How can lean manufacturing concepts be used with MRP and ERP?

Sometimes, in technology, as in life, opposites come together in a surprising way. Such is the case for lean's pull technique and ERP's emphasis on push.

Perhaps surprising to some, lean manufacturing concepts can be brought to an ERP system -- with its backbone of material requirements planning (MRP) principles -- to create more efficient manufacturing processes.

To get to the how, let's set the context of each concept. MRP, a "push" system, is the fundamental approach embedded within all ERP systems. With a push system, inventory needs are determined in advance, and product is developed to meet that forecast. In contrast to the push of MRP and ERP, lean manufacturing concepts emphasizes a "pull" philosophy, whereby nothing is purchased or manufactured until there is demand -- not a forecast, but an actual demand.

MRP is part of the planning function within an ERP system, which also includes the entire integrated suite of software that a manufacturing company uses to run the business -- production, purchasing, order management, financial, accounting and more. Lean's pull techniques are focused on production execution and do not address planning. Lean manufacturing concepts can be brought into the ERP environment as a replacement or, more often, as a supplement to the production part of ERP. Most often, this means Kanban pull signals -- a common implementation of pull in a lean implementation -- are used to trigger the final assembly of finished goods, bring components to production areas from stores or feeder locations, or to send replenishment releases to suppliers -- blanket purchase order releases, using a form of electronic Kanban.

In this scenario, Kanbans take the place of traditional work orders. ERP developers may provide supporting functions in their production control applications to accommodate Kanbans, or the user company may implement procedural workarounds. One such workaround is to report production -- triggered by Kanbans -- against standing work orders.

A more comprehensive approach to pulling work through what is inherently a push system is demand-driven MRP (DDMRP), a technique developed and promoted by the Demand Driven Institute. DDMRP can be implemented using spreadsheets alongside regular MRP or ERP, or through add-on software that is compatible with major ERP systems and available from several independent developers. The Demand Driven Institute maintains a list of certified DDMRP-compliant software on their website.

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