ERP systems in lean production

Purpose and overview – Faced with increasing global competition and growing cus- tomer expectations, manufacturers looking for significant performance improvements often look to one of two choices: implementing an ERP system, or applying the tools and techniques associated with lean production. In fact, many companies are today ap- plying both approaches in an attempt to realise competitive advantage in the global marketplace. However, there seems to be an on-going debate within the academic litera- ture as to whether lean and ERP are complimentary or contradictory technologies. This paper aims to present a thorough and critical review of literature with the objective of bringing out pertinent factors and useful insights into the role and implications of ERP systems in lean production, and to develop a research framework that can be used by researchers and practitioners for studying the value of integrating ERP with lean. The research methodology used is literature survey. Literature was collected primarily through journals within the area of operations management. For rigorousness, text- books, conference papers, white papers and dissertations were excluded from the subse- quent analysis. Though older literature was considered to define the scope of the inves- tigation; only literature published after the year 2000 was considered in the analysis in order to be current in the research field.

Main findings – I propose a classification scheme for current research on ERP and lean production, and identify six major areas in the extant literature. The literature survey is then used to find existing research gaps, and provides a research framework for future research directions regarding the applications and implications of ERP systems in lean production. The following issues can be considered to represent the most critical areas for further research into the role and implications of ERP systems in lean production: x Combining lean and ERP for competitive advantage

x Methods for the concurrent application of lean and ERP x ERP support for lean production

x Real-time information for intelligent planning and execution of lean manufacturing operations

x ERP systems for the extended lean enterprise

x e-Kanban as a platform for integrating ERP and pull systems The research framework can be seen in Figure 17:

Figure 17: A Research Framework for ERP in Lean Production (Powell, 2012a)

Combining lean and ERP for competitive advantage

Firstly, both ERP systems and lean production were considered in the literature as ena- blers of competitive advantage. There was good evidence of the positive effects brought about by implementing either of the two approaches, but any measure of performance improvement realised by applying both approaches together is lacking in the current literature. Thus, the future research directions within this area should address the practi- calities and respective quantification of how ERP and lean can be combined to realise competive advantage.

Methods for the concurrent application of lean and ERP

Secondly, the implementation processes of both approaches should be considered fur- ther. Gunasekaran and Ngai (2004) suggest that the implementation of an IT system requires a strong team that includes key, knowledgeable managers from all functional areas. A well-documented project plan is also required, addressing key implementation issues, and moreover, top management support and involvement are essential factors for success. The success criteria for the effective application of lean practices are almost identical to those for ERP implementations, for example team formation and top man- agement support. However, although evidence of simultaneous implementations are lacking in the scientific literature, Masson and Jacobson (2007) suggest that ERP-based lean implementations will grow over time. Therefore, an interesting research topic with- in this area would be to investigate the potential of ERP-based lean implementations. Can the implementation methodologies of both approaches be integrated to develop a single best-practice model?

ERP support for lean production

Thirdly, the support functionality of each of the approaches should be considered. Alt- hough in the traditional sense ERP systems have been considered as a contributor to waste in lean production (Bruun and Mefford, 2004; Hicks, 2007), modern advances in IT and the improved capabilities of ERP have caused some authors to think differently (Riezebos et al., 2009). Therefore, further research should address the support function- ality of contemporary ERP systems for lean production. For example, how can contem- porary ERP systems support lean production principles? It would also be interesting to evaluate how lean thinking can be used to support the successful deployment of modern ERP systems. These are some key issues which should be given further thought in order to improve the competitiveness of manufacturing organisations.

Real-time information for intelligent planning and execution

The fourth major issue identified in the literature was that of the role and value of in- formation, which should be given close regard. If information is to replace inventory (Chen and Paulraj, 2004), the accuracy of the information becomes of significant im- portance, as does its timeliness. Of particular relevance here would be to address the capability of an ERP system to provide real-time information for intelligent planning and execution of lean manufacturing operations. This could be particularly relevant for applying pull production practices in engineer- and make-to-order environments, which have not typically been suited to the traditonal kanban approaches.

ERP systems for the extended lean enterprise

The fifth area identified was that of supply chain integration. Companies in the race for improving organizational competitiveness in the global markets of the 21st Century re- quire their supply chains to be connected in an electronic and dynamic nature. These supply chains should also have a focus upon customer-centric value creation, removing non-value adding activities and contributing toward the lean supply chain. Empirical research within this area should investigate how ERP systems can be applied as a medi- um for extending lean practices throughout the supply chain, as an enabler of the ex- tended lean enterprise.

e-Kanban as a platform for integrating ERP and pull systems

Finally, the development of kanban and the role of the Internet have a major part to play in the application of ERP within lean production. Godinho Filho (2010) reviewed 32 variations of kanban, though only two variants were significantly related with the field of IT (e-kanban and barcode-kanban). However, both of these variants showed signs of promise as enablers toward improved competitive advantage. Therefore, a final sugges- tion for future research directions would be to further examine applications of e-kanban as a platform for the integration of ERP and pull production. For example, how can a contemporary ERP system be configured to support a pull system?

I subsequently chose the third issue identified in the research framework - “ERP support for lean production” - as the research direction for the next research paper.

Limitations – This paper presents the results of a thorough and critical review of opera- tions management literature published since the year 2000. Though one could consider

it a disadvantage to disregard the extensive literature on MRP and JIT from the 1980s and 1990s, in order to remain current in the research community, I consider it more im- portant to focus on the most recent developments in the field. After all, it seems that it was the early MRP and JIT literature that has led to the “contradictory” nature of ERP and lean production that we face today.