How Manufacturing Software Should Adapt to Support Lean Principles

by

ERP Analyst, Software Advice

Over the years, manufacturing production strategies have come and gone. One tussle between manufacturing strategies remains: the debate between MRP software advocates and lean manufacturing advocates. On one side is the philosophy that material requirements planning (MRP) software is required to adequately plan production. On the other side is the lean philosophy, which argues that these planning tools are too rigid to reflect actual production environments and ultimately impede effective production.

Despite the popularity of both approaches, the debate persists. Some manufacturers rely on sophisticated software systems to plan production, while others rely on simple Excel spreadsheets and lean principles. Still others use a hybrid of manufacturing software and lean methods.

The conflict between these two philosophies got me wondering: Why is there a rift in the first place? And, more importantly, what can be done about it? In this article, I’ll look at a few ways that manufacturing software can evolve to accommodate lean manufacturing principles.

A Brief Look at Lean Manufacturing Principles

Lean manufacturing is a production philosophy that focuses on waste reduction via improvements in the flow between manufacturing processes. In a lean manufacturing environment, waste is broadly defined as spending resources (labor, materials, etc.) on any activity that does not add value to the end customer, or detracts from profits. This means limiting inventory, labor and machine use to only what’s needed to meet production requirements. In an ideal world, a lean manufacturer would have the right supplies arrive at the right place and time to create only the products necessary to meet demand. In this way, lean manufacturing is said to “pull” orders into production as consumer demand is generated.

The Conflict Between MRP and Lean

The concept of “pulling” production to meet demand is a key area of contention between lean advocates and manufacturing software advocates. Lean advocates argue that manufacturing software is built on an outdated model of manufacturing and distribution, in which it is best to “push” production ahead of demand and promote products to sell them. But it’s more than a conflict between “pulling” and “pushing” production. Many lean advocates view MRP software as an overly complicated, transaction-intensive system. They argue that relying on these systems is inefficient and leaves manufacturers unable to adjust to demand fluctuations.

In contrast, manufacturing software advocates believe that today’s manufacturing challenges require planning tools to get an accurate picture of production requirements. This side argues that the lean model does not plan ahead to deal with the complexity and volatility of today’s planning and supply chain scenarios, which can result in inventory shortages.

Finding Common Ground Between MRP and Lean Advocates

While the conflict may appear to position these two parties on opposite ends of the spectrum, some common ground exists. As Chad Smith and Carol Ptak, managing partners at the Demand Driven Institute, noted in a recent whitepaper, both sides share a quest for flow in manufacturing operations. Flow in this context can be defined as the efficient movement of materials and information through every part of the manufacturing process. According to Smith and Ptak, MRP software advocates seek flow because materials and processes that flow are the easiest to plan and manage. Meanwhile, lean advocates promote flow because it helps pace to actual consumption, which reduces the inventory held at a manufacturing facility. The two approaches to production share two additional goals:

  • Pace production as close to actual demand as possible, and
  • Improve visibility into the supply chain.

With these shared goals, proponents of manufacturing software can find common ground with lean manufacturing advocates. Before that can happen, however, there are a few ways that manufacturing software needs to change.

Three Ways to Improve Support Lean of Processes

Building on this common ground, manufacturing software can learn a few things from the lean approach to production. I recently caught up with Bill Waddell, a leading lean manufacturing consultant, and Chad Smith, co-author of the third edition of Orlicky’s Material Requirements Planning, to discuss some of the ways they could see manufacturing software evolving to better support the lean manufacturing philosophy. I’d like to share a few of the ideas we discussed.

1. Incorporate support for value stream mapping.

Value stream mapping is a lean manufacturing technique that maps the flow of information and materials through the shop floor. Waddell believes that software should make this the integral part of the production process to help manufacturers identify key constraints and bottlenecks in the flow of production. These value stream maps would allow manufacturers to identify areas where flow is compromised to indicate which areas in the value stream need improvement. There are some manufacturing systems that support value stream mapping today, but it is usually secondary to batch processing functionality, forecasting, etc.

