The Ideal Manufacturing System and My Hypocracy


The post I put up last week slamming Big Data and ERP brought on spate of feedback that generally followed two lines of questions/criticism: (1) You constantly slam big systems but don’t offer an alternative; and (2) Isn’t it a bit hypocritical for you to slam information technology yet you jumped ship from Evolving Excellence and into bed with iDatix – an information technology company. Let me answer the first, which might help to explain the second.

ERP has its origins in MRP developed in 1961 on simultaneous tracks by Joe Orlicky from IBM and Ollie Wight, a consultant who went on to lead the APICS MRP Crusade. This was long before the idea of lean was well formulated or known outside of a very few isolated companies. Lean accounting was not even an idea yet. It sought to optimize inventory, rather than reduce it. It assumed functional silos were the way things were done, and those originators had no concept of value streams. It assumed push, rather than pull. It had no consideration for visual controls, and assumed decisions could and should be best made by the computer itself and specialists in buying and planning roles sitting in front of computer screens in offices apart from the factory floor. It was created before the days of globalization and, obviously, long before the days of smart phones, the Internet and a very computer literate workforce.

While the ERP systems that have evolved from early ERP attempt to accommodate these things, with varying degrees of success, they are still constructed around the idea of functional organizations, give supremacy to GAAP accounting, and assumed to be collectors and manipulators of complicated data to be managed by highly trained specialists who will be the analysts and decision makers. Just look at the weeks and months of training required upon implementation of one of these systems.

Manufacturing needs information technology support, but I believe the systems needed have to come from a clean slate, rather than a modification of traditional ERP. The system needed should be built around these principles:

The purpose of the technology is to collect and communicate, not to control, censor or make decisions.

End to End Value Stream Structure

The structural backbone should be end to end vaue streams, rather than functional departments. Just about every ERP system is primarily department and plant structured, with varying degrees of ability to look at information across value streams. The ideal manufacturing system would not only be organized around value streams in a factory, but across multiple factories, even in multiple countries, even across multiple companies. It would collect and organize data wherever the value stream goes.

Pure Data / Complete Transparency

The ideal system would not make decisions or show allocated costs. It would take data collected along the value stream and make it available as is - in its pure form. All data would be readily available to everyone in the company. No where should either the system or a person be set up as a gateway deciding which data should be shared with whom, or manipulating the data to show people what someone else has decided would be helpful.

Support Decision Making at the Point of Attack

This is the biggie. Decision making should be made by the people at the point of attack –production people, engineers, sales people – rather than managers, buyers, planners, staff people and others in offices away from where things are happening. Of course those people have to have knowledge of the objectives and values of the company, and have to operate within a set of decision making rules. At the end of the day, however, buying, production priorities, lot sizes, quality go/no-go decisions, pricing and delivery promises and the rest all have to be in the hands of the people on the front lines – the ones making things and face to face with customers.

Information Driven – Not Just Numbers

Information is not just numbers. The system must include the numbers, of course, but also pictures and graphs, drawings and diagrams, words and email. People making decisions in operations need to be able to see the whole picture – not just that which can be boiled down to numbers.

Accounting Primarily For Management Decision Making

The starting point for collecting and summarizing costs should be effective value stream decision making, rather than GAAP reporting. Virtually every system in existence today is the opposite – built on the premise that all costs should be collected and summarized for GAAP, and management accounting should take that GAAP data and manipulate it as bets they can to make decisions. The ideal system reverses this. It starts with collecting and summarizing costs for management decision making – then tells the GAAP accountants to take that data and do whatever they need to do offline in some back room to satisfy GAAP.

This is where iDatix comes in. They are not a manufacturing systems company. In fact they are manufacturing neophytes, but they very much want to learn. What they are is a work flow – process, value stream – information company. They are very, very good at capturing information in just about any form imaginable – numbers, output from big formal systems, email, pictures from smart phones, you name it – and communicating it very well up and down any value stream in just about any form. The fact that the iDatix folks have no idea of how things are supposed to be done in manufacturing is actually their greatest strength. They are not bound by the assumptions and paradigms that shackle the ERP folks.

They work with me because they want to learn from me about lean manufacturing and lean accounting, and I get to learn from them what is possible and how the technology works that I see as the logical backbone of lean manufacturing technology in the future – beyond ERP It’s that simple. I have no idea where things will end up, but we like working with each other just for the mutual learning and to see where it goes.

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