The first in a series of articles following the implementation of Lean Manufacturing for Microsoft Dynamics AX to a Medical Equipment Manufacturer

Roll With Lean: New ERP Systems Work With Lean Principles, Not Against Them

Part 1

Synopsys: Lean transformations require transformation of IT systems to reflect the new realities of operation with pull systems, kanbans and the requirement to respond immediately to changes in customer demand.

It's all very well leaning-out your manufacturing and supply chain processes but if your ERP systems aren't up to the job, then all that might happen is that balancing production gets progressively more difficult as your supply chain backs up in a maze of spreadsheets, guesswork and finger-pointing.

The nice part of my job is playing a direct role in helping my customers move their businesses from MRP-driven platforms, usually backed-up with an acre of spreadsheets, to something that closer-reflects how to operate in a Lean environment: Kanbans and all.

I have a customer in the UK who manufactures medical equipment. Over the past five years, they have embodied some of the best aspects of a Lean transformation: not only have they implemented all the best aspects of cellular manufacturing, but their product range has been rationalised in an extremely intelligent manner, combining a simplified range of common product families with a broad market reach for both domestic and export markets. In some cases, product variation can be controlled through a software change alone, such has been the extent of Lean product design.

Unfortunately, the supply chain was creaking and causing a familiar pattern of shortages, expedited deliveries and stock obsolescence, especially for component parts. What had happened was that as the manufacturing areas moved toward cellular production, the MRP system could not adapt. The traditional structure of production orders and MRP had gradually diverged from how the production processes were evolving, while the hard-pressed purchasing manager needed to maintain an alternative set of inventory and demand figures for much of his portfolio.

A significant part of the problem lay in the MRP system's structure. The traditional MRP model of forecast-based demand generating a range of production orders throughout the bill-of-materials didn't match a kanban-based environment where replenishment of finished products, components and key subassemblies was now managed by physical kanban cards. MRP was retained to generate production orders, as much as to generate documentation for the shop floor, as to use the system to consume inventory through backflushing.

The problem was that the generated orders simply did not match what they were making. Orders were created to reflect batch quantities far in excess of the daily capacity and this led to a backlog in system bookings: physical inventory would routinely diverge from system inventory and not only would this lead to problems with the despatch of finished goods, but component and subassembly inventories would diverge far from reality.

Now let's look at purchasing and stores. Here, system inventory could not be relied-upon and this led to the purchasing manager having to initiate regular physical checks of inventory which then had to be loaded into his own spreadsheets which were used to control the supply of key raw materials and components.

This pattern of operation is familiar to many of us. Slowly but inexorably, traditional MRP and production order-based systems fall out of synch with reality and gradually the number of spreadsheets and workarounds increases. System transactions are processed merely in an attempt to keep on-hand values in line with physical inventory and they become increasingly irrelevant as they fail to provide worthwhile information that helps people do their jobs. Meanwhile, as the transactions often fail to reflect the sequence of activities in the shop floor, it becomes increasingly difficult to post the transactions and so the cycle becomes progressively worse.

Some Lean practitioners have an easy solution for this: pull the plug on the MRP system and run things manually either fully or by "phantoming" out parts of the process! Great in theory and for the purist, but not much use in the Real World where we want to manage our business. ERP systems happen to be rather convenient for keeping track of where the business is, not to mention managing the cash and other key assets. What a pity to have a huge black hole in the middle of the whole process!

A better solution might be to implement an ERP system that works with Lean principles rather than against them. The system being implemented by my customer uses electronic kanbans to control the entire internal supply chain, from generating pull-to-order instructions directly from customer orders, through to launching replenishment kanbans to restock inventory throughout the internal supply chain from major subassemblies right down to withdrawing components from the stores.

The benefits of this approach are twofold: first of all, electronic kanban tickets can be set-up to reflect the physical layout of the production area and second, these tickets become transactional documents which can be used to provide feedback immediately they have been satisfied: the pull-to-order tickets for the top-level items can be scanned to perform a real-time update of inventory status, while triggering backflushing transactions if they are required. Similarly, those backflushing transactions can trigger the kanban replenishment of components and subassemblies; again, real-time and ensuring accuracy throughout the internal supply chain.

