How to Use Technology to Support the Lean Enterprise


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This SAP Executive Insight addresses the following questions: . What is the Lean enterprise? . What impact do Lean initiatives have on profitability? . What role does IT play in enabling Lean initiatives? . How is technology connected to the success of Lean initiatives?

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How to Use Technology to Support the Lean Enterprise

  1. 1. SAP Executive Insight How to Use tecHnology to sUpport tHe lean enterprise Achieving ProfitAble growth through leAn
  2. 2. the competitive nature of business demands that organizations differentiate by increasing their value to customers. this focus drives companies to eliminate wasteful activities and increase re- sponsiveness while maintaining superior quality – all value-laden initiatives that can be translated into profit. for many ceos, this means implementing “lean” initiatives that expose and attack waste, and setting goals for continuous improvement through Six Sigma principles. the ways in which organizations institute lean initiatives and Six Sigma programs vary. from disparate, spreadsheet-based proce- dures to integrated, automated processes, the approaches and their respective success rates vary. consensus is growing that technology is key for successful lean initiatives. A well-implemented enterprise resource planning (erP) solution provides such a foundation. by coupling lean initiatives with core enterprise software, you can improve inventory visibility, link up- stream vendors and downstream distribution replenishment pro- cesses to manufacturing, and respond to customer order chang- es in real-time. with lean and Six Sigma processes tied to your erP software, you can evaluate performance using consistent measures for success to continuously improve operations to de- liver the highest value to the customer. this SAP executive insight addresses the following questions: • What is the Lean enterprise? • What impact do Lean initiatives have on profitability? • What role does IT play in enabling Lean initiatives? • How is technology connected to the success of Lean initiatives? 2 SAP Executive Insight – how to use technology to Support the lean enterprise
  3. 3. eXecUtiVe agenDa At A glAnce Defining Lean Blueprint for Success: The Role of IT The Road to Lean lean and Six Sigma are two sides of for most organizations, adopting the same coin. lean seeks to minimize early lean adopters relied on visu- lean practices requires a fundamental waste and drive operational effective- al and manual tools to focus on pro- change to the existing structure of your ness by exposing and eliminating any cess changes within the boundaries organization. it requires breaking down activity that does not add value in the of the factory. while they were often silos of information and integrating eyes of the customer. Six sigma seeks successful at improving material flow, them in a meaningful way to improve to make all processes (manufactur- reducing lead times, and increasing processes and reduce cost and waste. ing, order management, and product the throughput of manufacturing pro- Your readiness to embrace this type of design to name a few) capable of pro- cesses, they often failed to have a change is reinforced by the use of tech- ducing the desired quality or result in significant impact on the financial per- nology, which supports your overall a statistically stable or repeatable way. formance of the enterprise. the enter- lean strategy in the following ways: Accomplishing this requires document- prises that achieved the greatest • Roll out common processes. how ed processes that are consistently fol- successes learned to manage lean do you establish consistently high, lowed and measured. improvements through the entire cash- predictable, repeatable, enterprise- to-cash value chain. wide levels of performance? becoming “lean” enables your organi- • Extend Lean processes to the sup- zation to improve throughput capacity today, manufacturing organizations ply chain. once you’ve improved and quality, reduce costs, and deliv- deal with more complex and longer enterprise performance, how can you er products to your customers reliably supply chains, yet customers demand leverage your supply chain to deliv- and with shorter lead times. if adopted higher product variety at lower cost er value? and deployed well, lean and Six Sig- and ever-shorter lead times. the lean • Achieve profitable growth. once ma methodology can improve profitabil- enterprise cannot afford low visibility you’ve optimized your enterprise ity by driving operational effectiveness or poor coordination across its global and supply chain, how do you lever- and eliminating variability, defects, and manufacturing network. Purely visu- age your lean enterprise to increase waste that undermine value. al and manual tools can’t keep pace revenue? in today’s dynamic, fast-paced global manufacturing environment. choosing the right it tools is essential in effec- tively exploiting lean and Six Sigma principles. SAP Executive Insight – how to use technology to Support the lean enterprise 3
  4. 4. roll oUt common processes ScAlAble leAn PrActiceS when embarking on a lean initiative, by establishing common business pro- Sauder Woodworking Company many companies start out slowly. Sev- cesses that are continuously evaluated Industry: consumer goods – eral key people are trained in lean and optimized and by using consol- mill products principles. these champions of lean idated enterprise data to perform Summary establish intricate spreadsheets that business-cycle analytics, you can prop- Sauder woodworking company is outline measures to reduce inventory agate continuous improvement across north America’s leading provider of or speed the manufacturing process. the enterprise and measure the impact ready-to-assemble furniture and the they lead the charge and spread the of actions on margins more reliably nation’s fifth-largest residential furniture gospel according to lean, holding kai- and accurately. You are able to estab- manufacturer. the company sought zen workshops and soliciting input on lish common work processes, real-time to increase visibility on execution pro- ways to improve performance. things data sharing, application integration cesses and improve manufacturing