At its very core, the Lean philosophy is a company-wide pursuit of efficiency. Variations of these principles are being adopted in different industries and in companies of all sizes. Early thinking on Lean often dismissed enterprise resource planning (ERP) and other information systems as incompatible with its mandate, however technology has emerged as a key driver of its benefits.
Small and midsize companies often cite cost reduction, quality management, and improved customer service as reasons to implement a business process improvement (BPI) initiative, such as Lean or Six Sigma. As a business grows and becomes more complex, the workforce increasingly needs a finely-tuned operation to meet expectations and, ultimately, outperform competitors. Decision makers, who are overseeing more employees, locations, partners, products, and customer relationships, need an ERP system to set the company’s strategic direction. Both ERP and BPI are important for managing a company and, in fact, support and enable each other.
Together is better
The benefits that ERP brings to a BPI initiative stem from the business intelligence tools offered by most systems. A key aspect of all BPI methodologies is measuring performance before and after changes to validate effectiveness. It’s a never-ending process that relies on accurate data. ERP fuels the process with powerful analysis tools that can dig deep into data and mine for inefficiencies and waste. Plus the reporting tools can be configured to track key performance indicators and directly attribute changes to objectives, such as productivity, inventory, and costs. It’s accurate, real-time data collected from across the organization and presented in a single dashboard – a powerful tracking and communication tool.
It’s clear that ERP supports process improvement – but the reverse is also true. According to research conducted by Aberdeen Group*, companies that have both outperform companies that have an ERP system without a BPI inititiative, such as Lean. This table shows that, across a variety of performance metrics, together is better.
The Aberdeen report goes on to reveal that companies with an ERP but no BPI initiative, such as Lean, are significantly less likely to use the advanced data gathering features in their ERP system. Shown in the graph by light blue bars, these companies are not fully leveraging their technology investment.
Takeaway
While this thinking may go against some hard-core Lean traditionalists, independent research shows that ERP helps companies take operational efficiencies to another level and BPI helps companies get more from their software. The combination can be a powerful performance booster. They keys to success are to choose wisely, since ERP will become the information backbone of your company, and to work with an implementation partner that can tailor the system to your business needs.
*Research conducted by Aberdeen Group and presented in its report, ERP and Lean, by Kevin Prouty (March 2012)
| Next month's article |
| Protecting your business from the unthinkable |
| What would happen to your business if you lost your client files, contracts, accounting records, and other critical information? We need only look at the devastation caused by floodwaters in Calgary to see how important it is to regularly back-up and store data offsite. In this article, we'll explore cost-effective and convenient solutions that can save your business when a disaster strikes. |
|
Article coming July 30 - enter your email address in the STAY INFORMED box on the right or follow us on LinkedIn. |