Kanban is a Japanese word that means signboard or signal card. Kanban systems were first introduced by Toyota in the 1950s as a scheduling system to determine what to produce, when to produce it, and how much to produce.
Kanban systems lead to an improved process flow through level-loading, reduced scheduling activities, and can result in significant inventory reduction and work-in-process. A Kanban system can be a very simple and effective “tool” to design a process that is scheduled based on actual demand.
Kanban scheduling systems are useful when
lot sizes differ between process steps,
processes are unbalanced, or
when distance introduces time lag or variability.
Kanban scheduling systems are simple and work best when
withdrawal rate or consumption is steady and predictable, and
replenishment times are predictable.
The basic concept of a Kanban system can be easily observed in a supermarket. In a supermarket, every item has a defined inventory location that holds a specific quantity of the item. Customers select the required quantity of a specific item and proceed to the checkout counter. At the checkout counter, the cashier scans each item and a signal will be transmitted to the supermarket’s database, indicating the items part number and quantity that has been “consumed”. Once a certain quantity of a specific item has been consumed, a supermarket employee will take for example a carton of that item from the warehouse and refill the shelf space in the store.
Originally, Kanban systems utilized physical cards that move back and forth between the “customer” process and the “supplier” process, serving as a signal to trigger the movement, production, or supply of material. Electronic or e-Kanban systems are nowadays more common and are able to improve on some of the drawbacks of manual Kanban systems.
Kanban cards, which may be multicolored based on priority, show at a minimum the internal part number & description, supplier name, supplier part number & description, restocking location, and the re-ordering quantity.
Two Types of Kanban Scheduling Systems
The most commonly used Kanbans are:
“Withdrawal" or “Move” Kanbans – This Kanban is used to relocate items from one work area or sub-process to another.
“Production" Kanban – This Kanban is used to replace the items when they are consumed or sold.
“Signal” Kanban – This Kanban is used to initiate production or replenishment of a predetermined batch size of a specific item.
In a single-card Kanban scheduling system, a “Signal” Kanban card is taken from the Kanban location once a defined minimum stock quantity has been reached. The card is then for example placed on a Kanban board, signaling the need for a stock replenishment order. The “supplier” process responsible for the replenishment of the Kanban location schedules its production based on the Kanban board and replenishes the Kanban location.
The minimum stock quantity that signals or triggers the replenishment request needs to assure that the remaining on-hand inventory is sufficient until the replenishment stock arrives and is based on the average consumption, consumption fluctuation, and replenishment lead time.
A single-card Kanban system could, for example, be used to prevent coffee "K-cups" stockouts. First, based on the average consumption and order fulfillment lead time, the minimum stock would be determined. Let's assume that would be a little bit less than one box of “K-cups”. Then, a Kanban card would be attached to the last box in inventory (see image above). As soon as an employee opens the last box, he/she removes the "Signal" Kanban card and orders a predefined number of “K-cups” boxes (as defined on the Kanban card) or places the card in a pre-defined location to trigger the replenishment process.
YouTube Video: Two Bin Supply Kanban System at St Clair Hospital
A dual-card Kanban scheduling system uses "Withdrawal" and "Production" Kanban cards. One card is attached to each container holding a pre-defined quantity of items. To relocate or move a container from the “supplier” process to the “customer” process for consumption, the attached “Production” card is removed from the container and placed on the Kanban board. The “Withdrawal” card is then attached to that container and the container is moved to the “customer” process for consumption. The “supplier” process schedules production based on the cards on the Kanban board and pre-defined scheduling rules. Once a container of items has been produced, a “Production” card is removed from the Kanban board and attached to the container. Figure 1 illustrated the concept of a dual-card Kanban scheduling system.
“Decoupling” Processes using a Kanban Scheduling System
A very effective application for a dual-card Kanban scheduling system is the “decoupling” of two very different sub-processes, for example, a machining process and an assembly process.
A machining process is often fairly automated, resulting in high depreciation costs, and requires significant setup time to change over from one product to another, resulting in low utilization when producing small batches of different items.
An assembly process is often less capital intensive and requires no or very little changeover time.
Figure 2 illustrates how a Kanban scheduling system can be used to “decouple” these two sub-processes, optimizing the utilization of the machining process, while using assemble-to-order in the assembly process.
YouTube Video: Kanban Scheduling System at Motawi Tileworks
A Kanban Scheduling System Development Process
Our experience has shown that the most effective way to develop and implement Kanban systems is to teach the Kanban concept and then let the actual users of the system set it up and own it.
For organizations with no or very limited experience, we suggest starting with a very formal and documented process when developing and implementing a Kanban scheduling system. Over time and with more experience many of the steps can be performed without detailed documentation.
We suggest the following eight steps when developing and implementing a Kanban scheduling system:
Step 1. Analyze your products and processes and decide what parts and products would benefit most from a Kanban scheduling system. While most Kanbans are developed for raw material and work-in-process inventories, the system also works for finished goods inventory and even office supplies.
Step 2. Study the hourly or daily usage (average and fluctuation) for each Kanban part over the past six to twelve months and determine the appropriate minimum and maximum stock levels for each part. Watch out for seasonality or any other special consumption patterns. More inventory must be kept for frequently used parts, and pull triggers need to be set accordingly.
Step 3. Study the lead times for each Kanban part. Lead times are how long the product takes to arrive at your plant after your place an order for it with the supplier, or how long it takes your plant to manufacture a part. Reduce long supply lead times if possible, either by negotiating better terms with suppliers or switching to new, faster suppliers.
Step 4. Assess the minimum stock level for each part based on part lead time. Err on the side of caution and take possible manufacturing, quality, or supplier issues into account. You can always tweak the quantities later, once everything stabilizes.
Step 5. Identify the Kanban locations and containers for each part. Create the Kanban cards and Kanban board for a manual system or set up your Enterprise Resource Planning (ERP) or Production Management System (PMS) according to your Kanban parameters.
Step 6. Develop scheduling rules and/or algorithms for the “supplier” process based on the Kanban board to ensure timely replenishment of all Kanban locations.
Step 7. Order a full, maximum stock level for each item. Begin the Kanban process for each item as its stocks are filled.
Step 8. Observe the efficiency of the Kanban system. Tweak the minimum, maximum, replacement quantities, and pull trigger amounts until item usage rates, lead times, and inventory levels reach the “perfect” balance, with replacement stock arriving just before existing inventory runs out. Keep a small amount of "safety stock" on hand in case your tweaking results in inventory shortages.
To learn more about Lean Kanban Scheduling Systems and other Lean Management tools, visit our OpEx Academy for Training Materials, eLearning Modules, Online Courses, and Public Workshops.
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