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3 Key Areas to Reduce Costs with Lean Techniques

While the principles behind lean techniques can be applied to nearly any business, the term "lean" is most often associated with process improvement and cost reduction in manufacturing. The process inefficiencies that lean techniques address aren't unfamiliar or exotic; in fact, they exist in every operation. Here are three areas where implementing lean techniques, along with an ERP system, could save you a lot of money.

Companies most often implement ERP systems because they want to integrate and manage disparate business processes with a single point of control. While an ERP system provides a framework for achieving business process efficiency, simply implementing one may not be sufficient to achieve the expected results.

Carl Heeder is director of ERP Systems at IDEV Technologies, Inc., a developer and manufacturer of medical devices headquartered in Webster, Texas, Heeder has identified three areas where the application of lean techniques to existing business processes would yield immediate benefits: purchasing and suppliers, sales orders, and shipping. Even though these processes were external to the manufacturing process itself, the lack of automation impacted how well the company could deliver product to its customers.

Purchasing and Suppliers

In terms of purchasing and suppliers, the ERP system provides the capability to restrict the purchase of parts to approved suppliers. Table 1 shows how IDEV modified business processes through tailoring to achieve lean results.

Heeder tailored the Epicor system processes at IDEV and it resulted in the following benefits to purchasing and to the company's vendors:

"The Epicor software came with the capability to restrict the purchase of certain parts to approved vendors," says Heeder. "We simply used tailoring to modify and extend that functionality to meet our specific requirements."

Sales Orders

A second area at IDEV that benefited from the application of lean techniques was the sales order process.

As a result of these changes, customer service established more rigorous control over the sales order process:

Heeder says, "Giving customer service control of the sales order process was essential to reducing order processing time; it was the right place to introduce controls."

Shipping

Shipping was the final area to receive attention for process improvement, which made sense since shipments depend on the completion of tasks in the other areas, and is the endpoint for their efforts. Most of the changes involved preventing shipments that do not satisfy specific criteria.

Overall Results

The application of lean techniques to IDEV's ERP system allowed the company to concentrate more on building new business and serving customers, rather than focusing on the mechanics of business processes.

Some of the significant improvements included:

"Letting the system automate the manual processing of purchases, orders, and shipments has substantially improved the flow of product to the customer," Heeder concludes. "We have a higher level of control and oversight on all these areas, which is critical to the efficient handling of new customers and increasing sales."

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Epicor ERP

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