Advice and Assistance for Manufacturers
November 2014
Sorting out the solutions
We all know what ERP is… the major information management system for 
manufacturers (and others) that integrates all of the major functions of the business – sales, inventory, manufacturing (planning, scheduling, production control), purchasing, financial management, and more. There is still some confusion, however, about just how some of the other approaches – Lean Manufacturing, Theory of Constraints, DDMRP, etc. – fit in and whether they replace ERP or are complementary.
ERP
On the one hand, ERP is a direct descendent to MRP and MRP II, an information management resource that collects, manages and makes accessible the masses of information that track activities across the enterprise. This information supports management and control needs and reporting (financial, operational) to satisfy regulations and business operational needs.
On the other hand, ERP is essentially a model of the company built around a planning function that simulates what will likely occur, given the existing conditions (orders, inventory levels, etc.). Further, the planning function carries current conditions forward and calculates a recommended set of actions necessary to successfully carry out the plan as stated in the sales and operations plan and/or master schedule.
Although its roots go back to the 1960s, ERP has evolved and expanded from the original MRP and includes a vast array of functionality, technology and capabilities designed to meet today’s business needs.
That said, other approaches have been developed that may bring up the questions: Is ERP still the best approach? Do these newer techniques offer a more appropriate path for manufacturing management?
Lean manufacturing is what we in the Western world call the Toyota Production System (TPS), developed by the Japanese automotive industry to improve performance and quality in their quest to become a major factor in the global automotive market as, indeed, they have done. Lean and TPS emphasize efficiency (eliminate waste), rapid response, “pull” operation (where everything is driven by demand or usage) and a focus on manual techniques rather than computer-generated plans.
At first look, it might appear that Lean does not require ERP and actually is incompatible with an ERP-managed approach. Lean, however, is an approach to execution and does not provide the record-keeping and reporting that are essential business functions. Nor does Lean address planning. And Lean techniques, even though they are reaction focused (demand driven) rather than anticipatory, cannot succeed without planning.
Today’s ERP allows the incorporation of Lean techniques including Kanban (physical replenishment signals and “electronic Kanban”) as replacements for traditional production control or, more often, a supplementary facility working hand-in-hand with ERP’s production control and flow manufacturing control.
Theory of Constraints (ToC) is implemented in the plant through an approach called Drum-Buffer-Rope (DBR). Like Lean, DBR is focused on production control and can be very successful in increasing throughput and reducing WIP inventory and lead time. Like Lean, DBR can be implemented within an ERP environment as a supplement or replacement for traditional production control techniques. Several ERP packages in fact include a DBR capability as an alternative execution (production control) module.
DDMRP
One of the newer approaches to manufacturing management is actually a refinement of MRP/ERP aimed at making MRP/ERP more in tune with today’s manufacturing environment. Demand-Driven MRP uses an inventory management and replenishment technique that reduces inventory levels while delivering superior results (reduced shortages) even in volatile environments. DDMRP is described in “Orlicky’s Material Requirements Planning, Third Edition” by Carol Ptak and Chad Smith, McGraw Hill, 2011
Summary
New ideas and techniques emerge all the time, and the best of these gain recognition in the market and become readily available alternatives for companies seeking to improve and better manage operations. ERP has incorporated many of the best “new ideas” and found ways to work together with new techniques to provide manufacturers with more tools for managing the business. So far, however, nothing has come along to replace MRP/ERP as the go-to solution for overall enterprise planning and management.