How Enterprise Resource Planning Can Help Companies Become Lean - Coursework Example

?How ERP can help companies become Lean In the last few years most organizations are trying harder and harder to adopt a lean structure. To become lean means to eliminate those processes and practices that does not add value to the customers. The essence of becoming a lean organization is “the continuous pursuit of waste elimination”. A lean organization delivers “shorter lead times, improved quality, reduced cost, increased profit, improved productivity and better customer service.” These are also the most important characteristics of a successful organization in today’s highly competitive world. 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. An ERP system in this case shall be an ideal addition to the company’s resources as it makes available information across all functional departments thus ensuring transparency and availability of information at all times. Using an ERP system, a company can streamline its business processes by integrating internal and external management information and create a flow of data between all the different departments in a real-time environment. Those companies that are striving to adopt a lean approach have recognized the value that an ERP system offers and are adopting measures to integrate this system into their operations or, in case of those using older computer systems, migrate to the newer ERP platform. 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. “Enterprise systems are also the “local” link to trading partners that allow for the elimination of waste and delays in the supply chain. Facilities, customers, reps and distributors can help develop better forecast and coordinate activities to ensure better service through collaboration. Likewise, through optimal integration with supplier systems, miscommunication, delays and confusion can be avoided – all of which contribute considerable waste in the supply chain.” (Turbide) Continuous Improvement Most new ERP systems come equipped with Business Intelligence tools that help companies evaluate performance and perform business analysis from day one. This way management can easily identify areas where the company has improved and target those processes which can be further improved upon. A move towards JIT inventory systems is one aspect where businesses can focus on in order to optimize their processes and resources. Sales and Customer Service Opportunities “Customer service has to be a focus of any organization and Lean efforts can and should not only strive to remove waste from customer-facing processes, but also deliver better customer service at the same time. When waste is removed from customer service processes, delays, inconvenience, mistakes, and costs also are eliminated. The resulting streamlined processes inevitably make it easier and more rewarding for the customer to do business with the company.” (Turbide). Most ERP systems place a lot of importance on Customer Relationship Management (CRM) and some even integrate CRM as part of the ERP system in order to deliver excellence to customers. Order-less Manufacturing and Kanban “In a Lean environment, the ability to communicate real-time material usage to the customer’s supply base is crucial. This enables the pull-based system and reduces inventory and the cost of premium freight buffers. Real-time communication also enables the suppliers to react immediately to customer demand changes, optimizes supply chain execution, and increases both speed and accuracy throughout the supply chain” (Infor). Suppliers become less dependent on physical inventory counts and can adopt more proactive measures due to visible, real-time demand information. Collaboration ERP systems have sales and production planning tools that help forecast demand with the use of minimum resources. These tools keep the supply-side and demand-side of a business in sync and allow a flow of information that enables organizations to deliver superior service and lowest costs. Advantages of Using an ERP system ERP system can help an organization in adding value and benefit the company in the long -run. One of the major advantage of having an ERP system implemented in an organization is it helps in improving the day to day efficiency which helps in making better and informed decisions. The ERP system also makes sure that all of the organizations information is in one central location from which all employees can access it. This also helps the organization in reducing the costs. Considering today’s economic climate the implementation of an ERP system can give the organization a competitive advantage over rival companies. The ERP system also allows the employees to access information from any location. They do not need to be in the office premises to get access to the system but the system can be used from anywhere which helps in reducing wastage of time. An organization has many processes and departments like finance, accounting, distribution, sales, marketing and HR. Each of these departments has their own procedures and methods, but at the end of the day it is important for a company to integrate all the procedures and departments. This is where the ERP system becomes useful as it integrates the organization’s internal and external management information. The ERP system adds value to an organization as it creates a flow of data and information between different departments. The system also works real-time so if any employee of the company puts up any information than that information is instantly accessible for the other employees which helps in making efficient decisions. The ERP can also prove to be very useful for organizations in the manufacturing sector. ERP can help firms in forecasting future market trends and demands through the use of statistical models. ERP also allows the manufacturing firms to integrate their offices and factories and this helps in reducing geographical issues which are faced by multinational companies. The ERP system also allows the firms to multi task which helps the firms in saving time and become more cost-efficient. In today’s economic scenario it is vital for firms to address the issue of wastage of time and other useful resources. The ERP system helps the firms in addressing the issue and become more efficient in the long run which helps them in building a good corporate image. The system also provides a detailed analysis of the transactions which take place in the organization and also helps in reducing human labor who would be involved in those companies who do not have the ERP system. Conclusion ERP systems can be customized to an organization’s needs and come packed with a variety of different tools and options. Organizations should keep a keen eye out for those systems and vendors which suit their needs best and offer a high degree of flexibility to support the product value streams and offer mechanisms to reduce wastage and increase efficiency. Bibliography ERPN. "ERP benefits are many, far and wide." Enterprise Resource Planning Newsletter: State of IOWA April 2001. Infor. "Supporting the Lean Value Stream With Technology Solutions: A Proactive Approach to Manufacturing." White Paper (2005). Roman, Kay. "Benefits of Implementing an ERP ." Collegiate Project Services (n.d.). Turbide, Dave A. "Five Ways ERP Can Help You Implement Lean." EPICOR (2005). Read More