I came across a company called DIRTT some time back and keep coming back to them for the simple reason that they seem to be the ultimate example of just what a lean company can be. There are lots of reasons to be impressed with them from their culture (DIRTT stands for Do It Right This Time and they call themselves and their employees Dirttbags - no job titles), flat organizational structure, intense focus on customers and near obsession with speed, but the most compelling lesson to be learned from them in my rarely humble opinion is their rejection of ERP.
As background DIRTT is an interiors company that started up in 2005. The guys who formed it were driven by a lean vision from the get go … “they wrestled with how to manufacture a completely custom-designed interior, made with craftsman-like detail, with radically reduced lead times, which was good for the planet and their community. They wanted to create shared value: value for their shareholders and their stakeholders.”
They succeeded. Mass customization going from initial customer design to installation in 3-4 weeks compared to industry standards of 3-4 months. It worked for a lot of reasons but it seems to me one of the most powerful was their rejection of ERP.
“From inception, the company’s goal was choosing software capable of providing a single, seamless experience from initial Client Concept at Point of Sale through to Manufacture and Delivery. While bulky ERP (Enterprise Resource Planning) type systems claim to provide such solutions, the founders’ past experience proved quite the opposite. In fact, the elimination of the requirement for an ERP system was paramount for DIRTT.”
The difference, of course, is that ERP assumes functional silos are the normal, natural, inevitable course of things and goes to great, convoluted lengths to facilitate local optimization of each silo and then manage the inventory of products or information in between the silos … supposedly optimizing the whole as a result of facilitating the optimization of each element of the whole. Never mind that Eli Goldratt proved very clearly that local optimization does not lead to global optimization … accountants and old school managers demand their silos – cost centers, profit centers, departments with budgets and metrics and all the rest – so ERP systems make their dreams come true.
The guys at DIRTT designed their entire company around the value stream instead of the usual silo by silo approach, and conjured up software to optimize flow.
I cannot see any conceivable way for an ERP driven company to compete with DIRTT. Anyone who is working in an environment that has formalized and automated a process of handing information off from one function to the next will always be at a severe disadvantage compared to a company like DIRTT that has institutionalized seamless value stream integration.
The even bigger lesson is that the guys who created DIRTT decided that they were going to manage their company while most leaders blindly assume ERP is some proven manufacturing necessity and ‘manage’ their companies by selecting among the various ERP providers - thereby turn the actual management of the company over to some software designer who, in all likelihood, has never even seen the inside of a factory.
How information flows is at the very heart of lean. I spoke at an iDatix/PEX webinar last week and made a number of points but the most important of them was probably that information technology absolutely has to inform and empower the people actually creating value up and down the value stream; and that when it is designed to inform and empower staff people, managers wo want to sit in offices and run the place by remote control and formalize the jobs of planners, buyers and schedulers it is doing nothing but embedding waste in the company that will be virtually impossible to eliminate.
The power of DIRTT is that, in rejecting ERP, they institutionalized value creation, instead of waste. That makes them an extraordinary company and one that teaches a very, very powerful lesson.