flow improve – you’re operating more effi- and data integrity to meet demands for and efficiency by following a strategic ciently, meeting customer expectations inventory visibility, real-time order man- direction for lean manufacturing. Sau- . . . running Lean. Then what? Good agement, proactive exception man- der wanted to find manufacturing shop- companies disseminate the success- agement, business intelligence and floor systems that are lean enablers. ful lean processes throughout the local analytics, and many other capabilities organization. world-class organizations that are key to the success of any lean Results with SAP® Software share successful lean practices glob- and Six Sigma initiative. employing the • greatly simplified work-order report- ally and extend those lean principles right technology foundation significant- ing process to back-office processes to achieve ly impacts your ability to extend lean • Achieved fast adoption and improved a truly lean enterprise. but how do principles to achieve the following per- ease of use of new manufacturing you make sense of those intricate formance improvements: dashboards spreadsheets if your champion is reas- • improve business insight and pro- • reduced operator interaction (non- signed or, far worse, leaves the com- ductivity by delivering real-time, per- value-added activities) by 85% at the pany? More challenging, how do you sonalized measurements and metrics drawer focus factory instill your successful lean practices that are tied directly to corporate throughout your global enterprise? objectives • Provide access to information such world-class organizations are migrat- as business statistics and key perfor- ing from people-based approaches to mance measurements presented in processes supported by a technolo- the context of business tasks gy that outlives and outperforms the • ensure compliance and predictability individual. implementing an integrated of business performance business software platform to institu- • enable deeper financial insight across tionalize lean processes creates a par- the enterprise and tighten control of adigm shift. instead of silos of lean finances expertise, you establish a lean culture. • Automate financial and managerial You don’t have to rely on one person accounting and financial supply chain preaching the gospel of lean initiatives; management it becomes engrained in everyday ways • Provide rigorous support for financial of doing things. reporting and corporate-governance mandates such as the Sarbanes- oxley Act of 2002 4 SAP Executive Insight – how to use technology to Support the lean enterprise
  5. 5. eXtenD lean processes BEyond ManufacTurInG now that you’ve established a cul- organizations can magnify these ben- ture of lean throughout your enter- efits by extending lean and Six Sig- Wilson Tool International Inc. prise and implemented common, ma practices to the enterprise as part Industry: industrial machinery and successful practices with fast and pre- of a common technology platform. by components dictable responses, it’s time to broad- blending a lean philosophy and new Summary en your perspective. After all, if you technology, you will be able to quick- wilson tool international inc., the don’t address downstream distribution ly design new streamlined opera- world’s leading independent manu- as part of your lean initiative, you can tions, both within and beyond the shop facturer of tooling systems based in improve factory response times and floor to achieve a high degree of flex- White Bear Lake, Minnesota, focuses reduce work in progress, but still be ibility and customer responsiveness. on product innovation, reliability, and holding excess inventory in the distri- extending lean principles through- quality. with hundreds of highly special- bution process. So, let’s ask the ques- out the enterprise and the supply chain ized products, wilson implemented tion: how can you leverage your supply ensures that you optimize the value the SAP® erP application and the SAP chain to increase value for your cus- chain and establish business-cycle ana- Extended Manufacturing Planning and tomers? Top-performing companies are lytics to continually improve processes. Execution for Mill Products package delivering greater value by using tech- to streamline order management and nology to accomplish the following pro- technology solutions enable world- sales management systems in order cess improvements: class organizations to outperform to track inventory and process orders • Automate and integrate manufactur- competitors by enabling collabora- worldwide automatically. ing processes with other core busi- tive business processes designed to Results with SAP® Software ness processes to reduce waste and quickly sense and respond to changes • increased productivity by 27.4% and reduce cycle times in customer demand. to complement quality by 21.7% • Share common data and information this, specialized software solutions pro- • reduced inventory by 20% and en- across the company to enable a sin- vide the necessary leverage to improve abled faster inventory turns of spare gle version of the truth and to analyze productivity, prepare for new prod- parts and end equipment, resulting in impact of actions on profit margins uct launches, and drive cultural change a return on investment in 18 months • Dramatically reduce finished goods throughout the enterprise and supply – within 1.5 years of implementation inventory by extending lean replen- chain. • reduced lead time by 24.9%, setup ishment principles to the distribution time by 53.6%, and travel distance network by 57.7% • increase demand visibility by estab- • reduced inventory storage space lishing point-of-sales communication by 43.1% due to improved inventory directly with customers visibility and control, leading to fewer • improve days sales outstanding physical inventory counts and by introducing innovative, vendor- approximately uS$250,000 in managed inventory programs with productivity-loss savings customers • reduced order errors and returns • increase customer satisfaction by significantly improving the respon- siveness of the entire value chain SAP Executive Insight – how to use technology to Support the lean enterprise 5
