Lean Manufacturing Data Analytics (Enabling ERP, MES, OEE Systems to Dollarize Cost of Wastes & Reveal Cost Reduction Opportunities)

Abstract/Technology Overview

ERP (Enterprise Resource Planning) and MES (Manufacturing Execution System) systems do not provide Lean Manufacturer-Users with sufficient information for Product Cost Reduction planning.

This is because ERP systems handle process information such as General Ledger costs, Work Orders, etc only, whileMES handles Process and Machine-level technical indices separately. Hence, ERP and MES systems are unable to convert their information of Production Waste & OEE-Losses into Costs, which is useful for Lean Manufacturing.

Hence, this technology is developed as a solution to:

  1. enable ERP System to dollarize the Cost of Wastes and Losses at the Process Levels, reveal and tracks Cost Reduction Opportunities with high ROI,
  2. enable MES System to dollarize the Cost of Wastes and Losses at the Process, Products and Machine Levels, reveal and tracks Cost Reduction Opportunities with high ROI,
  3. provide fully automated and highest accurate reporting system if this solution is to combined with both ERP & MES Systems                                

In addition, this technology provided solution to

  1. Digitalized Display function onto TV panels to visualize any critical Technical / Cost / Process indices, and
  2. Provide Predictive Maintenance Database down to the Machine Parts level.

This Industry 4.0 Technology enables MES and/or OEE Systems Providers to provide financial visibility of the Cost Impact of all Process and Machine Activities in the typical ERP / MES / OEE reports.  Such an enhanced ERP /MES system will be able to provide a value-added feature to MNCs and SMEs who need to pursue Lean Manufacturing and Cost Reduction.

Technology Features, Specifications and Advantages

1 - Original algorithms, established Lean Target Costing principles, OEE formulas, Lean Manufacturing definitions of Processing Wastes to extract critical information from the manufacturer's ERP and MES systems. Works with all ERP / MES / OEE systems and has User Tables to edit changes or additions in Product Mix, Process lines, BoMs and Machines.

2 - World-class Overhead Costs allocation method.
Overheads can be up to 60% of Product Cost. Two general methods used to allocate overhead cost are, first, the traditional Standard Costing with Variance Analysis, which uses production volume to allocate overhead costs. This method often resulting in high allocation errors. Second method is Activity-Based Costing method, which uses Production Times to allocate overhead costs. However, the best method for High-Mix, Low Volume environment, is by the Loading Time (Production Time + Unplanned Downtimes) because unplanned downtimes can result in 10% to 30% of Production Times.  

This Technology can enhance any ERP and/or MES system's capability to

  1. Report Factory Costs at the Product-by-Product level for each Work Order for Strategic Pricing decisions.
  2. Reveal LEAN WASTES in both Costs and LEAN Indices down to the lowest levels of individual Processes, individual Products and individual Machines. 
  3. Enable modeling of expected ROI of proposed Improvement Projects such as Lean 6S and OEE process improvements, Equipment and Capacity Investments, 
  4. Factory Key Indices Visualization displayed on big TV Panels of any data in the ERP/MES against Factory Floor layout
  5. Accumulative Predictive Maintenance Database for optimum maintenance.

Potential Applications

Potential Applications:

  1. New or Established ERP System Providers can enhance their offering by adding this Industry 4.0 Technology as a Cost Reduction Module.
  2. New or Established MES System Providers can enhance their offering by adding this Industry 4.0 Technology as a Cost Reduction Module.
  3. Providers of both ERP and MES Systems can add this Technology even more fully featured Management Cost Reduction System.
  4. ERP and MES Providers can offer their existing customers an Upgrade with this Technology.

Customer Benefit

The ERP or MES OEM will be able to stand out from the crowd by having the added functionalities.

Example: This Technology can help the end-user (Manufacturer) to reduce his Product Cost from $10.00 to $8.50 within 12 months in the following ways:

  1. Each Work order for a Product Run will have its actual Factory Cost reported individually for strategic Pricing
  2. Lean Manufacturing Data Analytics shows that there is COST GAP of USD4 between the Current Cost of $10.00 and its Zero-Loss Cost (say $6.00).
  3. Cost Gap of $4.00 is distributed down to individual processes, individual products, individual machines with detailed specific losses and the specific costs of losses.
  4. Cost Ownership becomes transparent. Cost Owners can perform marginal analysis of proposed Improvements through modeling to show the financial impact of his proposed cost reduction improvement plans.
  5. Lean Manufacturing Data Analytics can visualized all Critical Factory Floor Key indices onto TV Panels.
  6. Lean Manufacturing Data Analytics can build up a Predictive Maintenance database at the Machine Parts level.

Technology Owner

Tan Moses


LeanCost International Pte Ltd

Technology Category
  • Big Data, Data Analytics, Data Mining & Data Visualisation
  • Enterprise & Productivity
  • Manufacturing
Technology Status
  • Available for Licensing
Technology Readiness Level
  • TRL 8