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Articles - Publication Date 7.19.1999
Lean vs ERP
Toyota's concept challenges enterprise resource planning.
By Doug Bartholomew
Who would have imagined that enterprise resource planning and its forerunner, manufacturing resource planning -- the core of manufacturing information systems for the last three decades -- would one day be viewed as the enemy of streamlined production?
It's true. Pitted against each other in a battle on the plant floor today are:
- Enterprise-resource-planning (ERP) software -- installed at tens of thousands of manufacturing companies during the last decade.
- Lean manufacturing -- an increasingly popular concept pioneered in Japan by Toyota Motor Corp. and since embraced in the U.S. by thousands of firms.
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.
"ERP gives information, but it does not necessarily add value to the bottom line of a company," says Stephen McMahon, director of the lean-manufacturing business unit at Coleman Consulting Group, San Francisco. "You can spend more time bar-coding than manufacturing products." Adds senior manufacturing analyst Tom Grace of AMR Research Inc., "Companies get no shop-floor productivity out of ERP."
Adding fuel to the ERP bonfire is skepticism on the plant floor and in corporate offices about the reliability of MRP data. "Most people don't even believe the reports they get," says Stacy Alexander, process manager at Greencastle Metal Works Inc., which scrapped MRP to adopt a lean approach. "When we did MRP, we'd find 30 transactions that were incorrect."
For these reasons, many manufacturing plants often have trouble swallowing the corporate IS dictum that they will use ERP. "It's no surprise plants resist implementing ERP; one step forward for IT may overturn years of streamlining operations," Grace writes in a February 1999 report entitled, "ERP and Flow: The Status Quo Meets Its Replacement."
Some say the two concepts can coexist in the same plant; others disagree, viewing them as oil and water. "Sales-forecast systems are a waste of time and are usually wrong," says Tom Briatico, vice president and general manager of Maytag Co.'s Cleveland Cooking Products division in Cleveland, Tenn. "I think ERP is a waste of money. We're staying away from ERP. We want to eliminate MRP because it doesn't work. You want to fix the process -- spend all your time there." Adds consultant McMahon, "To do both ERP and lean jeopardizes the success rate of either."
On the plant floor, ERP often becomes a liability. The problems it introduces -- or perpetuates from the days of MRP -- include complex bills of material, inefficient workflows, and unnecessary data collection. The introduction of lean to a plant suffering from these MRP-induced ailments offers a much-needed antidote. "Flow replaces ERP on the shop floor and also cures IT headaches that ERP inspired in factories," writes Grace in his report.
That's because some manufacturers spent millions of dollars putting in company-wide ERP systems without first redesigning their manufacturing processes. It would be the same as putting the sled in front of the dog team, experts say. By contrast, says McMahon, "I'd attack lean first, and then, once you've removed all the wasteful processes, you can standardize it with ERP."
A classic exa
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"We were using MRP before, but we turned it off because it creates a lot of non-value-added transactions."
Stacy Alexander, process manager, Greencastle Metal Works
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