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IMPLEMENTING KANBAN ALTERNATIVES IN LEAN MANUFACTURINGEnterprise Resource Planning

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EXECUTIVE SUMMARY Manufacturing companies are adopting Lean because of its

efficiency—lowering costs and lead-time, while improving quality

and performance. In today’s highly competitive and challenging

markets, companies need every available advantage.

Many people equate Lean manufacturing with the use of kanbans:

physical or visual signals that trigger replenishment. While kanban

use is indeed a part of many Lean programs, it is not the only

solution for triggering the movement of material. Kanban has its

place, but there are more appropriate alternative approaches in

situations where kanban is not a good fit.

It is important to remember that Lean is an approach and an

attitude—not a specific set of techniques or tools. The most

important aspect of Lean is a focus on the elimination of “waste”

(i.e. anything that does not contribute directly to making the

product). Kanban and kanban alternatives focus on inventory

reduction, proper staging of parts and materials (reduced

handling and delay), and efficient procurement/production of

replenishments.

KANBAN AND LEAN Kanban is a replenishment signal that acts as the primary linkage

in a “pull” environment. Typically a substitute for a manufacturing

order or purchase order, the kanban signifies that an item,

material, or assembly has been used and that another can and

should be made, moved or acquired to replace it. When properly

applied, kanbans help reduce inventory and shorten lead-time,

reducing waste in support of demand-driven “pull” operations.

Kanbans work best where demand is steady for a given period

of time. Once the appropriate number of kanbans is put into

circulation, material flow is timed to usage, inventory remains

constant, and shortages should be eliminated. However, the

kanban system is not designed for frequent demand changes. If

demand increases, shortages occur; if demand decreases, there

will be excess inventory. Management must continually monitor

the number of kanbans in circulation and make the appropriate

adjustments.

Where there is a varying demand and/or a mix of products being

produced, particularly with small quantities, computer techniques

do a much better job of having the right parts available with

minimum inventory investment. In addition, computer techniques

are designed to track changes in demand and usage and

automatically adjust activities to accommodate those changes.

ERP—NOT A FOUR-LETTER WORD People tend to define ERP as a traditional system. In reality, these

so-called traditional systems plan inventory availability quite

precisely, based on the forecast. Best performance is achieved

when the forecast is accurate (or at least closely managed), and

execution is carried out effectively. Also, ERP can be a lot more

forgiving of challenging business conditions, such as rapidly

changing forecasts, supplier schedule changes, and the like.

In a make-to-order or assemble-to-order situation where kanban

does not fit, ERP with a product configurator offers the most

effective approach. Components, materials and/or assemblies are

planned and stocked according to a forecast. The configurator

captures customer specifications and generates the production

Time waste differs from material waste in that there can be no salvage. The easiest of all wastes and the hardest to correct is the waste of time, because wasted time does not litter the floor like wasted material.

Henry Ford

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or assembly work order for quick completion and shipment.

Planning systems coordinate replenishment of components used

in accordance with minimum inventory/maximum availability

objectives. Such a system is not hampered by the variation in

demand of products and configurations. In fact, it is designed

to operate in this environment and generate minimum inventory

consistent with availability and customer service objectives.

Hose Master of Euclid, Ohio successfully pursues this strategy.

This 200 employee firm makes both custom and standard hose

products for domestic and export sales. The company uses a

configurator-enabled ERP system to process 6,000 quotes and

2,500 orders each month. Since implementing the system, Hose

Master has improved service levels and maintained or shortened

delivery times, while handling an increased quote volume.

Hose Master Benefits:

• Faster, more automated configure-to-order quoting system

led to improved service levels, faster quote delivery, and

quicker new hire training

• Able to handle increased business with previously publicized

lead times; improved lead times in some instances

• Offered self-service features via the Web

BECOMING LEAN Lean is all about eliminating waste—cutting unnecessary costs

like excess inventory levels, reducing lead time and handling,

and focusing on doing things right the first time. A variety of

techniques and tools can be applied across the wide range

of manufacturing situations to control material flow, reduce

inventory, and shorten lead-time.

For materials and parts with relatively steady usage, kanban offers

a paperless- and orderless-approach. For custom manufacturing,

a configurator integrated with a full-function ERP system is

the answer. In the vast area between these two extremes, the

following provide the best tools for reducing waste, lead-time,

inventory, handling, scrap, rework, and other non-value-adding

activities:

• Integrated ERP system with comprehensive applications

that address the full range of a manufacturer’s activities,

including customer service and supplier relationships.

• Solid forecasting and master scheduling processes that keep

close track of demand and ensure that execution is fully in

sync with customer needs.

• A focus on process improvement and waste elimination,

heavily reliant on empowered workers and responsive (and

responsible) management.

• Automation where it makes sense—shop floor data

collection, RFID, electronic ordering, self-service web, and

more.

• An open mindedness toward new and innovative

approaches like Theory of Constraints, demand-driven

strategies, and collaboration—consistent with the company’s

position, products, customers, and capabilities.

In today’s highly competitive world, success is all about satisfying

the customer, controlling costs, and maximizing profits. Every

improvement program can achieve these goals when capitalizing

on the best of lean manufacturing and overall best practices.

A modern, integrated ERP suite that supports not only manufacturing, but also financials, supply chain, and customer management—and is supported by functionality for tracking a company’s performance—can help support the proliferation of lean throughout the enterprise.

Excerpt from: “SMBs: Embrace Lean as Part of the Current Business Transformation” by Simon Jacobson

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NEXT STEPS A textbook Lean implementation can be quite daunting—value

stream mapping, intense training and implementation, radical

changes in processes and company culture. But you don’t have

to do all that to take advantage of Lean thinking and gain

Lean benefits. All it takes is openness to new ideas, trust in the

knowledge and experience of the workers, and a willingness to

make changes. You can adopt Lean practices incrementally and

continuously in a gradual, extended journey toward improvement.

When software capabilities are key to achieving your business

objectives, Intuitive ERP and Made2Manage ERP software and

services meet the wide range of manufacturing and business

requirements. They are matched closely with specific customer

needs, incorporating deep industry knowledge and experience.

Plus, each is continually enhanced to meet evolving customer

requests and suggestions.

Notable for ease-of-use, fast navigation, tailored views and tight

security, Intuitive and Made2Manage applications deliver the

functionality without the fuss, permitting manufacturers to focus

on process improvement and their Lean journey.

Intuitive offers rich functionality for a broad range of

manufacturing environments, including electronics, medical

devices, aviation and others, and makes implementation easy for

small to midsized companies. Made2Manage provides full ERP

capabilities for custom manufacturers centered on a “casual” bill-

of-material for making complex products, while continuing with

design and engineering activity.

Active product support and enhancements deliver the capabilities

and technologies that customers want and need in their specific

industries, including ERP, Business Intelligence (BI), Customer

Relationship Management (CRM), Advanced Planning Systems

(APS), Manufacturing Execution Systems (MES), and configuration

from one supplier.

Intuitive and Made2Manage are backed by an experienced

management team and deep financial resources, combining high-

fit solutions, solid customer relationships, and a strong balance

sheet into a value proposition unmatched by other vendors. Both

are ready to provide the information management solutions and

support you need to keep your business lean, productive, and

ahead of the competition in today’s rapidly changing market

environment.