INTRODUCTION of ERP: 1. Flow of Reliable Information 2.

INTRODUCTION – ERP

ERP means Enterprise Resource Planning
is a business management system that integrates all domain of the business such
as manufacturing operations, supply chain, customer, human resource and finance

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Various
Functions of ERP

 

It’s a
business management software which links the business process automatically by
giving real time information to the authorized user. It can be developed
In-house or available commercially so as to support the above mentioned
activities of organization. ERP is the backbone of the company.  

It has a cascading effect also. As one
change in one place changes the whole system everywhere.

Vendors
of ERP: Production Partner, Implementation Vendor and Maintenance Partner

All vendors have: Tier-1 software(SAP,ORACLE),
Tier-2 (Cheaper than Tier-1) and Tier-3

Tier 1: use proprietary software so
license fee is present to different stakeholder, Hence fee increases.It has
brand value and is costly

Tier 3: Uses open source software, So
no licensing fee is required. Rigidity and hence source code needs to be
changed every time instead of software and it is known as  value for money.

Modules
of ERP: Sales and Distribution, Production Planning, HR module, Warehouse
Module and Financial and controlling module

Misleading
Perception in ERP: Overnight improvement in organization’s
functionalities. Instant reduction in cost. Instantly raise in profits.

Advantages
of ERP:

1.       Flow of
Reliable Information

2.       Avoid data
and operation redundancy

3.       Improved scalability

4.       Improved maintenance

5.       Global
Outreach

Disadvantages
of ERP:

1.       Expensive

2.       Time
consuming

3.       Vendor
dependency

4.       Complexity

Factors
for choosing ERP

1.       Conformity
of the modules: Suits by business culture and objective

2.       Strength
of key modules: Buy strong key modules of system for CRM or build customized
modules so that the competitors cannot access

3.       Scalability
and Global outreach

4.       Customer
Reference

5.       Strong
monitoring system for controlling parameters like Quality

6.      
Commitment of Top management

 

INTRODUCTION
– Lean Management

Lean
is a management method in operations that aims to improve the performance of an
enterprise by identifying waste in any system and removing it by utilizing the
available set of tools and techniques,

Lean
Management tries to create a value stream for the products and services that
organization offers to its customers.

 

“Lean Management is a process by which the
continuous efforts of all the concerned parties enable an organization to
create a channel for the value stream by eliminating waste from the system.”

 

Why
Lean Management?

There was a strong need to improve
production and response time and cut costs so that they can stay competitive in
an increasingly fierce marketplace. There are various reasons why the companies
are espousing the concept of lean management. Some of them are mentioned below:

1)     
Streamlining the company’s processes: With the
implementation of Lean, the manufacturers are able to streamline their
processes throughout the entire organization, from the front office all the way
to distribution. Due to this the efficiency has increased with a significant
level and the manufacturer is able to work at its full potential. This results
in a reduced manufacturing cost and increased speed to market.

2)     
Removes waste: The core objective of Lean is to reduce waste and to meet this, it
addresses the nine areas of Waste: motion, inventory, waiting time,
transportation, information, quality, overproduction, processing and
creativity. By eliminating waste, a company has the opportunity to abolish time
spent on unnecessary tasks.

3)      Improved Quality and Fewer Defects: In a lean environment, most of the activities are performed with
keeping the quality improvement as the objective. Without waste and its
additional costs such as transport or inventory, the product gets added value
and better quality. When the quality of the production is optimal, there are
fewer defects and if they occur they could be easily eliminated.

4)      Financial
Benefits: Lean
management has the potential cost savings
benefits. If in a company, the Lean principles are properly set, the financial
benefits are highly significant. Customer satisfaction will be achieved
smoothly as the value perceived them can be fulfilled to a greater extent. The
reduction in waste as well cost and defects adds additional money which should
be set into quality improvement and the better product quality ensures higher
profit.

Top lean
manufacturing companies are Toyota, Ford, Intel, Nike, FedEx
Express and many others to
name. Lean Management functions as a growth strategy and this makes value flow
at the pull of the customer.

 

 

 

The Synergy between Lean Manufacturing
and ERP

On the surface level, Lean Manufacturing (Kanban for example) and ERP
looks different but there are quite a few similarities between them. Lean
management works to reduce waste by reducing inventory level, whereas, ERP focuses
on replenishing inventory by keeping a constant check on the reorder point.

 

With proper implementation of ERP, the efficiency of Kanban and other
lean management techniques increase.

