How Enterprise Resource Planning Can Help Companies Become Lean
In the current economic climate, there is cut-throat competition and a rat race has emerged to capture and retain a large customer base. The larger a firm’s customer base, the stronger it shall become. A firm’s customers are its most valuable asset, as they are the ones who spread positive word of mouth if the company is delivering good value and this, in turn, drives demand and subsequently the growth of an organization. Firms nowadays recognize the importance of delivering ‘customer delight’ more than ever before and this has led a change in their business strategies whereby companies are striving to eliminate as many costs as possible and streamline their business processes in order to provide better service at lower costs and pass this benefit down to their customers. Availability of information, or rather the lack of it, is often cited as one of the main reasons why delays occur in business processes and often results in two or more departments doing similar paperwork thus duplicating the work, something which is totally unnecessary and only consumes more time and money than necessary. The proponents of Lean have recognized that ERP can help organizations achieve the objective of becoming lean. The five basic principles that form the basis of the idea of Lean – value definition and specification, value stream mapping, uninterrupted flow, customer pull and the pursuit of perfection – are “all supported and enhanced by comprehensive information control and management tools that an end-to-end enterprise software suite delivers.” How an ERP system streamlines a company’s business processes An ERP system can help a company move towards a lean structure in many ways. These include helping reduce waste, moving towards continuous improvement, exploiting and satisfying sales and customer service opportunities, keeping suppliers and production up-to-date with the use of order less manufacturing and Kanban and creating an environment of perfect information and collaboration. Waste Reduction An ERP system, if implemented, becomes the main information carrying artery of a company, carrying data pertaining do day-to-day activities, measuring progress and using metrics to identify opportunities where a company can improve its processes. Some ERP systems also allow companies to conduct ‘What-If’ analyses and help determine activities that have the quickest payback times. A transparent system with perfect information flow allows all departments to visibly see where each activity lies in terms of progress and ensures that duplication of work doesn’t take place.With an ERP system in place, firms can effectively use the most efficient methods of routing and workflow such as using the most cost-effective way to manage inventory, use transportation and warehousing services, properly time production and work activities to minimize idle time and avoid non-value adding services.