Manufacturing business IT alone is never enough

Enterprise IT – ERP systems, supply chain suites, business intelligence add-ons and so forth – is essential for running modern manufacturing businesses, but it’s not enough. Not only that; too often we don’t go for what we really need first, but more importantly, even when we do we don’t change the business rules that the new systems are designed to improve. So, famously, says Dr Eli Goldratt, author of the business management best seller The Goal and more recently Necessary But Not Sufficient, and self-proclaimed father of the application of the Theory of Constraints (TOC) in manufacturing businesses. And early in the New Year we should all be thinking about that. In an interview with consultant John Bermudez at analyst AMR Research, Goldratt reaffirms that IT works best when it’s used to remove a limitation and the business changes to take advantage of that fact. Bermudez gives the example of RFID (radio frequency identification) technology which still seems to have failed to catch the imagination. “This will be revolutionary because it removes an enormous limitation: the ability to easily collect and enter [operational] data into IT systems,” he says. More to the point though, Goldratt insists that much of the current integration effort involving tying internal enterprise and external supply chain systems together will fail, and probably make things worse. Why? Precisely because little or no attempt is typically made to change the business rules, workflow and operations to profit from the change. “For all of the systems and connectivity in place, many enterprises still have business processes that operate in silos and almost all supply chain systems are designed to optimise locally,” says Goldratt. Enterprise applications and EAI (enterprise application integration) should be applied to situations where they can remove limitations – but then remove them! Goldratt says we are headed for disaster if we expect major improvements in efficiency and profitability simply by connecting systems and people together “if they continue to process the data according to outdated business rules.” Bermudez for one says he’s convinced and that AMR will be directing some of its research accordingly. Busy manufacturing leaders shouldn’t wait for the analysis. Start thinking and acting now. Better yet: contact the Goldratt Institute or its affiliates, starting at www.goldratt.com