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ERP and Waste Elimination
Tuesday, February 25, 2014

Many organisations believe that an ERP project will reduce waste and make the company more efficient. ERP is primarily an information tool that enables the company to plan and control their activities by integrating all of the elements of the business from an information perspective.

Ninety per cent of ERP projects fail to deliver tangible business improvements or reductions in cost adding activities. To get the most from the ERP project, business process reengineering, lean principles and six sigma techniques need to be applied, at some point, as well as the implementation of the software. Process reengineering lean and six sigma techniques are based around reducing
non-value adding activities and strive to for a zero defects environment.

For most organisations attempting to combine the four into a one stop project will end up in confusion and complicate an ERP project that most likely will become beset with significant issues of project delays, software fit problems and budgetary blow-outs.

There are different schools of thought on the application of these technologies! Some believe that process reengineering, lean applications and six sigma should be implemented before ERP. Others argue that ERP is an enabling technology that provides the platform for process reengineering, lean and six sigma. To take it a step further there are those who advocate replacing ERP with lean and six

Can lean or six sigma manage the entire supply chain without ERP? I don’t believe so. ERP is required for all of the up-front processing of information such as forecasting, sales order processing, production and materials planning, accounts payable, accounts receivable, product costing and many other vital functions of the business.There are certainly opportunities for the application of lean, six sigma and process reengineering to streamline activities and reduce cost-adding activities such as activity based costing, vendor managed inventories, factory and vendor pull systems (kanban). In all of these ERP is a still a vital aspect of operating a business. An understanding of how these technologies can be applied should be looked at before embarking on any business improvement program to determine the optimum application to benefit the organisation. How the ERP system is implemented can facilitate or block
the application of the other technologies.

Experience worth listening to!

Ray Atkinson