  6. 6. acHieVe profitable growtH BEcoME a LEadEr In LEan lean is not really about cost savings. the right technology platform – one Greenheck ultimately, the benefit of lean after that facilitates rapid deployment of Industry: Manufacturing removing waste, streamlining process- innovative business processes – drives Summary es, and increasing customer satisfac- value for your enterprise in the follow- greenheck is the worldwide leader in tion is in establishing a foundation to ing ways: the manufacture of quality air move- support profitable growth. every com- • Simplifies, automates, and integrates ment and control equipment. the pany that embarks on a lean initiative complex business processes company maintains 14 manufacturing should have a plan for how it will use its • facilitates and ensures interoperabili- facilities across the united States, freed-up capacity and working capital. ty between applications and systems as well as one in china, and a dozen instead of using that capacity to build • Provides actionable intelligence distribution centers in the united products that will sit in inventory, hop- and supports rapid response to States, dubai, Shanghai, and Mexico. ing for an order, world-class companies unplanned events greenheck’s inflexible and inefficient it leverage their agility as a catalyst for • Supports the complexity of your infrastructures were unable to support growth. by exploiting their new-found global business future growth. capacity, they can introduce new prod- • increases the productivity of the ucts and enter new markets with min- organization by documenting and Results with SAP® Software imal investment in capital equipment enforcing standardized work and pro- • improved visibility into the business and floor space. And by leveraging cedures across the enterprise with better and more timely access their experience with process improve- • Supports collaborative processes to information ments, their new product lines can be while providing the highest level of • Support for significant business introduced with efficient, profitable, data security for sensitive information growth with quick and easy integra- lean practices right from the begin- tion of acquired companies ning. innovative lean leaders also find • growth without additional headcount ways to deliver new high-margin, due to increased efficiency value-added services to their custom- ers, such as quick delivery programs that can command a premium price. having the right technology foundation will enable you to keep a step ahead of changing market conditions, competi- tors, and swings in customer demand. today’s dynamic markets require enter- prises to adapt and innovate at an ever- faster pace. the technology platforms that support innovation and adaptability deliver a competitive advantage. 6 SAP Executive Insight – how to use technology to Support the lean enterprise
  7. 7. captUre tHe benefits of lean StArt Your leAn JourneY now by using technology to establish a foundation for common business pro- cesses, you are putting an integrat- ed lean Six Sigma environment that delivers sustainable, repeatable perfor- mance and profitability within reach. An erP foundation provides powerful func- tionality for manufacturing planning, execution, and quality maintenance while an open integration platform con- nects the enterprise to your supply chain to achieve the greatest efficien- About the Author Further Reading cies in time and cost to deliver the fol- lowing benefits: David Strothmann is an SAP industry to learn more, please visit • Increased responsiveness: react principal for the SaP Industrial Machin- or contact your SAP quickly to market changes and take ery and components industry group. representative about the following: advantage of emerging opportunities Prior to joining the software industry, • adaptive Manufacturing: Enabling the – without needing to carry excess Strothmann spent over 15 years in lean Six Sigma enterprise manufacturing management and has inventory • Strategies for Profitable growth for extensive experience working with • Greater efficiency: improve your Industrial Manufacturers companies that practice lean manufac- order fill rates, increase on-time ship- turing techniques. • greenheck business transformation ments, and boost manufacturing vol- Study – Manufacturing umes with shorter lead times – all • Sauder woodworking business while increasing the value added transformation Study – Manufacturing per product, per employee, and per • wilson tool international business resource transformation Study – Manufacturing • Reduced operating costs: Minimize the costs associated with exception resolution, inventory management, data management, and more – while ensuring the highest levels of quality “The selection process was very rigorous. We used a formal approach and customer service of weighting and scoring the requirements for each of the potential solutions, added things up, and SAP was the leader.” Don Brekke vice President of information technology greenheck SAP Executive Insight – how to use technology to Support the lean enterprise 7
  8. 8. 50 092 010 (08/10) © 2008 by SAP Ag. All rights reserved. SAP, r/3, xApps, xApp, SAP netweaver, Duet, Partneredge, byDesign, SAP business byDesign, and other SAP products and services mentioned herein as well as their respec- tive logos are trademarks or registered trademarks of SAP Ag in germany and in several other countries all over the world. business objects and the business objects logo, businessobjects, crystal reports, crystal Decisions, web intelligence, Xcelsius, and other business objects products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of business objects S.A. in the united States and in several other countries all over the world. business objects is an SAP company. All other product and service names mentioned are the trademarks of their respective companies. Data contained in this document serves informational purposes only. national product specifications may vary. these materials are subject to change without notice. these materials are provided by SAP Ag and its affiliated companies (“SAP group”) for informational purposes only, without representation or warranty of any kind, and SAP group shall not be liable for errors or omissions with respect to the materials. the only warranties for SAP group products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. nothing herein should be construed as constituting an additional warranty. /contactsap