If ERP is implemented quite perfectly, the efficiency of most of the
other operating methodologies improve substantially. Kanban and other lean
management techniques increase quite efficiently.

 

How ERP helps lean
management:

 

All transactions are automated and have very low level of interaction
with the end user, hence the user is allowed to work on the real task while
rest is managed by automation.

 

Let us learn from a few examples: –

 

Combining ERP with Kanban in Electronic and Paper manufacturing firms.

ERP systems can provide the facility to print Kanban cards once or
multiple times on the basis of what the firm wants. Further decisions can be
made about the preference of amination or further customization on each card.
This all can run in a sync by maintaining a tandem between the ERP system and
Lean Manufacturing methodology, or Kanban in this case.

 

ERP can further enhance operating efficiency by providing electrical
Kanban which are less likely to get lost unlike the paper based Kanban.
Physical Kanban can get lost easily because of the human error involved and
hence can lead to disruption in the process of manufacturing a particular good,
further costing in terms of time lost.

 

The electronic Kanban created using ERP can also be used at long
distances as the system is interconnected and requires no physical transfer of
Kanban. This allows the firm the operate faster and stay connected even over
longer distances.

 

Create Instant Kanban using ERP for instant metrics. For example, actual
production speed, scrap percentage, etc. This is essential if a manager needs
to be pragmatic and needs to make quick assessment of a situation.

 

ERP further offers the ability to customize a Kanban for a particular
event which does not usually fall under the Kanban spectrum in a firm.

 

Instrumentation manufacturer enhances Lean
efforts with new business solution

 

WIKA USA is a leading company
in manufacturing temperature and pressure instruments. It has an annual
turnover of more than 110 Million USD with an employee strength of 600.

 

WIKA USA wanted to be more
competitive in its industry by improving upon its customer responsiveness and
reducing the cost of manufacturing its products by eliminating inefficiencies.
To do so it started shifting towards lean processes by the start of 2001.
During this time it was operating with SyteLine software in its ERP system.

Lean processes required
fundamental changes to its system as the earlier manufacturing systems were
based on Batch oriented supply chain and the Lean processes required it to be
based on customer demand leading to enhance forecasting. The implementation of lean
practices lead to reduction in inventory, increased efficiency of production
and decreased warehouse space. It not just applied Lean processes to
manufacturing but also to the existing business processes like quality
assurance, planning, receiving and shipping of goods. To do this there was a
requirement to modify the existing ERP software.

 

As Lean focuses on continuous
improvement in the processes through Kaizen, the management team understood
that the ERP software has to fully integrate the Lean processes.

 

To accomplish the objectives,
existing SyteLine software was heavily modified. However this customization of
StyLine did not fully support the Lean processes and due to this the company
had to use paper based processes along with its ERP system which lead to
parallel tracking of process. This defeated the requirement of an ERP systems.
Then the company realized that they needed a system which could integrate all
of the Lean processes and hence they approached Microsoft.

 

In 2006 WIKA USA identified
that Microsoft Dynamics AX was suited for company’s operation as it supported
lean methods. Further they discovered that the Lean enterprise solution from
Microsoft Gold certified partner eBECS insured full integration of lean processes
with the new ERP system. The system easily transferrable to its regional
operations.

 

After the implementation of new
ERP system along with Lean Enterprise the company was able to fully adopt Lean
manufacturing principle. Unlike previous operation of WIKA USA where they had
to support Lean processes using paper based processes using visual cues like
Kanban cards for the indication of inventory level, now the systems got updated
automatically through the software once the data was entered at a single level.
Also the different operational element such as production capacity and
inventory levels were linked with the new system which increased te visibility
inturn increasing the efficiency.

 

Benefits:

The following benefits were
achieved with the help of new system:

1.       Increased customer
responsiveness

·        
There was a reduction of lead time from 6 weeks to 5 days.

 

2.       Faster inventory turnover

·        
With the help of Lean Enterprise solution, inventory is automatically
pulled from the warehouse to the production cell when there is a requirement.

 

 

3.       Support for continuous
improvement

·        
The new integrated system supports planning department at WIKI USA to
spend more time on value-added tasks, such as handling exceptions in customer
demand. Also, the increased visibility into customer demand helps planners in
better forecasting of products with long lead times.

 

4.       Solid foundation for growth

·        
The new system provides the right infrastructure and tools to help the
company grow and achieve its goal.

