Regular readers know that we often focus on how software solutions can create problems for lean. This isn’t to mean that all software is a problem, and we definitely believe that software tools, appropriately deployed, can create value. But more often than not they mask waste and reduce the ability to change by enforcing rigid processes. Once you reduce inventory and move to pull production, is MRP really necessary? Does a complex system to manage NCMR’s, CAPAs, and other exception documentation really add value, or should the focus be on reducing root causes that are creating the need for those documents in the first place? You get the picture.
Apparently some in the IT world are starting to understand.
IT a roadblock to progress? Never, you say. How can that be when IT lives and breathes innovation? Who else but IT dared to usher open source, XML, SOA, and cloud computing out of the high-tech labs and into production systems? Nevertheless, there is one aspect of technology where all of that daring doesn’t seem to be in play.
Could he… really… be talking about lean? Yep.
Manufacturing has traditionally been a push system. Up until lean, business analysts would forecast demand, and manufacturers would ship products to market based on those forecasts. Unsold goods would sit in the warehouse or distribution center either waiting to get into the pipeline or never to be sold due to a missed forecast.
More than a decade ago, Toyota created kanban, a system that builds to demand rather than forecast. It is a pull system based on what the market currently needs. Demand doesn’t have to be just from a downstream customer; that is not the only "market" recognized by Kanban. If a product ships from a distribution center, the system recognizes that the center needs more of that product, as Kanban is continually sending pull signals to an upstream work center.
When done right, inventory can go from being held for a month down to a day, or it might never even see the inside of a warehouse, going instead from the manufacturing plant straight to the customer.
Nice summary from an IT guy! So how does that rock his world?
SAP or Oracle MRP are a problem because they cannot set up an "execution" system to perform based on lean principals. SAP and Oracle are irrelevant; both are good planning tools, he says, but planning is batched-based and does not involve real-time execution. Customers typically trim back on their ERP systems. It is still the system of record, but they tend to turn off the MRP function.
"One of the things MRP does is to take a forecast into a consideration of how we order," says John Young, materials and supply chain leader at Trane Residential Systems, a manufacturer of HVAC systems and subsidiary of Ingersoll-Rand. "In a Kanban environment, we basically throw that away." Young says that he still pays attention to the forecast as a planning tool, but because of Kanban, everything is "replenishment"-based. In the last 120 days, the company has saved about $300,000 in parts held.
I’m sure SAP and Oracle would dispute that they are purely batch-based, as both have supposed "lean modules." But we’re admittedly biased so we’ll let it ride. The author then tries to simplify the concept further to help out his readers.
Young describes Kanban this way: It’s as if you lived 100 miles from the closest grocery store, and if you need to buy a container of milk, you would buy two gallons at a time. But now with Kanban, you only need to buy one gallon. It is this new concept that is the biggest stumbling block for IT in terms of adopting lean manufacturing. Most major companies have invested multiple millions in their ERP system, and it’s IT’s job to run the system.
On top of that, these software-acquisition decisions for the major ERP systems are made by the CEO and CIO, who don’t understand the shop floor.
Oh yes, how many times have we heard that directive from the top? The IT groups need to step up and see how they can help create value for the company, even if it doesn’t directly create work for their departments.
If IT views itself as a cost center that just says, "Yes, sir, we can do it," then nothing changes. If, however, IT decides it has something of value to contribute and suggests there is a better way, someone upstream might just listen.
Bottom line, manufacturers are struggling, and all IT is saying right now is, "Don’t worry, we’re going to put an Oracle system in place, and in three years, all your problems will be solved. Trouble is, the manufacturer may not be around in three years.
Think about it.
We have. We’re glad you are too.