Practices. It is an excerpt of a paper | | | | points which must be addressed. Here are |
| originally written by George Miller, | | | | the most common complaints we have |
| Founder of PROACTION. It has been | | | | heard. |
| modified and updated by Paul Deis, | | | | • Proliferation of Screens, |
| PROACTION CEO. | | | | Transactions |
| Introduction | | | | • Cumbersome Transactions/Release |
| Some pundits have opined that ERP | | | | Procedures |
| (Enterprise Resource Planning) or ERM | | | | • Batch Process Orientation |
| (Enterprise Resource Management) is dead | | | | • Fixed Lead Times, In Day or Longer |
| and that Lean replaces it. That's like | | | | Increments |
| saying that the car chassis is replaced | | | | • Poor Constraint Planning/Management- |
| by the new engine. ERP is the backbone | | | | Set-Piece MRP, with Disconnected |
| system of a modern enterprise. Lean is a | | | | Resource Planning for Multiple |
| management philosophy, with supporting | | | | Constraints |
| tools and techniques to run a business | | | | • Failure to Manage Non-Recurring & |
| much faster, cheaper-better. They are | | | | Non-Production Activities |
| NOT mutually exclusive, but Lean ERP | | | | • Weak Document Management |
| must differ from the traditional | | | | • Hard to Extract Information |
| approach. The chassis needs some design | | | | • Weak, Inflexible Workflows |
| changes. | | | | • Lack of Lean tools such as KanBan, |
| Is ERP Obsolete? Points to be Made: | | | | VMI, etc |
| • ERP has evolved considerably and has | | | | Earlier ERP approaches had additional |
| almost ceased to exist as we knew it | | | | problems, somewhat better addressed now, |
| years ago | | | | such as: |
| • Lean and newer ERP can coexist | | | | • Lack of financial systems |
| • Lean still needs an IT | | | | integration |
| infrastructure- ERP can help provide it | | | | • Lack of support features, such as |
| • ERP is compatible with Lean, but | | | | maintenance, QA |
| software vendors need to improve lean | | | | • Lack of project management |
| features | | | | integration |
| • Industry needs to learn to use ERP | | | | What Have Vendors Done About This? |
| better to support Lean | | | | In our experience, software usually lags |
| Contents | | | | the development of new business |
| • Lean ERP: Not an Oxymoron | | | | philosophies and techniques by a number |
| • ERP Definitions and Evolution | | | | of years. It took an infuriatingly long |
| • EPADSIG Body of Knowledge Areas | | | | time for even very basic JIT concepts to |
| • Lean Definitions | | | | percolate down into business software |
| • What are Customers Looking For? | | | | and corporate practices. The job still |
| • Lean Aerospace Initiative | | | | isn't complete. Newer Lean concept |
| • Lean Principles | | | | implementation is still lagging. It |
| • ERP Weaknesses | | | | takes years for new ideas to be |
| • ERP/Lean Enterprise | | | | understood and accepted. Then companies |
| • Summary Functional Requirements | | | | need to insist on their adoption and |
| • Conclusions | | | | organize planning and implementation |
| DEFINITIONS | | | | activities. Software companies need to |
| The evolving definition of ERP ... | | | | discern customer requirements, even |
| "An accounting-oriented information | | | | anticipate them, then provide software |
| system for identifying and planning the | | | | tools and support services for them. |
| enterprise-wide resources to take, make, | | | | Finally, industry needs to learn and |
| ship and account for customer orders. An | | | | effectively implement the new tools. |
| ERP system differs from the typical MRP | | | | WHAT TO DO ABOUT IT |
| II system in technical requirements such | | | | More proactive companies aren't waiting |
| as graphical user interface, relational | | | | for software vendors. They're devising |
| database, use of fourth-generation | | | | manual approaches or writing their own |
| language, and computer-aided software | | | | software. Some are advising their |
| engineering tools in development, client | | | | software vendors on what they need. A |
| server architecture, and open system | | | | new sub-industry of dedicated Lean |
| portability." - APICS Dictionary 8th Ed | | | | software tools has also emerged. |
| I always thought that was a very poor | | | | Don't wait for the ideal software. Move |
