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How The Cloud Helps Manufacturers Get To The Root Of Lean Management

Companies that change their processes, but not the outdated and non-integrated applications beneath them, are simply hacking at leaves — expending energy but achieving little.

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Manufacturers who want to improve their manufacturing practices often find they need to start at the bottom — with the IT systems that support those processes. Streamlined, lean processes won't work without an integrated, cross-enterprise IT platform to support them. Companies that change their processes, but not the outdated and non-integrated applications beneath them, are simply hacking at leaves — expending energy but achieving little.

A case in point is EarthKind, a Bismark, ND maker of a humane, all-natural rodent repellent. Over six years ago, EarthKind undertook a lean manufacturing initiative at its plant in Moresville, NC. Lean manufacturing methodology, and its cousin, Six Sigma Lean Manufacturing, emphasize streamlining business processes and reducing waste. In EarthKind's case, it had lean manufacturing practices in the factory, but hadn't expanded the "lean" concept to related functions such as ERP, order entry, and supply chain.

As EarthKind grew, however, it realized that its order entry processes and applications were not keeping up with the rest of the business. EarthKind used several applications in the order management process, none of which could share data with the others. Because the systems weren’t integrated, employees had to input data into each application, creating redundant data and, sometimes, inaccurate data due to the occasional human error. It also required significant time to train staff on the various systems — sometimes more than a year. All of which held back the lean initiative.

EarthKind’s management decided to uproot its on-premise ERP systems and migrate to NetSuite’s cloud-based ERP instead. That decision to go with a completely integrated platform eventually reduced the time needed to enter an order by 85 percent, according to the company.

Since migrating to the cloud, the company has also increased the accuracy of its invoices, improved customer satisfaction through faster and more accurate customer communications, enabled its remote workers to have full access to data and applications, and provided its executives with a single, integrated view of data and business processes, which helps them make more accurate decisions.

Now, says Kari Block, EarthKind’s CEO, “We lease everything and we have employees in different locations so we’re all able to get on and see the same data and determine what to watch and how to react.”

How Legacy ERP Can Undermine a Lean Initiative

There are a number of features of on-premise ERP that don’t support lean practices:

  • Lack of integration means applications have to be bridged manually, resulting in redundant data, errors, and wasted productivity.
  • Manually extracting data from each silo means timely analysis of data on areas like company performance or customer purchases and behaviors becomes very difficult. Often, the results are outdated by the time the analysis is complete.
  • Business process customization is difficult, undermining attempts to streamline, speed up or automate workflows.
  • Remote access is often awkward and may require extra client software and coding. Without full access to corporate data and applications, remote employees may be forced to use other applications, resulting in competing silos of company data.
  • Server and software license purchases introduce capital costs, and require hiring in-house IT staff to maintain and troubleshoot the ERP application.

How Cloud ERP Helps Manufacturers Grow Fit and Lean

Manufacturing executives don’t always recognize the inefficiencies of their legacy IT systems. As EarthKind and other savvy manufacturers understand, cloud ERP platforms offer end-to-end integration of all business and manufacturing processes, from accounting to warehouse management. They usually also provide visual tools for customizing processes to suit each company’s unique needs, including a lean initiative.

Cloud ERP also eliminates high upfront costs and IT payroll expenses. The end user organization pays a monthly fee to the cloud provider, who takes care of software updates and maintains the servers and network infrastructure.

Canadian manufacturer TrueNorth Avionics, a maker of in-flight telecommunications equipment for high-end corporate and VIP aircraft, replaced its in-house IT systems with cloud ERP. While the company was experiencing rapid growth, both in North America and internationally, it strained the firm’s development and production processes.

The cloud ERP platform provided controls in the form of real-time dashboards and visual analysis tools as well as the business process management tools to streamline workflows for optimum speed and efficiency. TrueNorth’s management now has access to inventory views across the entire supply chain and can model forecasts with a demand planning module. The analysis tools make it possible for executives to drill down into a specific metric or performance issue to identify possible root causes. That helps executives to pinpoint areas that aren’t as efficient, or lean, as they should be.

As EarthKind and TrueNorth aptly illustrate, manufacturers have many good reasons to move to cloud ERP platforms. Besides the benefits of cross-enterprise integration, customization capability, and cost savings, cloud ERP also gives decision-makers the tools and data they need to have full visibility into their company’s performance. That means not just its manufacturing performance but all of the functions both downstream and upstream from the factory.

Gavin Davidson is a Manufacturing Industry Lead at NetSuite.

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