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What is Kanban and How Can it Aid in Lean Manufacturing?

what is kanban lean manufacturing

I continue my series on Lean manufacturing today by answering the question, "What is KANBAN and how can it aid in Lean Manufacturing?" Do you remember the theme to this LEAN series? It is that “There is always a better way to do anything.” When I introduced you to kick starting lean initiatives I spoke about one tool in your LEAN toolbag, 5S, and what benefits the elements of 5S hold to help you create a LEAN environment, in the next post in the LEAN series, I introduced you to KAIZEN or what is sometimes referred to as continuous improvement and how to eliminate the 7 wastes, and in today's post I introduce you to another tool which can help you in your quest for LEAN manufacturing, KANBAN.

Here’s a different and better way for some manufacturers/distributors and warehouses to meet customer demand with optimum supply. It is a “KISS” method: keep it simple and stupid:

What is KANBAN: Definition

  • The word "Kanban" is of Japanese origin and literally translates to "signal card," referring to the reorder slip used to procure more supplies. When an assembly item or stocked item begins to run low, an employee takes the item's reorder card to a manager, who produces or buys the needed amount. The refreshed supplies arrive before the first supply has run out, and production or sales continue without hindrance. While reorder slips used to be the norm for requesting more of an item, today computerized cards or empty packaging containers perform the same task.
  • Kanban is a PULL system. It pulls inventory as it is needed. ERP/MRP is a PUSH system. It pushes inventory into a warehouse for “Safety Stock” to deal with fluctuations in demand from changing forecasts.

What is KANBAN: Features

  • Kanban is considered a "lean production" technique, or one that eliminates labor and inventory waste. One of the ways Kanban reduces waste is through the "pull production" model that regulates item production based on consumer supply and demand. Instead of estimating the number of a specific item the market will want and producing based on that amount, Kanban produces items in direct relation to the number requested by the market.

What is KANBAN: Critical Points

what is Kanban principlesOf course, in your "What is Kanban" quest, education and training is necessary along with a few pilot program trials for employees to experience the pull system and teamwork. Visual systems are a necessity. Employees can see rather than guess/forecast the needs of the customer. With smaller inventories processes go uninterrupted.

The use of an instructional card, visible record and signboard are used. The status of production and inventory are clearly displayed using very simple visual communication methods. As a result, processes are streamlined and problems resolved quickly.

Under Kanban, facilities stock inventory based almost entirely on orders paced by customers. Forecasts are not used like in ERP/MRP, only actual customer orders.

Products are “pulled through production purely by customer demand." This is a paradigm shift from the push system which puts inventory into a warehouse based on forecasts. Visual markers are used to help personnel monitor inventories more clearly. All production personnel can see can see exactly how many customer orders have been placed and when al orders have been filled.

Huge inventories are not cost effective. They are a large investment. Space is also costly. With Kanban you stock inventory only when customers demand products. For many Western facilities, maintaining small inventories may appear somewhat problematic. Large inventories are thought to keep a facility from running out of materials. With Kanban, PROPERLY IMPLEMENTED, materials are always available to meet a facilities production demands.

What is KANBAN: Benefits

Some common benefits realized by warehouse, shipping, and logistics managers:

  • Lowers overhead costs
  • Standardizes production goals
  • Increases efficiency
  • Reduces obsolete inventory
  • Gives work area personnel more control
  • Improves flow
  • Prevents over production
  • Provides managers progress reports
  • Improves responsiveness to changes in demand
  • Improves teamwork
  • Kanban can reduce inventories by 75% in some industries

Since station operators continually “pull” the supplies they need from the proceeding station, production goals in Kanban are naturally established by customer demand. The production goal for each station operator is to always keep pace with Kanban’s continual “pull.” Inventory is always moving fluidly. These goods immediately enter the process after they land on the loading dock. The suppliers are pre-certified by Quality Assurance, so that they can be moved to the production process in a “Ship-to-Use” program, instead of a ship to the warehouse.

