The Purist

There are many different schools of thought in operations management and within each we often find the purist. Two such purists would include the Enterprise Resource Planning (ERP) purist and the Lean Manufacturing (LM) purist. According to Merriam Webster’s dictionary, a purist is:

“One who adheres strictly and often excessively to a tradition; especially: one preoccupied with the purity of a language and its protection from the use of foreign or altered forms.”

These two philosophies (e.g., ERP and LM) have very different traditions, thus very different ideas of how to implement. It is therefore very logical that an ERP purist and a LM purist would be at odds with one another.

ERP purists adhere to … Planning horizons, schedule stability, data accuracy (bills of material, inventory, etc.), push systems, detailed shop floor control and transaction processing, and variance analysis.

The bottom line from ERP is that double digit inventory turns are possible (based upon cost of goods sold). Ten turns in most industries are not only achievable, but are considered exceptional if demonstrated. Customer service levels can be risen and shortages eliminated (once how to manage dependencies are learned).

LM purists adhere to … Eliminating waste, continuous improvement, value stream mapping, factory floor layout, kanban pull systems, and simplification.

The bottom line from LM is also a double digit inventory turn, but considerably more than ten. Because LM is primarily an execution system, it requires a longer range planning system. Most LM purists will at least agree to keep the ERP system for long term planning. This planning however is not tied to execution.

The problem with the “purist” in either case is that they want to discard all other philosophies and operating models for their “pure” approach. John Costanza of the JIT Institute was the first such purist I ran across back in the 1980’s. John’s viewpoint was simply, “you cannot evolve from an ERP company to a LM company. It takes radical redeployment.” I am often in the company of purists from both sides.

As a consultant, I often follow LM purists in several organizations. As the ERP guy, my job is usually to figure out what can be done to salvage the ERP system after such a visit. Using an ERP analogy, a lean purist often behaves like an ERP consultant that only knows a few of the modules. He implements what he believes to be correct for those modules often at the cost of the other modules. Those of us with ERP experience know that this does not work well in the ERP world. It does however suggest that overall business objectives (short, middle and long term) must be considered in any implementation.

Many LM purists come from manufacturing engineering positions and many do not understand the internal workings of the ERP system. This type of purist is very much like the MRP analogy above.

While a great deal of my career has been learning, implementing and teaching other organizations how to implement ERP systems, I do not consider myself to be a purist. Instead, I adopt a “best of breed” approach. It has been my experience that ERP works better (and often easier) when implemented with LM concepts, especially that of continuous improvement. ERP alone is a good tool, but when combined with LM, or the Theory of Constraints (TOC), it is a much better tool. There are concepts in all three of these major manufacturing philosophies that can be used in both internal and external supply chains.

On the other hand, I do get defensive when confronted with a LM purist that claims ERP does not work. ERP would not have survived as long as it has if it didn’t work. The reality is that many ERP organizations are looking to LM for improvement, yet can’t “throw the baby out with the bath water.” In the short term, ERP needs to stay functioning as it is the core business system. Over the long term, dependency on the ERP system can be reduced, or even eliminated. The largest hurdle seems to be overcoming an accounting system based upon transactions. If the transactions that drive the accounting system are no longer performed, how will we drive accounting? This means that any LM implementation, in a company that uses ERP (which most do) must account for this transition.

I believe in a holistic approach. Whatever the strategy and/or tactics employed, they must be congruent with the corporate direction. Implementing technology in any one area must therefore not prevent the success in another. Purists often seem to forget this as well.

What do you think?

ERP and Lean Manufacturing

Your company is a long time user (i.e., since early 1990's) of a small business Enterprise Resource Planning (ERP) system. This manufacturing planning system contains an integrated accounting system as well. One of the major characteristics of these systems is that they are transaction based. This means that as transactions are processed in operations (i.e., receipts, issues, transfers, etc.) the corresponding accounting entry is processed through to the balance sheet and profit and loss statement.

Over the years, the company has brought in Just in Time (JIT) consultants and has tried several projects to make these primarily Japanese technologies work. Zero inventory, quality circles, kaizen blitzes, etc. have all been started, used for a while and then quietly forgotten about.

The company just announced a new "Lean Manufacturing" (LM) initiative. A new consultant has been hired and he is teaching the implementation teams on demand pull techniques. The consultant is a long time JIT/LM practitioner and a "lean purist." He has stated that ERP is just a planning system and does not work well on the shop floor. He is putting in kanban replenishment systems that signal when material is to be moved. Detailed transactions will not be processed on the floor. He claims that with LM, you don't need a perpetual inventory control system. ERP however, does.

The ERP people fear that after the first month of operation, the accounting system will have broken down. The way the company use to account for operations will no longer be working. For example, purchase orders will be received, but the material received will never be used. Inventory in the system will grow infinitely, or need to be adjusted out. The accounting people have taken a seminar on lean accounting, but admit that it will be a while before they can design such a system for the company.

The basic issue is: "Can the organization implement LM and discard the transactions required, at least in the short term, for the ERP and accounting system to function?"

Factors to consider:
1. Some parts can easily be converted to kanban and the system coded so that they are treated as "bulk issue" or floor stock parts. Doing so eases ERP system planning.
2. Some BOM structures can be flattened as cellular technology is implemented. Unneeded levels can be changed to phantom or pseudo levels.
3. Repetitive manufacturing can be used to make it easier for operators to transact production completions. Routing transactions can therefore be eliminated, yet production hours (at standard) earned.
4. Administrative tasks can be moved to the cell (i.e., cycle counting, point of use storage and maintenance, and most importantly, transaction processing) freeing up support staff to work on the LM initiative.
5. Shop floor data collection may be used to facilitate the flow of material. Fundamentally, it will reduce the lag time between when the transaction occurs and when the ERP system is updated. This will increase inventory accuracy.

ERP and LM can coexist until the LM system is proven and the standard cost accounting system changed to support the lean activity.

What do you think?

Welcome to Solutions - Blog

Welcome to the first post on Solutions - Blog

Blogs have been around since the beginning of the Internet, it just took until 1999 for them to be named as such. Blogs with simple user interfaces (like Blogger) have been around for about ten years. I figured it was time to move to the bi-directional blog format.

Just as with the printed newsletter, blog articles will be published as interesting observations and key opportunities for learning occur, much of which are derived from our work in the field. Travelling to different geographical locations, from organization to organization and hearing observations from many different levels of management provides different perspectives on today’s world of manufacturing and in supply chain management. I plan to continue sharing those observations with you.

Please participate where you can. You input is valued and appreciated.

Rick