Strategy: Marry Lean principles with ERP...Part 2

In my last post, I mentioned how 5Ss of Lean can be applied in ERP for larger benefits. Similar to 5Ss of Lean, we also have 8 wastes classified in Lean that can be applied in ERP scenario and when blended with already matured processes and IT management strategies in the organization, these acts as a cataylst to improved ROI of ERP investment. Let me articulate these 8 wastes in terms of ERP environment and how these can add value.

I will start with the first waste that is Overproduction. The definiion if overproduction in Lean is well understood but to apply this in ERP, it certainly means that do not eat database space with more modules installed than required, more functionalities deployed than needed as per IT strategy or with more custom components than ablolutely necessary. This not only eats costly database space (specially when on premise ERP implementation is still the most popular service and SaaS has just acquired less than 10% of market) but also creates confusion in users, leads to more unnecessary documentation, increases staff cost in non value added trainings and increases instability in system. In addition, this will reduce the scalability of ERP in some situations. So this waste is a perfect fit for ERP.

Moving to the next one, which is called as Waiting. We have seen in ERP like manufacturing, that many a times, users are waiting for their turn to take actions just because an activity is still happeneing in the system or another is taking time to complete a task in the system. This reduces efficiency of staff and is sure shot case of dollar leakage. The To-Be processes as we call in a typical ERP deployment project, needs to be designed keeping this in mind so that the waiting time can be reduced to minimum. Also, the custom components running time needs to fine tuned in the build phase so that they take minimum possible running time and no users have to wait for their completion to start their set of activities to take the process forward.

The 3rd waste is Stocks and Inventory. Lean advocates minimum stocks or inventory as same is true for ERP too. ERP is deployed by a large number of organizations just to reduce their stocking levels with sustained service levels so ERP understands the importance of this waste, to the maximum. But to comeback to the chain of thoughts on how to articulate this waste in terms of ERP scenario, we need to again tie this back to the first waste where we are keeping the modules, functionalities or custom components to the lowest possbile level. Also, this susggests that we need to move from the make to stock situtation to make to order situation by increasing forecast accuracy as well as reducing lead times - the processes mapped to ERP product needs to take care of these aspects accordingly.

Let me move to the 4th waste here, which is Transportation. Lean highlights that transportation of material should be minimum possible in an manufacturing scenario ans same is true for ERP also. Though most of the ERP products these days, are web cased and do not need to be installed on client machines, we still need to keep in mind that we do not select a product that is not enabled on web and hence can not be accessed from Web. Also, the integrations of ERP with 3rd party systems need to be seamless and real time so that no time is lost in data transportation from one system to another.

The next waste focuses on reducing the Motion in shop floor and in the cases of ERP it means that there should be minimum manual touch points or hand-offs in the system/process. The processes should be sufficiently automated in ERP so that minimum time goes in subjective decision taking and business logic incorporated in ERP takes care of automated decisions in most cases. For example, order scheduling for customers takes too much time and have high subjectivity but can be smoothened with the help of automated logic incorporation in ERP which will then automatically schedules orders and reduces motion in the process.

Processing is the next waste as per Lean and it has a direct impact on ERP as the system is supposed to take minimum processing time for the programs, integrations, custom components and information availability.

The next waste in Lean processes is Defects. Defects is something that applies almost everywhere - whether you are manufacturing, managing a supply chain or running an ERP system. Like the manufacturing defects, IT systems have their own defects or issues or bugs as they are popularly called and these are required to be minimum possible as these not only reduce the instability of the system and makes it vulnerable to outages and hence business disruptions but also reduces the efficiencies of staff and increase staff cost. Defects resolution is seen as one of the most nono value added activities after ERP goes live and shaves your revenue off due to maintenance of huge support teams to keep the system stable. We need to make sure that enough testing for each and every component that goes into ERP, is done during the ERP cycle so that these deadly post implementation defects can be kept at bay.

I will move to the last one that is called as Information. Genrating and communicating information is also seen as a waste in Lean and it too is valid in the case of ERP. Though ERP is seen as wealth of information and it is believed that it helps in informed decision making for the stakeholders but we need to make sure that we are keeping the reports to an optimum level as per our requirement as huge number of reports in different formates will not only create confusion in the eyes of ever changing users but will also increase load on the system. Focus should be on the flow of information from and to ERP from the 3rd party system and the accuracy of the data that resides in ERP.

I could summarize my thougths on how ERP can be blended with Lean Principles, whether they are the 5Ss or the 8 wastes. I am sure these can be utilized in an ERP scenario in much more ways as the list I higghlighted is no way closer to an exhaustive list. Keep thinking and evolving.