| definition. Don Frank agreed with me and | | | | ahead to develop and implement cost |
| offered a better one at an EPADSIG | | | | effective approaches early. Your ERP |
| (APICS Engineered Products and Aerospace | | | | system can be extended by manual |
| Defense Specific Interest Group) | | | | procedures, interfaces with other |
| presentation. It was subsequently | | | | systems, home-grown software, third |
| adopted in newer APICS dictionaries. | | | | party add-on software and/or enhanced |
| APICS newer definition of ERP: | | | | functionality from ERP suppliers. Early |
| A method for the effective planning and | | | | attempts can serve as prototypes for |
| controlling of all the resources needed | | | | more elegant ERP enhancements later on. |
| to take, make, ship and account for | | | | Try to develop add-ons and modifications |
| customer orders in a manufacturing, | | | | in a way that will not harm |
| distribution or service company. - APICS | | | | maintainability and upgradeability of |
| Dictionary 10th Ed. | | | | ERP software later on. Some of the |
| That definition is very valid for a Lean | | | | add-on application vendors will |
| environment. What isn't valid is the | | | | ultimately be swallowed up by the |
| design of most ERP software and | | | | enterprise software suppliers, when they |
| management systems to utilize it. | | | | finally see how important these |
| Lean Definition 1: | | | | applications are becoming. |
| Lean Production-A philosophy of | | | | In selecting ERP software, add-on |
| production that emphasizes the | | | | software or undertaking your own |
| minimization of the amount of all the | | | | projects, look for the following ..... |
| resources (including time) used in the | | | | What to Look For (High Level): |
| various activities of the enterprise. It | | | | • Embedded Business Philosophies |
| involves identifying and eliminating | | | | (Lean, Six Sigma, TOC, JIT, etc.) |
| non-value-adding activities in design, | | | | • Flexible, Rapid |
| production, supply chain management, and | | | | • Technology/Platforms (Open, |
| dealing with the customers. Lean | | | | flexible, low cost) |
| producers employ teams of multiskilled | | | | • E-Business/Web-Enabled |
| workers at all levels of the | | | | • Ease of Integration |
| organization and use highly flexible, | | | | • Support Lean Operations |
| increasingly automated machines to | | | | • Support Lean Finance/Costing |
| produce volumes of products in | | | | • Support Lean Product/Process |
| potentially enormous variety. It | | | | Development |
| contains a set of principles and | | | | • Support Industry Oriented |
| practices to reduce cost through the | | | | Application Savvy |
| relentless removal of waste and through | | | | What to Look For (General): |
| the simplification of all manufacturing | | | | • Easy to Set Up, Flexible to Change |
| and support processes. Syn: lean, lean | | | | • Basic Structure/Discipline |
| manufacturing. - APICS Dictionary, 9th | | | | • Simple to Extract, Process Data |
| Ed. | | | | • Able to Define and Control |
| Lean Definition 2: | | | | Straightforward Processes |
| A systematic approach to identifying and | | | | • Supports Needed (and Required) |
| eliminating waste (non-value-added | | | | Business Processes |
| activities) through continuous | | | | • Simple as Possible to Learn and Use |
| improvement by flowing the product at | | | | • High Quality Software, |
| the pull of the customer in pursuit of | | | | Documentation, Support |
| perfection. - The MEP Lean Network | | | | • Strong Future Product Plan to Stay |
| Lean Definition 3: | | | | Competitive |
| Perform in the Optimum Value-Added | | | | • Best and Better Practices |
| Manner Each Step of the Delivery Process | | | | What to Look For (Set-Up, |
| for a Product or a Service to Optimize | | | | Implementation): |
| the Total Value Chain." - Dr. Dan | | | | • Rapid Implementation Tools |
| Shunk, ASU | | | | • Guided, Template Set-Ups |
| Lean Definition 4: | | | | • Vertical Market (A&D) Versions |
| Set Up and Run Processes to Minimize | | | | • Model Implementation Plans/Set-Ups |
| Defects, Time, Cost/Investment, While | | | | • Simple Table/Parameter Setups |
| Optimally and Profitably Serving Target | | | | • Template Data Maintenance |
| Markets. - George Miller, PROACTION | | | | • Simple, Flexible Report/Inquiry |
| Lean is a business philosophy, not just | | | | Writing |