 

 

 

 INTRODUCTION – ERP

ERP means Enterprise Resource Planning
is a business management system that integrates all domain of the business such
as manufacturing operations, supply chain, customer, human resource and finance

Various
Functions of ERP

 

It’s a
business management software which links the business process automatically by
giving real time information to the authorized user. It can be developed
In-house or available commercially so as to support the above mentioned
activities of organization. ERP is the backbone of the company.  

It has a cascading effect also. As one
change in one place changes the whole system everywhere.

Vendors
of ERP: Production Partner, Implementation Vendor and Maintenance Partner

All vendors have: Tier-1 software(SAP,ORACLE),
Tier-2 (Cheaper than Tier-1) and Tier-3

Tier 1: use proprietary software so
license fee is present to different stakeholder, Hence fee increases.It has
brand value and is costly

Tier 3: Uses open source software, So
no licensing fee is required. Rigidity and hence source code needs to be
changed every time instead of software and it is known as  value for money.

Modules
of ERP: Sales and Distribution, Production Planning, HR module, Warehouse
Module and Financial and controlling module

Misleading
Perception in ERP: Overnight improvement in organization’s
functionalities. Instant reduction in cost. Instantly raise in profits.

Advantages
of ERP:

1.       Flow of
Reliable Information

2.       Avoid data
and operation redundancy

3.       Improved scalability

4.       Improved maintenance

5.       Global
Outreach

Disadvantages
of ERP:

1.       Expensive

2.       Time
consuming

3.       Vendor
dependency

4.       Complexity

Factors
for choosing ERP

1.       Conformity
of the modules: Suits by business culture and objective

2.       Strength
of key modules: Buy strong key modules of system for CRM or build customized
modules so that the competitors cannot access

3.       Scalability
and Global outreach

4.       Customer
Reference

5.       Strong
monitoring system for controlling parameters like Quality

6.      
Commitment of Top management

 

INTRODUCTION
– Lean Management

Lean
is a management method in operations that aims to improve the performance of an
enterprise by identifying waste in any system and removing it by utilizing the
available set of tools and techniques,

Lean
Management tries to create a value stream for the products and services that
organization offers to its customers.

 

“Lean Management is a process by which the
continuous efforts of all the concerned parties enable an organization to
create a channel for the value stream by eliminating waste from the system.”

 

Why
Lean Management?

There was a strong need to improve
production and response time and cut costs so that they can stay competitive in
an increasingly fierce marketplace. There are various reasons why the companies
are espousing the concept of lean management. Some of them are mentioned below:

1)     
Streamlining the company’s processes: With the
implementation of Lean, the manufacturers are able to streamline their
processes throughout the entire organization, from the front office all the way
to distribution. Due to this the efficiency has increased with a significant
level and the manufacturer is able to work at its full potential. This results
in a reduced manufacturing cost and increased speed to market.

2)     
Removes waste: The core objective of Lean is to reduce waste and to meet this, it
addresses the nine areas of Waste: motion, inventory, waiting time,
transportation, information, quality, overproduction, processing and
creativity. By eliminating waste, a company has the opportunity to abolish time
spent on unnecessary tasks.

3)      Improved Quality and Fewer Defects: In a lean environment, most of the activities are performed with
keeping the quality improvement as the objective. Without waste and its
additional costs such as transport or inventory, the product gets added value
and better quality. When the quality of the production is optimal, there are
fewer defects and if they occur they could be easily eliminated.

4)      Financial
Benefits: Lean
management has the potential cost savings
benefits. If in a company, the Lean principles are properly set, the financial
benefits are highly significant. Customer satisfaction will be achieved
smoothly as the value perceived them can be fulfilled to a greater extent. The
reduction in waste as well cost and defects adds additional money which should
be set into quality improvement and the better product quality ensures higher
profit.

Top lean
manufacturing companies are Toyota, Ford, Intel, Nike, FedEx
Express and many others to
name. Lean Management functions as a growth strategy and this makes value flow
at the pull of the customer.

 

 

 

The Synergy between Lean Manufacturing
and ERP

On the surface level, Lean Manufacturing (Kanban for example) and ERP
looks different but there are quite a few similarities between them. Lean
management works to reduce waste by reducing inventory level, whereas, ERP focuses
on replenishing inventory by keeping a constant check on the reorder point.

 

With proper implementation of ERP, the efficiency of Kanban and other
lean management techniques increase.