The key thing is to roll with lean and support it, not fight against it. Lean works and we know it, but traditional ERP systems generally don't get it. There is -shock, horror - still a place for MRP in this process; many companies acknowledge the value of extending the Lean supply chain externally, but often suppliers have to be coaxed to operate within a kanban environment and it may often be a better interim strategy to use traditional reorder management processes to keep the shelves of the main store stocked. It might not be true Lean as the theorists know it, but then again many of them haven't had to deal with your day to day issues, and it is pragmatic. Similarly, MRP can still provide a medium-to-long-term view of requirements to give suppliers an indication of where the market is heading.

My customer will be going live later this summer. Stage One will be to create a manual kanban board so we can schedule the shop floor, allowing us to mix products and level the cells in a visual and intuitive manner. Electronic kanbans still work in the physical world; they give us a traveller to accompany the work and, by carrying barcodes, allows receipts to be booked with minimal effort, thus ensuring that the ERP system maintains an accurate picture of what is going on. We are also developing the Plan For Every Part (PFEP) to ensure we have a clear and easily understood course of action for the supply of materials to the shop floor, while the first preparatory steps towards the generation of purchase kanbans for a pilot group of suppliers are underway.

Our customers have operated ERP with a Lean core for over many years and have succeeded in enhancing their own Lean transformations by operating in an environment where ERP supports Lean and does not work against it. Very soon, one more British manufacturer will join this select group and allow their systems to catch-up with the superb progress they have made with their physical processes.

Please follow this story through the coming months:- It will also be published on the eBECS Customer Update, the Lean eZine.

Neil Ferguson-Lee

NB - Lean Manufacturing for Microsoft Dynamics and additional Lean functionality provided by eBECS will be generally available on August 1st 2009. To find out more please visit www.leancoe.com

Lean & Green Manufacturing: Real Solutions to Cost Cutting - FREE On demand recorded webinar

Missed the live webcast on June 23rd? Watch the recording online or download for offline viewing

Click to watch the recorded Microsoft Dynamics webcast: Lean and Green Manufacturing: Real Solutions to Cut Costs

Despite being around for decades, most manufacturers have still not implemented Lean manufacturing processes and systems to their advantage. Many more still do not understand how to improve operations and manage energy consumption without available environmental performance indicators. With current economic conditions, government regulations and the importance of cutting costs and improving customer service, going "Lean & Green" are the vehicles to accelerate you past your competitors.

Discover

• Why Lean is a must-have business initiative in this economic crisis.
• What solutions are available to support your lean initiatives and environmental sustainability
• How companies are going "Lean and Green" for greater advantages

Click to watch the recorded Microsoft Dynamics webcast: Lean and Green Manufacturing: Real Solutions to Cut Costs.

Customer Success - Live Metals

Major Global Metals Manufacturer Go Live on Microsoft Dynamics AX 2009

eBECS' customer, a Major Global Metals Manufacturer has successfully implemented the Microsoft Dynamics AX 2009 business solution for 550 staff. The company replaced a 25-year old AS/400 system with Microsoft Dynamics AX 2009 providing workflow, real-time reporting and a degree of integration and data accessibility that simply was not possible under the old system.

Microsoft Dynamics AX 2009 was chosen because of its high degree of flexibility, depth of functionality and the clear product lifecycle backed by Microsoft. eBECS was chosen as the implementation partner because of our in depth industry knowledge and consistant reputation for delivering complex global ERP projects on time and to budget.

Alessa Industries selects eBECS for Business Transformation using Microsoft Dynamics AX

Alessa Industries Company (AIC) selects eBECS to deliver and drive its Business Transformation to a World Class model Utilizing eBECS knowledge of business processes and the latest business tools of Microsoft Dynamic AX

Riyadh, Kingdom of Saudi Arabia. - June, 2009 - Alessa Industries Company (AIC) a leading manufacturer and distributor of world brands for air conditioning solutions and home appliances in the Kingdom of Saudi Arabia, employing more than 1500 people, has chosen eBECS Limited to deliver its business transformation to a world class business model. Alessa will align its supply chain processes, resources and supporting technology platform based on Microsoft Dynamics AX, to match market and customer demand and needs, enabling AIC to consolidate its local market and extend its reach in the Middle East and beyond.

Recognizing the challenges ahead, the AIC executive team is determined to maximize the returns from AIC brands through innovations and process efficiencies for its entire end to end business model, aligning market demand to manufacturing executions.

