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Lean Resource Planning
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MRP vs. Lean Manufacturing

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How does one determine the potential for improvement within a company? First identify what performance mea­sures are considered in determining "world class" perfor­mance. Considerable time, effort and practical experience have gone into their compilation. Then determine how your company measures up to them. Often some of the data required to make these determinations aren't easily found, but since you'll frequently use this information in the future the investment is worth it. Since the benefits projection will be read by a mix of conservatives and progressives, a Return On Assets (ROA) calculation should be done. Exhibit 4 highlights the major elements. For each box there is a set of calculations which have long been accepted by those in finance, and ROA logic is in the public domain.

For those who have mastered or are dabbling with Activity Based Costing (ABC), I would suggest that for purposes of decision support, a benefits calculation would be useful. Movements such as Business Process Reengineering focus on processes, the natural domain of ABC. Maybe the intangible benefits associated with ERP will have consid­erable economic value, benefits such as:

• Improved customer service

• The ability to grow without proportional cost increase

• Reduced management expediting, more time to plan (appropriate in the era of the knowledge worker)

• Improved product quality, less rework

• The ability to maintain accurate records for govern­ment regulations

• An improved "quality of life," employee morale and job satisfaction

• Improved accuracy of management information

An overlooked benefit of ERP is that there is a need for considerable education and training required to success­fully implement it. While at first that might sound like a negative, it isn't. Virtually everyone is reintroduced to what is now a huge and rich body of knowledge. Being aware of and expanding the body-of-knowledge is impor­tant in holding onto a competitive advantage. The world isn't standing still!

In summary, the economics of ERP are proven and compelling.

Fit ERP to the Company or the Company to ERP?

The only reason this argument is being discussed is that just like in the 1970's, there are those corporate MIS/IS staffs who want to "develop their own" system. Without question the allure of the new RDBMS's and 4GL's is a major influence in this regard. But the point has to be made that ERP is a business model, and in the era of time-based-competition, having an important project paced by soft­ware development is a questionable strategy. Remember, ERP software is an enabler, not the center of the universe.

What It Really Costs to Implement ERP

For those of you who have implemented MRP or Closed Loop MRP or MRPII in the past, you might recall the " TEN COMMANDMENTS OF." The ten commandments really addressed issues of leadership, intent, affecting positive change, focus and quality of effort. These are the real currency of organizations. Guess what? When I pulled out the list and compared them to the success factors for ERP, they are a perfect fit. Talk about a timeless document! The commandments:

1. Thou Shalt Acquire and Sustain thy Management's Support.

2. Thou Shalt Establish Accountabilities for the Accuracy of thy Data.

3. Thou Shalt Set Objectives and Measure thy Perfor­mance Against Them.

4. Thou Shalt not Place thy Least Experienced in thy Company's Most Critical Position.

          5. Thou Shalt not Economize on Educating thy People.

6. Thou Shalt not Endeavor Implementation Without Experience.

          7. Thou Shalt not Duplicate the Informal System on thy Computer.

8. Thou Shalt not Bear False Witness Declaring ERP a Data Processing System.

9. Thou Shalt not Omit Tasks in thy Haste nor Prolong Them for thy Comfort.

10. Thou Shalt not Expect ERP to Eliminate all thy Problems

Summary

Enterprise Resource Planning is the end result of thirty years of trial and error, innovative thinking and leveraging of computer technology. The business concepts embedded in it have and will continue to produce tremendous competitive advantage and economic benefit to the manufacturing industry. ERP is the right tool for the challenging nineties.


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