Lean, ERP and the Revitalization of American Manufacturing
At “Manufacturing’s Next Chapter,” a recent business summit hosted by The Atlantic, industry leaders, government officials, and economic experts discussed a range of issues focused on the manufacturing sector. The increasing role of Lean manufacturing was evident in the proceedings. Also known as lean production or lean management, Lean manufacturing refers to a complete business system for organizing and managing product development, operations, suppliers, customer relations, and the overall enterprise. It requires less capital, material, space, time, and human effort to produce products and services with fewer defects to precise customer desires, compared with traditional modern management.
John Shook, chairman and CEO of the Cambridge, Mass.-based Lean Enterprise Institute, spoke to what he termed “right shoring,” an approach he said manufacturers should think of instead of re-shoring or off-shoring. “Things will be made in different places and they should be,” Shook said, “but we can be smart about it. Being smart about where to make products usually means locating design and production closer to the markets where products are sold.” But it also means knowing the total costs—not just labor costs—of each location where manufacturing facilities are, and Lean can be an invaluable asset in this effort. Shook noted that many companies who chased lower labor costs a decade ago discovered to their chagrin that labor savings were more than offset by higher supply chain costs. Decisions were made without understanding the implication of “hidden costs.”
In a recent post on “Leaning out” manufacturing processes with ERP, we noted the benefits that are establishing Lean manufacturing as a best practice for manufacturers: shorter lead times, better quality, lower costs, higher productivity, and improved levels of customer service and satisfaction. While we noted five ways ERP can help the application of Lean in manufacturing (i.e., reducing waste, facilitating continuous improvement, identifying sales and customer service opportunities, extending the benefits of orderless manufacturing and Kanban, and collaborating across the supply chain), of particular value in understanding real costs is the critical role enterprise systems play in documenting and communicating the records of enterprise activity. As American manufacturers come to realize how their ERP systems can work to support the goals of Lean manufacturing, they may find a competitive advantage heretofore not fully considered or leveraged. They certainly are positioned to do so.
According to industry analyst Dave Turbide, good enterprise system support is an essential component of virtually any Lean initiative. We couldn’t agree more.
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