Investigating ERP Support for Lean Production

This thesis presents work from a three-year PhD project within the research program SFI Norman: Centre for Research-based Innovation – Norwegian Manufacturing Future. SFI Norman is an eight year research program with the vision to develop new and multi-disciplinary research on next-generation manufacturing, and create theories, methods, models, and management tools that enable Norwegian manufacturers to thrive in global competition. SFI Norman has two main research partners – NTNU and SINTEF – and also consists of a number of industrial partners, including Kongsberg Automotive, Benteler Aluminium, and Pipelife Norway. This research project began in 2009 as part of the SFI Norman research area “Demand Driven Value Chains” (DRIVE). After the mid-term evaluation of Norman, the research areas were reclassified, and in 2011 this project became part of the new research area “Operations Management in Norwegian Manufacturing”. A major research topic in this research area is the relationship between lean production and information technology (IT). For example, though the lean principles are nowadays well understood, the relationship between IT and lean production remains a controversial and far less explored topic. Some would even suggest that the two approaches are contradictory in nature, stating that whilst lean is often characterized by decentralized coordination and control, IT is typically best suited to support centralized production planning. This thesis aims to provide illustrative frameworks in order to explore the topic in more detail. Lean production and enterprise resource planning (ERP) systems have for many years been recognised in the scientific literature and industrial trade journals as enablers of world-class manufacturing operations. Though many companies have undertaken the implementation of either or both of these approaches in order to achieve greater competitive advantage; in the traditional sense, IT such as ERP has often been viewed as a contributor to waste within lean production, for example through the generation of excessive data and unnecessary transactions, and by encouraging overproduction and excessive safety stocks, resulting in high inventory levels. However, as the business world changes and competition from low-cost countries increases, new models must be developed which deliver competitive advantage by combining modern-day technological advances with the lean paradigm. This PhD project set out to investigate the “contradictory” nature of ERP systems and lean production. Having first carried out an extensive literature review, it was identified that contrary to the traditional view, there appeared to be a potential synergy to be realised in combining both approaches. Therefore, the support functionality of ERP systems for lean production was subsequently evaluated by closely examining the capabilities of a contemporary ERP system in the context of lean production principles. This work was carried out by applying an action research methodology over a twelve month period at a Norwegian SME located in Trondheim, Norway. The company was involved in a concurrent implementation process – applying both a new ERP system and lean production practices. This resulted in two outcomes for the project – a framework for ERP support for lean production; and a model for an ERP-based lean implementation process. One of the fundamental reasons for the contradictory view of lean and ERP has been the discussion of pull vs. push. Whilst it is common knowledge that lean manufacturing intends to function as a pull system, environments which use ERP- and its associated material requirements planning (MRP) logic have typically been classed as push systems. Therefore, in order to strengthen the validity of this research and to mitigate any bias from the action research, the real-time, participatory research was supplemented by retrospective case study research, and four case studies were carried out in the Netherlands in order to investigate specific ERP support for pull production. This resulted in the development of a capability maturity model (CMM) for ERP support for pull production, which not only identifies the support mechanisms of an ERP system for pull production, but categories them into various levels of maturity. The outcomes of this project have implications to both theory and practice. The results of the investigation indicate a trend towards the combination of lean and ERP in manufacturing organisations. This has led to a number of contributions to theory and to practice. For example, the framework for ERP support for lean production can be used by researchers and practitioners in applying ERP systems and lean production together in order to increase the competitiveness of manufacturing companies. Secondly, the capability maturity model for ERP support for pull production makes a contribution to knowledge in that it identifies the functionality of ERP systems that can be applied to support pull production, and to practice, allowing manufacturers to benchmark the level of integration between its ERP- and pull systems, providing incentives to continuously improve. These contributions suggest a movement away from the traditional viewpoint of the contradictory nature of lean and ERP, and offer a solution to the recurring debate in the scientific literature as to whether or not lean and ERP are complementary technologies. Thirdly, the framework for an ERP-based lean implementation process also contributes to the field of knowledge within lean and ERP, and can be used by practitioners for the concurrent and synergetic application of lean and ERP