Combining APS and Lean to win with speed in the new global economy
By: Mike Liddell, CEO of Lean Scheduling International and Author of “The Little Blue Book On Scheduling”
Manufacturers worldwide have been struggling to meet the challenges of a stressed global economy. When the expected recovery comes, those companies in position to “ramp up” quickly will become the new winners; the rest will either pick up the crumbs or go out of business.
The winners will be companies that understand that there will be windows of opportunity but that they would be quite small. In order to be ready, they must act now to make the structural changes to their systems allowing them to systematically manage growth without the corresponding increase in inventories, long lead times, staff and mass confusion. This article reviews some of the issues and suggests a very attractive alternative.
In order to survive past recessions, most manufacturers have been forced to reduce their inventories, cut waste, and improve operating efficiencies. Although these actions sometimes produced benefits, they were usually based on actions taken independently of what their Enterprise Resource Planning (ERP) system was telling them to do.
ERP is Not the Answer
The hard reality is that manufacturers have been relying too much on the planning functionality in their ERP legacy systems. These systems are rooted in early 1980´s concepts such as infinite capacity, time buckets and backward scheduling. The software that drives MRP Planning applications was primarily designed to address the needs of a make-to-stock manufacturer. The only reason it ever worked at all was because of the excess buffers of inventory and time that was being planned into every level of the manufacturing process.
The new paradigm states the only way that companies can cut costs and reduce inventories, is to change the way they operate so that they can react quicker and smarter to change. For those paying close attention, this is not really breaking news. But it appears many other companies are not clear about what steps they need to take to meet this challenge.
Introducing Lean Manufacturing
Over the years attention of everyone many companies started to understand the limitations of their ERP systems. As a result, they started implementing a concept called Lean manufacturing. While ERP systems were getting more and more complex and cumbersome, Lean was promising a world that was dedicated to reducing waste and making things simpler. The well documented successes achieved by big companies like Toyota caught the attention of everyone.
Without getting into a long discussion on Lean manufacturing, it is important to know that, at the planning and execution level, Lean is built on three key concepts of waste elimination – muda, muri, and mura. Because muda addresses the need to remove non-value-added work such as overproduction (production ahead of demand) and excess inventories (all components, work-in-progress, and finished product not being processed) it offers the most fertile opportunity.
Although many of the companies who decided to adopt Lean concepts were able to achieve some level of success there was a clear problem that Lean proponents tried to ignore and that was – most Lean success stories were achieved by manufacturers who had highly predictable demand patterns and a limited number of products.
But for the rest of the world, Lean has proved to be disappointing at best and catastrophic at worst. One of the reasons for this appears to be that Lean systems were manually intensive, so they often were disconnected from their Legacy planning systems.
ERP vs. Lean
There is a clear and obvious conflict between ERP/MRP and Lean. While new Lean initiatives were reducing inventory levels, the old ERP/MRP planning systems were doing what they always do – trying to increase inventory levels. Sooner or later this causes a breakdown in communications which leads to inventory shortages, late shipments, and eventually mass confusion. Faced with this situation, many manufacturers now realize that they either must abandon their Lean initiatives or find a planning system that will work hand in hand with Lean.
APS – The Missing Link
The good news is that there is a very exciting solution to this problem that promises to help almost everyone. APS (Advanced Planning & Scheduling) systems are proving to be the missing link because they can do everything that traditional ERP/MRP Planning systems can´t do. Because APS systems can accurately manage time, they can react to changes at the operation level and still create a schedule that quickly and accurately synchronizes multiple constraints. The ability to manage change quickly and systematically makes everything possible.
You can find more about this topic and others in Mike Liddell´s book “The Little Blue Book on Scheduling”. Or contact Mike at [email protected]