If ERP is implemented quite perfectly, the efficiency of most of the
other operating methodologies improve substantially. Kanban and other lean
management techniques increase quite efficiently.

 

How ERP helps lean
management:

 

All transactions are automated and have very low level of interaction
with the end user, hence the user is allowed to work on the real task while
rest is managed by automation.

 

Let us learn from a few examples: –

 

Combining ERP with Kanban in Electronic and Paper manufacturing firms.

ERP systems can provide the facility to print Kanban cards once or
multiple times on the basis of what the firm wants. Further decisions can be
made about the preference of amination or further customization on each card.
This all can run in a sync by maintaining a tandem between the ERP system and
Lean Manufacturing methodology, or Kanban in this case.

 

ERP can further enhance operating efficiency by providing electrical
Kanban which are less likely to get lost unlike the paper based Kanban.
Physical Kanban can get lost easily because of the human error involved and
hence can lead to disruption in the process of manufacturing a particular good,
further costing in terms of time lost.

 

The electronic Kanban created using ERP can also be used at long
distances as the system is interconnected and requires no physical transfer of
Kanban. This allows the firm the operate faster and stay connected even over
longer distances.

 

Create Instant Kanban using ERP for instant metrics. For example, actual
production speed, scrap percentage, etc. This is essential if a manager needs
to be pragmatic and needs to make quick assessment of a situation.

 

ERP further offers the ability to customize a Kanban for a particular
event which does not usually fall under the Kanban spectrum in a firm.

 

Instrumentation manufacturer enhances Lean
efforts with new business solution

 

WIKA USA is a leading company
in manufacturing temperature and pressure instruments. It has an annual
turnover of more than 110 Million USD with an employee strength of 600.

 

WIKA USA wanted to be more
competitive in its industry by improving upon its customer responsiveness and
reducing the cost of manufacturing its products by eliminating inefficiencies.
To do so it started shifting towards lean processes by the start of 2001.
During this time it was operating with SyteLine software in its ERP system.

Lean processes required
fundamental changes to its system as the earlier manufacturing systems were
based on Batch oriented supply chain and the Lean processes required it to be
based on customer demand leading to enhance forecasting. The implementation of lean
practices lead to reduction in inventory, increased efficiency of production
and decreased warehouse space. It not just applied Lean processes to
manufacturing but also to the existing business processes like quality
assurance, planning, receiving and shipping of goods. To do this there was a
requirement to modify the existing ERP software.

 

As Lean focuses on continuous
improvement in the processes through Kaizen, the management team understood
that the ERP software has to fully integrate the Lean processes.

 

To accomplish the objectives,
existing SyteLine software was heavily modified. However this customization of
StyLine did not fully support the Lean processes and due to this the company
had to use paper based processes along with its ERP system which lead to
parallel tracking of process. This defeated the requirement of an ERP systems.
Then the company realized that they needed a system which could integrate all
of the Lean processes and hence they approached Microsoft.

 

In 2006 WIKA USA identified
that Microsoft Dynamics AX was suited for company’s operation as it supported
lean methods. Further they discovered that the Lean enterprise solution from
Microsoft Gold certified partner eBECS insured full integration of lean processes
with the new ERP system. The system easily transferrable to its regional
operations.

 

After the implementation of new
ERP system along with Lean Enterprise the company was able to fully adopt Lean
manufacturing principle. Unlike previous operation of WIKA USA where they had
to support Lean processes using paper based processes using visual cues like
Kanban cards for the indication of inventory level, now the systems got updated
automatically through the software once the data was entered at a single level.
Also the different operational element such as production capacity and
inventory levels were linked with the new system which increased te visibility
inturn increasing the efficiency.

 

Benefits:

The following benefits were
achieved with the help of new system:

1.       Increased customer
responsiveness

·        
There was a reduction of lead time from 6 weeks to 5 days.

 

2.       Faster inventory turnover

·        
With the help of Lean Enterprise solution, inventory is automatically
pulled from the warehouse to the production cell when there is a requirement.

 

 

3.       Support for continuous
improvement

·        
The new integrated system supports planning department at WIKI USA to
spend more time on value-added tasks, such as handling exceptions in customer
demand. Also, the increased visibility into customer demand helps planners in
better forecasting of products with long lead times.

 

4.       Solid foundation for growth

·        
The new system provides the right infrastructure and tools to help the
company grow and achieve its goal.

 

 

 

 

 

 

 

 

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