| techniques. Lean means doing things as | | | | • On-Line, Context-Sensitive Help, |
| simply and cheaply as possible, while | | | | Tutor |
| providing superior quality and very | | | | • Easily Customized Workflow, Screens, |
| quick service. An old joke about this is | | | | Options |
| that you can pick any two. But, that's | | | | What to Look For (Operations): |
| no longer acceptable. The organization | | | | • Flow Manufacturing |
| needs to absorb thinking Lean to be | | | | • Cellular/Line Support/Line Balancing |
| Lean. It needs to embed it in its | | | | • Kanban/Pull |
| culture, metrics, policies, procedures | | | | • VMI (Vendor-Managed Inventory) |
| and finally, its tools. | | | | • Minimal Transactions Needed, Simple |
| Some worry that Lean can't be built upon | | | | Data Entry |
| ERP. The real problem is that the vast | | | | • Near Real Time Scheduling |
| majority of companies have not even | | | | • Cycle Time Management |
| successfully embraced ERP yet, so they | | | | • Exception Management |
| would be building on very shaky | | | | • Quality/Process Management |
| foundations. I smile to myself after | | | | • Constraint Management |
| visiting some company claiming to have a | | | | • Cross-Contract Planning (with Soft |
| "certified Class A ERP system." Then I | | | | Pegging/Allocation) |
| talk to the workers and start hearing | | | | • Non-Recurring and Recurring |
| the real story, namely that the Emperor | | | | Activities |
| isn't wearing any clothes at most of | | | | • Rapid/Efficient Transaction Input, |
| these companies. Some companies may try | | | | Defaults, Automation |
| to leapfrog ERP, but they will first | | | | • Interface/Integration With Process |
| need to master the basic disciplines of | | | | Control Systems |
| an organized system. No shortcuts there. | | | | What to Look for (in More Detail): |
| LEAN CHANGES TO ERP | | | | Engineering/BOM/Routing: |
| While our fathers' ancient MRP-centric | | | | • Coding to Promote Group Technology |
| ERP is largely obsolete, an evolving | | | | Sourcing |
| Enterprise System approach definitely | | | | • Model the Manufacturing/Service |
| lives on, mutating and adapting to a new | | | | Process |
| world of shrinking: cycle times, | | | | • Facilitate Alternate Config.'s, |
| budgets, non-value-added activities and | | | | Process Def.'s |
| headcounts. | | | | • Reduce Defects Through Accurate, |
| Some companies are implementing Lean | | | | Timely Configuration and Process |
| tools manually. Some are modifying ERP | | | | Spec.'s, Release and Change Management. |
| software, or incorporating third party | | | | • Manage Documents, Workflow |
| Lean add-on software/systems to enhance | | | | Program/Contract Management: |
| functionality. An isolated few are | | | | • Support Timely, Accurate Estimates |
| still trying to do homegrown | | | | • Support Competitive, Profitable |
| applications. Cultural change, | | | | Pricing |
| education and leadership are also needed | | | | • Record, Flow Down, Contractual |
| to help alter how organizations are run. | | | | Commitments |
| Lean tools are gradually being | | | | • Tight Tie-in To Program Schedules |
| incorporated into standard ERP | | | | • Operations, Finance Integration |
| offerings, but are lagging behind the | | | | • Comprehensive Budget Definition and |
| pace of the overall Lean movement. Some | | | | Tracking |
| ERP vendors are now addressing it more | | | | • Timely Identification/Correction of |
| through white papers than product | | | | Problems |
| development. As mentioned previously, | | | | • Ensure that Proper Configuration |
| third party vendors are helping to fill | | | | Used |
| the gap. Some of these may be | | | | • Efficient Transaction Processing for |
| ultimately acquired by the enterprise | | | | High Volume Environments |
| software vendors. | | | | Planning: |
| Some vendors, to differentiate | | | | • Group Requirements- Same, Similar |
| themselves (and confuse us all) are now | | | | • Consume Excess, Alternates, |
| referring to themselves as "Supply | | | | Substitutes |
| Chain," "eBusiness" or even ERPII | | | | • Time-Phase-Granular |
| suppliers. | | | | • Optimize Constraints- Time, |
| Major things needing to be incorporated | | | | Material, Labor, Equipment, Manpower, |
| into most current ERP systems to improve | | | | Technical |
| Lean support: | | | | • Respond, Adapt Quickly |
