Lean may have gotten its start on the shop floor, but its real value comes from something much bigger: deep integration between shop floor processes, the internal supply chain, and the larger, external supply chain environment in which every manufacturer operates.
The promise of truly integrated, lean enterprise is now driving companies of all sizes to reassess how they look at traditional ERP systems. While ERP systems have been instrumental in creating efficiency and driving cost-effective processes at manufacturers in a variety of industries, new thinking, and new technology, are needed to make the shift to lean. In short, lean enterprises require a "lean IT" initiative to meet goals.
Just ask Rick Wiegand, vice president and executive operating officer of Elliott Company, a mid-sized, global manufacturer of compressors and steam turbines for the energy industry, based in Jeannette, PA. When Elliott looked at its future, its increasingly global competition, and its need to better service its customers and partners through lean technology and processes, it was clear that a shift in thinking and a major shift in IT platform was going to be needed.
"There was going to be no evolution of the company without a further investment in IT," Wiegand says.
Elliott Turbo is hardly alone in its thinking. More and more manufacturing companies -- mid-market companies like Elliott as well as much larger Global 100 companies -- are realizing that the journey to lean requires a similar IT journey as well.
At the center of this thinking is the need for a "single version of the truth" that can drive key lean processes from the boardroom to the shop floor. For many companies working with outdated enterprise software systems, that single version of the truth is difficult if not impossible to obtain. A lean IT environment can only be realized by efficiently integrating data and the flow of data across the enterprise. And that requires the kind of software shift that Elliott began two years ago.
For experts like Karl B. Manrodt, the co-director of the Southern Center for Logistics and Intermodal Transportation at Georgia Southern University in Statesboro, GA, that single version of the truth starts at the demand signal. Without a reliable, accurate demand signal, manufacturers can't begin to reap the benefits that lean delivers.
And without the right technology, a company can't hope to both understand its real demand and ensure that an accurate demand signal drives the company and its lean supply chain.
"Fundamentally, it's a technology issue," says Manrodt. "You need the technology to communicate the signal rapidly to multiple parties." That communication must take place both inside the firewall as well as outside to external partners and suppliers, Manrodt adds.
"How far can you get without going external?" Manrodt asks, rhetorically. "The answer is not very far."
This need for a single version of truth that can be used to drive key internal and external supply chain processes has a number of key requirements. Some of the data used to drive these lean processes come directly from the lean playbook: real-time demand signals and routing information, quality measurements and controls, and key metrics such as working capital and on-time delivery, among others.
But most of these lean processes are next to impossible to implement without an integrated IT architecture that delivers the benefits of lean to the entire enterprise. The ability to rapidly, accurately, and efficiently collect and deliver the data that drives a lean supply chain is best realized by having a single integrated IT system that links the shop floor to back office and front-office processes.
As Elliott began to look at its lean requirements and its stove-pipe legacy environment, this new architecture became a major design goal for the company, according to Wiegand. For Elliott, going lean meant implementing a single Oracle environment to replace its disparate systems. "Our new system is structured as an integrated system," says Wiegand.
The integrated structure that Elliott is implementing, says Randall Villeneuve, vice president of industrial manufacturing at Oracle, is reflected in the implementation criteria for Oracle's lean software offerings: For IT to support lean, IT has to be lean itself.
"You want to avoid making implementation incredibly complex and time-consuming" says Villeneuve. "That means finding the sweet spot between doing too much and doing too little."
Oracle's approach for mid-sized manufacturers like Elliott is to provide a single integrated architecture, based on Oracle's e-Business Suite Special Edition, and to build templates that include -- out-of-the-box -- many of the key processes and metrics that are required for lean operations. Standard business flows for kanban planning, sizing, and replenishment are included, are among the key performance indicators needed to measure how well the lean "journey" is progressing.
Oracle's approach reflects its deep experience in building lean environments for its e-Business Suite customers. While there is no one-size-fits-all method that companies should follow in order to build a lean IT environment that can support a lean enterprise, there are a few basic requirements. A single integrated IT environment is essential in order to ensure that a single version of the truth is driving the entire lean supply chain.
Role-based access to key data, like demand information, and other key performance indicators is also essential: while not every stakeholder needs to see the same information, all stakeholders need seamless access to the information that allows them to manage the lean processes under their control. This means a well-designed set of lean-based metrics must also be available to chart the supply chain's progress and allow for real-time course corrections and modifications.
These requirements also demand a high-performance, scalable IT environment that can support lean processes in real-time. This means a high degree of data availability based on standard data types and a well balanced IT system that can respond to peak demand requirements.
The value of integration, high performance, and real time data access drives much of the thinking behind Elliott's new lean IT system. With an integrated system "our customers will be able to look at their orders on line and our project managers can look at cost in real time," says Wiegand. "And we can, in real time, react to factors that may be negatively impacting our costs."
And that ability to react in real-time has a direct impact on Elliott's bottom line, Wiegand reports: "You get an opportunity to correct and improve profitability"
How does a company begin the lean IT journey that can power a lean supply chain? Change starts fundamentally with the kind of IT integration that solutions like Oracle e-business Suite Special Edition can provide. For many companies, this entails the kind of system-wide rethinking and re-architecting of the IT environment that Elliott is now undertaking. But for other companies that have a relatively modern IT environment in place, implementing the lean IT environment to support a lean supply chain doesn't have to require a wholesale IT restructuring, says Oracle's Villeneuve. "Oracle's common data model makes it easy to integrate existing systems" into the new lean IT environment, Villeneuve points out.
Once the IT system is well-defined, it's time to start getting lean. For Manrodt, "managing the demand signal is the most fundamental thing." That's a matter of bringing together internal and external stakeholders, including direct customer input, and using the integration a lean IT environment provides to due true capacity planning.
This ability to build a more consensus-driven demand signal from the lean environment is essential to meeting a major goal of lean theory: using accurate data to drive key decisions on supplies, inventory, and capacity. "You can't drive a lean supply chain based on bad data," Manrodt points out. "If I'm starting with a bad number, I'm going to have waste."
But, Manrodt is quick to point out, a lean environment must above all be practical, and that means manufacturers have to have an IT system flexible enough to implement the appropriate business processes for their particular business, regardless of what the "lean zealots" may say. "The fanaticism sometimes becomes a hindrance to the process," Manrodt adds.
This practical, business-specific view is what drives companies like Elliott to a highly successful, yet pragmatic lean supply chain. By starting with a fresh look at IT, and then tackling its key lean requirements one-by-one, Elliott has been able to ensure that lean makes sense from a business standpoint, and not just from the standpoint of orthodox lean theory.
The bottom line when it comes to lean is no different for a mid-sized manufacturer like Elliott or a multi-billion dollar Global 100 manufacturer: lean business processes require lean IT processes to succeed. And a lean IT environment by definition must be implemented to fit the precise needs of the individual manufacturer. Going lean doesn't have to be hard, or overly expensive, as long as it's done right.