This article describes the concept of Kanban System, developed by Taiichi Ohno in a practical way. After reading you will understand the basics of this powerful quality management tool.
What is Kanban?
Kanban is a combination of two Japanese words, with Kan meaning for visual and ban for card.
Freely translated, Kanban means visual cards.
Using (coloured) cards on a board, it serves as a signalling system within a production process, aimed at improving and eliminating waste.
Kanban provides continuous production based on use.
This simple way of signalling can quickly determine where, when and how much of, for example, a raw material is required so there is never a shortage during the production process.
The most common form of Kanban is a card that contains at least the following information:
- Code number; this identifies the name of the product to be produced or the raw material that is required.
- Quantity; the amount of products to be produced or the amount of raw material that is required.
- Lead time; this provides information about the time frame within which to produce.
- Sequence number; by numbering the number of cards in the system, and for example indicating that it concerns 48/90, it is immediately clear which part the Kanban card is applicable to in the production process.
A Kanban card can of course vary in shape, size, colour and content. These can even take on modern versions like e-mails, sensors and electronic dashboards. The so-called Kanban boards are an example of such a variation based on the traditional Kanban cards.
A Kanban board uses magnets, plastic cards, post-its or stickers that represent a quantity of work or a product task in the production process. Movement on the Kanban board corresponds with the movement through the production process.
In most cases the board is divided into three columns: queue for production, production and produced (to do – doing – done). This makes it clear at a glance at what stage of the production process the cards are located.
Kanban System and Inventory
Kanban cards work as an optimal ordering system for materials. If the card has been removed, it is visually clear to everyone that materials are ‘being ordered’. If the card is still present, it means that it has not been noted by anyone yet and action must be taken.
Kanban hereby provides a proper and visual overview of inventory, making it more structured for delivery within the production process. Because each type of material has its own Kanban card, it is immediately clear which raw material has to be replenished.
Therefore, it helps to display an article number on each card with the name of the product, the quantity of supplies, the place where it is stored in the warehouse and where it has to be delivered.
By collecting all the Kanban cards, materials can easily and quickly be replenished. This makes Kanban effective and very easy to implement.
Kanban System and Customer demand
The basis of the Kanban System can be traced back to the Toyota Production System (TPS). It is a pull system that is always based on customer demand. All parts of the production process are related to each other so that the finished product fully meets the expectations of the customer.
In doing so, the Kanban System ensures that the production process is designed to produce only if there is customer demand. As a result, stock levels of finished products, semi-finished products and commodities can remain low, which reduces costs for the producer.
It is therefore necessary to supply the exact amount needed for production at a desired time. This way, the Kanban system ensures production based on use. As soon as inventory drops, the Kanban System provides a signal to replenish stock.
To properly test this system, it is important to observe the following rules:
- The quantities required for the production process must correspond with the quantities produced to prevent waste.
- A separate Kanban card is required for each raw material or semi-finished product that is needed.
- The Kanban cards can best be ordered according to the first-in-first-out method (FIFO) to prevent obsolescent stock.
- A Kanban card can be associated to a basket, cart, container, bin, etc. No Kanban card essentially means no production.
- In case of errors or defects in the goods delivered, the cause must be immediately identified and a solution found.
The Kanban System can be applied in different ways. The two bin system works best when replenishing, whereby the first bin contains stock for work. As soon as the Kanban cards have been removed from the first bin, the second container moves forward.
The first bin is then replenished whereby the system is balanced again. If the second bin does not contain any Kanban cards, replenishment takes place again and moves on. The FIFO method also applies to this scenario. This system is mainly applicable to finished products. Kanban cards are also used for production resources such as raw materials and semi-finished products.
Pros and cons of the Kanban System
The Kanban system is simple and effective, and is very suited in driving the production process and/or supply system. With the Kanban System, the production process is designed so that it only produces something when the customer requests it, which prevents waste of raw materials.
However, the Kanban System only works well if the number of product variations and/or product changes remain limited. With a large product variety, a lot needs to be changed in the Kanban cards, which can ultimately lead to obsolescent stocks. If this is the case, the Kanban System can best be used alone to signal the need for products.
Kanban System example
Many wholesalers and producers use the Kanban System. For a factory bakery for example, it is a way to maintain inventory and always work with fresh produce. Looking at the commodities, these can include materials such as flour, eggs, sugar, butter and cream.
Each raw material is assigned its own coloured Kanban card, which contains not only the product number, but also the turnover rate. Once the second to last tray with 50 eggs is taken out of the warehouse, the red Kanban card moves forward on the last tray. This makes it clear to the warehouse manager that eggs must be ordered. The newly supplied eggs are place behind the existing stock, properly adhering to the FIFO method.
The warehouse manager updates the warehouse system by directly adjusting the stock of eggs. Next, the system compares the remaining eggs with the point at which an order is shipped to the supplier (critical order point).
If the remaining amount is lower than the critical order point, it will be signalled by the system and an automated e-mail is sent to the supplier requesting a new delivery. When applied to all raw materials, it forms an excellent way to manage inventory and always work with fresh produce.
It’s Your Turn
What do you think? Is the Kanban System applicable in today’s economic and production world? Do you recognize the practical explanation or do you have more additions? What are your success factors for good inventory management system?
Share your experience and knowledge in the comments box below.
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- Monden, Y. (1981). Adaptable Kanban system helps Toyota maintain just-in-time production. Industrial Engineering, 13(5), 29.
- Ohno, T. (1988). Toyota production system: beyond large-scale production. CRC Press.
- Shingo, S., & Dillon, A. P. (1989). A study of the Toyota production system: From an Industrial Engineering Viewpoint. CRC Press.
- Sugimori, Y., Kusunoki, K., Cho, F., & Uchikawa, S. (1977). Toyota production system and kanban system materialization of just-in-time and respect-for-human system. The International Journal of Production Research, 15(6), 553-564.
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