Advice and Assistance for Manufacturers
November 2013
Kanban, a Japanese word meaning either card or sign (references disagree), refers to a technique that is part of many lean manufacturing initiatives in which a physical signal triggers replenishment. Kanban is a physical approach to ‘pull’, centered on the idea that you should only make or buy something to replace what has just been used or sold. When a finished product is taken out of inventory to ship to a customer, the kanban (tag, empty bin, rack space, or other indicator of its absence) becomes the authorization to make another. When production takes a component off the point-of-use storage rack, its kanban signals the stock room to bring out another one or signals the feeder line or supplier to make and deliver a replacement. The kanban replaces the manufacturing order, pick ticket, or purchase order release for a paperless, demand-driven replenishment mechanism. There are, of course, many variations in how this idea is actually implemented.
Kanban is being successfully used in many plants around the world, allowing companies to reduce inventory, shorten lead times, and become more responsive to demand. Kanban is an execution technique, not a substitute for planning or ERP and is in fact being used by many companies right along with full ERP implementations.
Kanban has its limitations, however, as does every other technique and approach. Kanban works best when demand is relatively stable, lead times are relatively short, and it is economic to make/buy/deliver in small lot sizes if not one-at-a-time. Two major obstacles to successful kanban are (a) the possibility of delays and loss of kanbans as they are posted, collected and transported to the supplying location; and (b) that kanban is a fixed process that does not respond to changes in demand. Both of these issues are addressed by electronic kanban.
In electronic kanban (an available feature in some ERP and MES systems), the physical tag is replaced by program logic. When a part or product is picked or issued, the program initiates the replacement activity (work authorization / inventory movement trigger / purchase order release). If the signal is going to a distant location or supplier, it could be sent instantaneously and electronically, eliminating delay and risk of loss or misdirection of a physical kanban.
When a physical kanban system is set up, a specified number of kanbans are created that sets the level of inventory (either actual inventory or replenishments in process) for the item. The magic number is enough to satisfy demand through the lead time to complete replenishment before stock runs out. As long as demand is relatively constant, the system works well. If demand increases, shortages will result unless more kanbans are added. Lower demand results in more inventory (fewer in-process or in transit). Electronic kanban can automatically increase or decrease the number of ‘tags’ dynamically – after all, it’s just electronic signal; no actual tags to add or pull out of circulation. Because electronic kanban is part of the IT environment, it also maintains a history, coordinates with planning and scheduling systems, and allows analysis of material movement activities.
Kanban can be a very simple and effective mechanism for replenishing inventory is a stable ecosystem. Electronic kanban adapts the kanban idea to function effectively under less stable conditions and removes delay and risk of mishandling physical signals. Both support the lean objectives of reducing inventory and non-value-adding activities.