Vendor Scheduling Implementation Within "What is KANBAN": There’s always a better way to do anything

You ask how suppliers live with shipping smaller quantities; to simplify purchasing, create vendor/supplier scheduling. Let purchasing set up the contract, negotiate prices and total quantities, and hand off the scheduling of releases to production planning to work directly with the supplier. In this way, purchasing does purchasing work, and production planning works with suppliers to feed the production line. Production planning now does not have to wait for purchasing to give them dates or quantities that will be shipped. They have this control.

What is KANBAN: Understanding the Kanban Card

The earliest form of Kanban is a simple card-based system known as a Kanban card. Production and warehousing use this system to track inventory and control production. These cards can be used for special instructions.

How does this Kanban card work? 

To initiate production, Kanban cards are always issued to the first operator in a process. Each card issued visually communicates important details about the order and authorizes its production. In the single-stage process the first station operator attaches the issued card to the production unit’s container. The card remains attached to the unit throughout production. This provides all subsequent stations operators the physical authorization to produce a unit and help them so they are filling an actual customer order. Once the production unit and its associated Kanban card arrive at the end of the process, the card is removed and returned to the hanging file. Empty slots on the hanging file in a central location gives all work area personnel access to the current production status. The Kanban Card system is very visual, as mentioned before in these LEAN articles.

Yes, there is a software based Kanban card. These systems rely on bar codes and electronic databases to track production and inventory. In this electronic system, managers can keep track of production from their offices or at any other location where computer access is available.

Within the enterprise resource planning (ERP) system, they set up an electronic version of Kanban. It is a visual signal to indicate when it is time to bring in more materials for production or distribution. As materials are pulled from the warehouse or buffer stock, a replenishment cue was generated and sent to suppliers to pull materials from them.

The warehouse floor can be easily and economically marked too indicate the proper locations for palletized or other large container storage (5S type storage).Floor marking make this inventory easy to locate. Queues should be restocked immediately since each queue is programmed to always have the right replacement stock to meet customer orders. When orders and quantities increase, these queues may need a small buffer stock to create flexibility with increasing demand.

Implementation: a cross functional team should be formed to manage the implementation. They have to monitor the implementation and feedback critical observation to the overall team leader

Key points:

  • Employees treat other employees as their own customer
  • Each employee strives to give their internal customer excellent products and services
  • Better communication
  • Higher quality
  • Lower production costs
  • Team members will work to combine related actions into single events so less time and energy is wasted

Mentioned in the last article is Value Stream Mapping (VSM). VSM is used to fine inefficiencies in the production line. This offers the customer the greatest possible value. VSM finds bottlenecks which can be eliminated to increase throughput and value to your customers. VSM looks at man-hours, time and costs. Using the theme, there is always a better way to do anything, you improve these hours, times and costs to bring value to your customer and to you. Also mentioned was root cause analysis which enables you to find the root cause of any problems uncovered and to eliminate them by writing a Standard Operating Procedure (S.O.P.) to permanently eliminate this problem.

As with all LEAN initiatives, you have to sustain and control this KANBAN system, so you do not fall back to informal systems. Discipline is very important to control KANBAN operations as well.

In the next and last LEAN series article, we will combine LEAN with Six Sigma. Yes, it can be done. Common sense, you bet!

Audience Participation Time

Can you think of areas in your facility where you can implement Kanban? It can be done in manufacturing or in distribution/warehousing. What about kitting, for example, can you use the Kanban concept in your kitting production? Other operations. Yes, you can. What are your ideas? Let me know in the comments section below.

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Chuck Intrieri
Mr. Chuck Intrieri is a highly experienced and credentialed Supply Chain Management professional and is a recognized thought leader and innovator, primarily in the areas of Supply Chain Optimization, LEAN initiatives, Operations, Manufacturing, Third Party Logistics (3PL) International Purchasing/Importing, Inventory Management and Logistics, Strategic Sourcing, and Procurement Operations.
Chuck Intrieri
Chuck Intrieri

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