Manufacturers have invested heavily in ERP, but are failing to see plant-floor performance gains. What’s missing from the picture? Lean practices.
ATLANTA (November 14, 2006) – After spending millions on enterprise resource planning
systems (ERP), many manufacturers are still chasing performance improvements at the plant
level. This is according to the results of a survey of more than 1,500 manufacturers conducted
earlier this year by Invistics, a developer of manufacturing performance optimization solutions
for complex, asset-intensive industries. The survey indicated that only a little more than a third
of the respondents felt that their ERP systems have delivered their expected ROI.
Respondents cited lack of visibility, lack of support for Lean principles, and no awareness of
variability as key issues.
According to Tom Knight, founder and chief strategy officer of Invistics, “While ERP solutions
work well as corporate business information systems, critical gaps remain in their ability to
improve manufacturing performance. Chief among these gaps is that ERP systems are
designed for manufacturing in a ‘perfect world’ that does not exist for complex manufacturers
awash in variability and constantly changing dynamics.”
“Virtually all manufacturers have invested heavily in an ERP solution as a platform for running
their business, yet few feel like they’ve achieved the manufacturing performance gains they
expected,” continues Knight. “This is especially true for factories characterized as being highly complex as opposed to high volume – those with hundreds or thousands of products, dozens of work centers, and significantly more process and demand variability. These manufacturers in particular are recognizing the need for a solution that can address their unique challenges and translate the vast amount of ERP data into improved decisions that optimize plant performance.”
For example, plants that employ a variety of manufacturing processes and shared equipment
to generate a broad mix of products face fluctuations in customer demand, supplier lead times, and machine reliability. ERP software is limited in its ability to manage waste and cycle time, and it tends to push products to market regardless of demand. Even with advanced planning systems (APS), ERP solutions do not take these different sources of variability into account when planning inventory and capacity levels driving up significant costs in excess inventory.
AMR Research has noted that “2007 technology investments are fueled by initiatives to
employ Lean practices through continued investment in ERP and renewed interest in next generation manufacturing operations.”1 Invistics MachSix™ is part of a new class of software
that enables performance improvements like Lean in highly complex environments. Built on
Lean and Six Sigma principles, MachSix integrates with and extends existing ERP
investments, allowing manufacturers to account for critical variability.
MachSix optimizes manufacturing operations, modeling around both supply and demand
variability and enabling a flow path-based approach to manufacturing – one that aligns
processes around a value stream and supports sustainable performance improvement
initiatives. The solution provides visibility into critical manufacturing metrics such as
throughput, cycle time, customer service and inventory levels and allows managers to plan
and execute to reach desired performance targets for each metric. MachSix also includes
simulation and optimization tools that support “what if?” planning scenarios to assess the
impact of a change on operations, before the change is applied.
Using Invistics MachSix, customers have been able to cut cycle times and inventory in half,
while achieving on-time delivery rates of over 99 percent. Invistics is making available a white
paper, entitled “Supercharging ERP for Manufacturing Performance in Complex
Environments.” To download the free white paper, go to www.invistics.com/Library.aspx.
To attest to the success of its solutions, Invistics has received $1.7 million in National Science Foundation grants to support its research on manufacturing performance optimization. Additionally, the Invistics Advisory Board includes operations research experts from MIT and Georgia Tech.
Invistics helps manufacturers in complex, asset-intensive industries such as consumer
packaged goods, chemicals, metals and pharmaceuticals achieve sustainable operational
excellence in an often overlooked, yet core, element of their supply chain—production
operations. Built on Lean and Six Sigma principles, its manufacturing performance
optimization solution, Invistics MachSix™, is specifically designed to redefine complex plantlevel tradeoffs between inventory costs, customer service, production, throughput and cycle times. Companies use Invistics’ methodology and software to identify and manage sources of variability while breaking down organizational silos. Invistics’ customers have achieved dramatic, sustained results including over 99 percent on-time deliveries, an average reduction of 50 percent in inventory and reduction in cycle times by more than half. MachSix integrates with, and enhances, ERP, supply chain and manufacturing execution applications by providing more accurate data, while accounting for variability and improving visibility into plant floor operations. More information is located at www.invistics.com.
1Fenella Sirkisoon, “U.S. Enterprise IT Spending Profile, 2006-2007,” AMR Research, 2006.