2. Continuously monitor lean metrics.

Systems should continuously track cycle times, capacity availability and production status in a way that's easy to access and analyze. These are the critical metrics of improvement under the lean manufacturing philosophy. Of these, the cycle time–the time it takes from when material arrives at the receiving dock until it leaves as part of a product–is the most important efficiency metric. Knowing capacity availability and the production status throughout helps inform manufacturers of how they can reduce cycle times.

3. Identify key places to add or subtract inventory.

Smith noted that a key capability the software needs is the ability to give you a clear picture of where to add or subtract inventory in the supply chain and your manufacturing plant. Most all systems provide methods to help companies determine when to supply and how much to stock. However, according to Smith, the primary question around inventory and materials should be where within the product, plant, supply chain and distribution network to place stock buffers. A system that can indicate where to hold inventory would help manufacturers create buffers to dampen variability, compress lead times and minimize working capital. These buffers would be set to the way the market pulls in quantity and volatility–instead of according to forecasts–to align production more closely to actual consumption levels.

If manufacturing software can evolve to better accommodate the needs of lean manufacturing, we can move one step closer to closing the rift between manufacturing software advocates and lean proponents.

What are your thoughts? How else do you think manufacturing software can change to closer align with the lean vision? Please leave your thoughts in the comments section below.

A special thanks to Bill Waddell, Chad Smith and Carol Ptak for lending their expertise to this article.

 
  • Ajit_Mhaiskar

    Interesting post Derek. Loved reading it. I especially liked the idea about stock buffers. However, with the complexity and risk that is there in the supply chains today I see these challenges continuing.

    For blockbuster products with shorter shelf lives – especially in the hi-tech sector the key objective will always be getting devices into the hands of the consumer as quickly as possible and lot of it will be driven by the ability to augment capacity. Lean principles may be the first and immediate casualty in such a scenario.

    For products which dont evolve as quick or dont get cannibalized easily in automotive or discrete sectors, lean principles could certainly play a greater role. However, the complexity of the supply chains will possibly pose the biggest challenge to this.

  • Rob Bansek

    Derek – valid points. 

    The conflict/alignment between technology tools and continuous improvement processes is real for sure.  But, I believe there is a third dimension that was left out.  What about the role of “people” in a Lean journey?

    Regardless of the tool used with Lean, whether it be MRP Software or an Excel spreadsheet, how much of the success or failure is related to the people?
    •    Were they appropriately educated?
    •    Was the education reinforced? Changes communicated?
    •    Were people retrained?
    •    Are people using the tools?  Is this audited?
    •    When something breaks or a failure occurs, what steps are in place to ensure the failure is documented, analyzed and corrected so it doesn’t recur? 

    Which brings us back to points one and two.

    Let’s face it, the tools (ERP, MRP, MES, etc.) and continuous improvement principles (Lean, Six Sigma, TPM, etc.) are prevalent in manufacturing.  But, are the results what you expected to achieve or are they underwhelming?  Is this due to poor tool selection?  Possibly the wrong program?  Or is it due to poor communication from the beginning and a lack of accountability throughout the process?  

    As I look back on my years in and around manufacturing it’s become clear.  The tools, whether it be MRP or spreadsheet combined with a sound program such as Lean, are not, in and of themselves, enough to facilitate sustainable improvement.  It is the engagement of the team, enabled by tools, and aided by sound processes and principles that will support continual improvement.  For more on the subject, here’s a quick read… Technology – Not the Whole Answer: 

    http://blog.sightbridge.com/2011/08/23/technology-not-the-whole-answer/

    Your thoughts?

  • http://www.workwiseinc.com/ Blacktopjeff

     Good article on the continuous debate of lean vs. MRP.  the fact is that both are the right answer and need to be applied to the right situation.  A company should strive to apply the correct solution to the correct problem.  The goal would be to drive as lean as circumstances allow.

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