| • Rapid system implementation | | | | • Reduce Related Administrative |
| • Flexible business modeling and | | | | Indirect Costs |
| system configuration | | | | • Ensure Proper Configuration Used |
| • Very simple operation | | | | • Help Manage Inventory, Production |
| • Built in process mapping, help and | | | | Resource Usage and Disposition |
| training | | | | Procurement: |
| • Very rapid response processes, from | | | | • Improve Sourcing |
| marketing, proposals and design, through | | | | • VMI, POU (Point Of Use), KanBan, |
| order processing, planning, procurement, | | | | E-Business |
| production and shipping. | | | | • Speed Up Procurement Process |
| • Strong quality assurance support | | | | • Highlight Requirements, Specs. |
| • Tools to slash administrative, | | | | • Facilitate Competitive Pricing |
| material and production costs | | | | • Reduce Defects Through Sourcing, |
| • Facilitate integration with other | | | | Requirements, Metrics, Communication |
| systems- internal and external | | | | • Administer PO's, Contracts, |
| • Fast and simple information | | | | Releases, Outsourcing, Processing |
| visibility | | | | • Reduce Related Administrative Costs |
| • True built-in constraint management | | | | • Help Manage Supplier Partnerships, |
| • Integrated product and process | | | | Including Supplier Certification |
| design management tools | | | | Evaluation |
| • Lean accounting and administration | | | | Quality Management: |
| Some Lean tools needed by many | | | | • Define/Deploy Quality Requirements, |
| businesses: | | | | Quality Plan |
| • Flow scheduling | | | | • Support/Track Certs., Inspection |
| • Cellular/focus factory support | | | | • Track all Defects, Reduce Process |
| • KanBan, consignment, point-of-use | | | | Variation |
| inventory | | | | • Quickly Identify and Highlight |
| • Rapid supply chain management | | | | Actionable Exceptions, Highlight |
| • Supplier management, VMI, | | | | Corrective Action |
| • Near real time, flexible scheduling | | | | • Ensure that Tooling, Personnel |
| • Six-sigma tools for quality | | | | Qualifications, Documentation, |
| planning, monitoring, improvement | | | | Materials, Processes, are Correct |
| • Standardization/group technology | | | | • Maintain Traceability, |
| • Project management for production, | | | | Accountability |
| capital and development projects | | | | Operations: |
| • "Control panel" metrics | | | | • Schedule, Control Activities |
| Although some of these can be supported | | | | • Accurately, Efficiently, Track |
| by software, these approaches first need | | | | Material Movement, Storage, Usage- VMI, |
| to be built into an organization's | | | | POU, KanBan, E-Business |
| overall management system. Even if | | | | • Help Ensure That Proper Items |
| software was ready for Lean, we still | | | | Configuration are Used |
| need to get most companies' management, | | | | • Help Manage Release, Issue, Staging, |
| employees and implementation support | | | | Management of Work Flow and Needed |
| ready for it. The rarest and most | | | | Resources (Material, Labor, Equipment, |
| important resource needed for changes of | | | | Tooling, Documentation/Specs. |
| this magnitude is still executive | | | | Instructions) |
| leadership and management support-it's | | | | • Record Work Performed, |
| not really about software. | | | | Configuration, Processes Used. |
| LEAN OBJECTIVES | | | | • Record Costs, Variances |
| To understand what Lean is about, we | | | | Financial/HR: |
| first need to fathom what it is supposed | | | | • Manage Funding, Billing, Collection, |
| to accomplish. | | | | Disbursement |
| To understand what Lean attributes we | | | | • Keep Timely, Accurate |
| need or don't need in ERP, first start | | | | Books-Enterprise, Business Unit, Cost |
| with stakeholder expectations .... | | | | Center, Program, Project, Part, Cost |
| What Are Customers Looking For? | | | | Element, for Budget and Actual |
| • Fast Turnaround, for inquiries, | | | | • Quickly, Efficiently, Track Costs |
| order processing and delivery, changes, | | | | and Variances for Products and Processes |
| information requests, new designs, | | | | • Manage Assets, Cash, |
| engineering changes and other great | | | | Investments-Improve Cash Flow |
| customer service. | | | | • Manage Human Resources- Skills, |
| • High Quality- very low defects in | | | | Benefits, Payroll- Improve Employee ROI, |