"We have selected eBECS because of their proven track record and extensive experience in Manufacturing, Distribution and total supply chain automation, which in my view are critical requirements in our selection process. The eBECS team was able to map our business model and define our business blueprint within short timescales. They have provided us with the road map to begin the transformation process, adopting best practice" said Ahmed Al Omari, CEO of AIC.

"We are proud and delighted to be selected by AIC for its Business Transformation journey and our aim is to enable AIC to set the standards for the market. eBECS will utilize its business and technology expertise to help remove waste in process and material functions, improve efficiencies and provide strict financial controls. The AIC management team will have the right business KPIs for them to monitor business performance and adjust production and services to match market conditions. During this project eBECS will utilize the full power of Microsoft Dynamics AX in order to help provide AIC with the business tools needed to manage it business process" said Mr. Sam Sammour, Chairman of eBECS Group.

About eBECS
eBECS is a specialist in the design and delivery of world class lean and agile business solutions. We pride ourselves on the value we provide to customers seeking enhanced business performance through the application of business consulting and business technology. Working with customers across manufacturing, distribution and the extended supply chain, we utilize Microsoft technologies to build practical and effective solutions that streamline and integrate processes, minimize waste, optimize the supply chain, and manage demand driven operations.
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For more information:
Stephen Wilson, eBECS, +44 7775 571110, swilson@ebecs.com
Atallah Yousef, eBECS, +966554150048, ayousef@ebecs.com

For more information about Alessa Industries Company:
Visit: http://www.alessa.com.sa/

For more information about eBECS Limited:
Visit: http://www.ebecs.com/

For more information about eBECS customer successes:
Visit: http://www.ebecs.com/CaseStudies.aspx

For more information about Microsoft Dynamics AX:
Visit http://www.ebecs.com/DynamicsAx.aspx

For more information about the Lean Enterprise:
Visit http://www.ebecs.com/LeanManufacturing.aspx

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Other product or service names mentioned herein are the trademarks of their respective owners.

Microsoft Dynamics Webcast: Lean and Green Manufacturing: Real Solutions to Cut Costs

eBECS is pleased to invite you to the FREE Microsoft Dynamics Webcast
Lean and Green Manufacturing - Real Solutions to Cut Costs

Tuesday, June 23rd

11:00 am (GMT-08:00) Pacific Time (US & Canada)

19:00 UK Time (BST)

Hear a panel discussion detailing:

* Why Lean is a must-have business initiative in this economic crisis.

* What solutions are available to support your lean initiatives and environmental sustainability.

* How companies are going "Lean and Green" for greater advantages

Lean Manufacturing for Microsoft Dynamics AX will be general availability in August 2009 - attend the webcast to learn more.

Register here for this free webcast

Although lean manufacturing practices have been around for decades, most manufacturers have still not implemented lean manufacturing processes and systems to their advantage. Many more manufacturers still do not understand how to improve operations and manage energy consumption without available environmental performance indicators. With current economic conditions, government regulations, and the importance of cutting costs and improving customer service, going "lean and green" are the vehicles to accelerate you past your competitors. Attend this webcast to learn why lean is a must-have business initiative in this economic crisis, what solutions are available to support your lean initiatives and environmental sustainability, and how companies are going lean and green for competitive advantages.

Don't miss this opportunity to learn how your company can leverage Lean processes and systems right away just as WIKA has done!

Sponsored by Microsoft Dynamics

JJ Food Service wins Wholesaler of the year

JJ Foodservice, a £117m-sales catering specialist, triumphed over cash and carry giants Booker and Palmer & Harvey and foodservice behemoths Brakes and 3663.

JJ Foodservice started out supplying to kebab shops. Today it's branched out to supply local authorities and even won a new £2.5m contract on the day of the awards to supply Derbyshire County Council.

"Tonight proved resoundingly that big isn't always best," said Adam Leyland, editor of The Grocer. "I wouldn't go so far as to say there's a new world order, but the credit crunch has destabilized the market and created new opportunities. Combined with a bit of good old-fashioned entrepreneurialism, smaller companies can outfox their larger rivals.

http://www.thegrocer.co.uk/articles.aspx?page=articles&ID=200778

JJ Foodservice use the Microsoft Dynamics AX business solution implemented by eBECS, together with the eBECS Call Centre Management software eDCCM. To find out more please visit http://www.ebecs.com/EDCCM.aspx