Today’s mid-market manufacturers must always have continuous improvement on their minds. It is important to make ongoing improvements to business processes in general, but especially by using effective techniques and technology that can cut waste and reduce costs. This idea of reducing items of excess in the business is, in essence, one of the main pillars of lean manufacturing.
Through our extensive experience working with clients in our industry, we have recognized that many of these waste-cutting efforts should focus on inventory to achieve optimum results.
Waste and Inventory: The Key to Lean
In a previous blog post entitled “,” we defined lean manufacturing as eliminating waste and producing more goods at a higher quality, but with fewer resources.
Having more inventory than is necessary to do the job can be one of the culprits behind covering up waste in your processes.
Many companies have concluded they can eliminate unnecessary waste by finding the right balance between too much and too little inventory on hand. Having the right amount of the right inventory is the best strategy for an overall lean manufacturing approach. Plus, it helps companies obtain business value for their inventory investment.
How Excess Inventory Can Affect Your Business
When a company acquires excess inventory, it is common to call these materials “safety stock.” Having too much “safety stock” on hand can lead to several wasteful processes that involve and affect several areas of the business, including:
- Warehouse Personnel
- Physical Inventory Counts
- Paper-Intensive Administration Work
- Manual-based Communication
Another area where we can see excess is what we call “factory waste.” This is another area of excess that can be extremely costly, as it affects work-in-process inventory and raw material inventory.
A Better Approach to Lean Manufacturing
So, you might ask: what can your manufacturing organization do now and in the future to reduce wasteful inventory management processes without increasing the risk of shortages that disrupt production and impact delivery of finished goods?
Implementing lean manufacturing tools is a great place to start. For example, putting 5S into place on the factory floor can result in effective workplace organization and standardized work procedures. 5S focuses on having visual order, organization, cleanliness and standardization of a workplace.
While these targeted approaches deliver on specific business process improvement areas, it is common for the improvement plateaus and waste to still be evident within the organization.
Here’s where an effective ERP selection process is needed in order to leverage ERP features for effective inventory management.
One Strategic Use of ERP
A powerful example of using ERP to cut waste was evident at a recent ERP system demo delivered by Infor Syteline. Our team was able to see some of the strengths the system offers in the following areas.
Merging Lean Concepts with MRP Functionality
Choosing items to be managed by a Pull-system is always a challenge. Once chosen, calculating the most cost-effective lot size is the next step. During the subject demo, we were exposed to the robust functionality contained in the SyteLEAN toolkit.
The Infor SyteLEAN product is an electronic Kanban system that automatically “right sizes” the selected inventory items based on average usage and forecasted usage, while factoring the variability within the data into the formula. These Kanban-planned orders are then combined with MRP-generated orders, which can be reviewed from the Planner’s Workbench.
Analytics and Reports
The SyteLean system provides reports showing the Pull-system status, Spike demand, Exceptions and a Supplier Forecast. These tools allow supervisors and planners to readily see which items have inventory below lead-time usage in enough time to take effective action to head off a problem.
In addition, SyteLEAN will provide recommendations covering items that are likely candidates to be managed by a Pull system.
Inventory Management and Rigorous Cycle Counting Tools
Unlike many systems, Infor Syteline does not freeze the inventory during a cycle count. The system is configured like this so materials personnel are not required to perform a count when the factory is not functioning. Instead, the count can be scheduled when it’s convenient for the materials function.
The Syteline system will monitor transactions that take place during the cycle counting process and adjust the inventory balance so the cycle count remains valid.
The unit of measure conversion function is another admirable tool found in the solution. In Syteline, this tool carries out the calculation all the way to twelve decimal places, which provides a robust balance between inventory quantities that may use unique units of measure in different process steps.
Office Work Flows and Metrics
Finally, Syteline provides the workflow messages and notifications required to assure that key individuals are alerted when Kanban signals have been sent to Planners. This provides visibility to shop floor management, allowing them to follow up as needed, while also providing accountability within the Planning function. This assures us that the proper production orders are released.
Lean Manufacturing and the Future of Your Business
It is important to remember that continuous improvement is not the result of implementing just one tool or one Lean manufacturing technique. Effective management of inventory is part of an ongoing journey of continuous improvement that includes Lean, Six Sigma, and ERP.
It’s critical to get educated on ERP capabilities, especially those that facilitate Lean-like demand leveling and JIT inventory, to enable future improvements.
We advise our clients heading into ERP selection to implement lean manufacturing technology solutions that provide a solid foundation to manage lean transactions from the customer, through production, and back to the supplier.
Download the paper Lean, Six Sigma, and ERP: Putting it All Together for Improved Performance for a closer look at best practices in lean manufacturing and inventory management.