| product, process and administrative | | | | Employee Satisfaction |
| activities. | | | | Universal Requirements: |
| • Good Price- Not just low unit | | | | • Effective Leadership, Commitment |
| price, but low total cost, considering | | | | • Effective Plan |
| unit price, other landed cost factors, | | | | • Data Integrity |
| cost of quality, cost of development, | | | | • Excellent Education, Training, |
| changes, maintenance, support, | | | | Support, for Qualified, Motivated People |
| procurement-related costs. | | | | • Effective "Upstream" Systems: |
| • Easy to Work With- Simple, | | | | Forecasting, Engineering, Sales |
| straightforward service, no endless | | | | • Streamlined, Flexible Processes |
| waiting on hold and convoluted voice | | | | • Metrics |
| mail menus, no runaround, | | | | IMPLEMENTATION CONSIDERATIONS |
| What Are Stockholders Looking For? | | | | Software is maybe 20% of the equation. |
| • Profits- Competitive return on | | | | A "system" is an organized way of |
| investment. | | | | accomplishing and objectives and may |
| • Equity Growth- Short/Long term. | | | | consist of: |
| • Security of Principal | | | | • Mission |
| • No Legal, Ethical Hassles- No | | | | • Leadership |
| "Enrons."What are Employees Looking for? | | | | • Goals, Objectives |
| • Security of employment, income, | | | | • Metrics |
| benefits | | | | • Organization/people |
| • Interesting, worthwhile work, sense | | | | • Policies |
| of purpose | | | | • Procedures |
| Lean Aerospace Initiative Objectives, as | | | | • Education |
| promoted by The Lean Aerospace | | | | • Training |
| Initiative: | | | | • Tools, such as software, hardware |
| • Promote a lean leadership at all | | | | and other technologies |
| levels | | | | Successful Lean implementation often |
| • Continuously focus on the customer | | | | requires all of the above for success, |
| • Development relationships based on | | | | although some success can result with |
| mutual trust/commitment | | | | only some of it. Many Lean improvements |
| • Optimize capability and utilization | | | | can be accomplished without any software |
| of people | | | | and computers, but these are required |
| • Make decisions at lowest possible | | | | for best results and integration with |
| level | | | | other systems in more complex |
| • Nurture a learning environment | | | | environments. In the meantime, |
| • Implement Integrated Product/Process | | | | significant improvements can be made |
| Development (IPPD) | | | | through adoption of Lean philosophies |
| • Identify and optimize enterprise | | | | and techniques, with manual or semi |
| flow | | | | manual systems. But if a company's |
| • Ensure process capability and | | | | competitor already has Lean IT systems |
| maturation | | | | and the company doesn't, it's like |
| • Maintain the challenge of existing | | | | knives vs. guns. An outstanding knife |
| processes | | | | fighter may prevail over an inept |
| • Assure seamless information flow | | | | gunslinger, but why risk it? |
| • Maximize stability in a changing | | | | Other Points |
| environment | | | | The sun does not rise and set on Lean. |
| Lean Principles (Generic): | | | | Although its principles are widely |
| We put these together based on | | | | applicable, they tend to revolve around |
| experience and exposure to Lean | | | | operational matters. Marketing, |
| thinking: | | | | Development, CRM and Human Resources are |
| • Identify Product Value Stream | | | | equally pressing areas needed for |
| • Rapid Response to Customer Needs, | | | | success. |
| Competition, New Tools and Technology | | | | Lean is simplicity. It is much less |
| • Flow- Single Piece | | | | complicated than almost any other |
| • Pull | | | | philosophy of running a business. Yet |
| • Eliminate Waste | | | | some people, more specifically, certain |
| • Lean Product and Process Design | | | | vendors, consultants and academics, are |
| • Responsiveness to Change | | | | trying to make it more complicated. They |
| • Continuous Improvement | | | | are developing complex new algorithms, |
| • Elimination of Defects | | | | new terms and techniques at a dizzying |
| • Standardize- Eliminate Process | | | | rate, in a frantic attempt to gain |
| Variation | | | | "traction" and visibility. Resist this. |
| • Visual Management/Control Systems | | | | Keep it SIMPLE, keep it LEAN. |
| WHAT'S WRONG | | | | |