Definition – What is a Kanban System?

Kanban is a system that schedules lean manufacturing. It controls the supply chain to realize cost savings through implementing the just-in-time inventory control system.

All we are doing is looking at the timeline, from the moment the customer gives us an order to the point when we collect the cash. And we are reducing the time line by reducing the non-value adding wastes.Taiichi Ohno

The term “Kanban” is a Japanese word that means “billboard, ” and it was first coined and applied by industrial engineer Taiichi Ohno in order to improve efficiency at Toyota. Ohno looked at the way that consumers buy goods and the way that supermarkets supply them to develop a more efficient inventory system.

When you go shopping, you don’t stock up with enough supplies for months or years. You buy what you need now, and the supermarket only stocks what it expects to sell now. This doesn’t worry you because you know the supermarket will have what you need next time you shop.

In manufacturing, each process is dependent, either on a preceding process or on materials obtained from a supplier. It’s a bit like shopping at a supermarket. It wouldn’t make sense to take more than you need right now, and when you have taken it, the preceding process or metaphorical “supermarket,” knows that it must stock up again for your next visit.

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Simpler than It Sounds?

The Kanban System sounds very simple on the surface. You only keep as much inventory as you are likely to consume within a limited time. When you use materials, your suppliers, be they external or internal, are notified that it’s time to make more stock available. This allows demand to control production rates so that you never have a surplus, but always have enough finished goods to be just in time.

You also don’t carry a lot of surplus inventory. After all, inventory is just a way of tying up money that could be earning you interest. Inventory can get spoiled, and it doesn’t make you any money. On the contrary, it costs a lot to hold inventory since some of your resources must now go into taking care of it.

The Kanban System setting limits for inventory-holding, and that includes work in progress. Let’s go back to the supermarket. You don’t want to stand in long queues before you get what you need. In the same way, your business doesn’t want a queue of goods that nobody needs right now anyway lining up for completion. By setting upper limits, you limit the queue length. And as in the supermarket, the shorter the queue is, the better.

The problem with all this comes when you start thinking about how to turn it into practice. Let’s see how Toyota did it.

Before IT Advancements: Kanban cards

Bear in mind that the Kanban System was developed before computers had a large role to play in business. How did Toyota implement the Kanban System? It used straightforward cards.

First of all, the focus had to change from a push to meet demand forecasts to a pull generated by actual demand. Thus, the message to produce will only pass through the supply chain when demand signals are received. Clearly, the message must move fast to allow for responsiveness to the demand stimulus.

Getting the balance right means monitoring actual processes and results. How quickly is the production funding responding? We do want to limit stock, but we also don’t want to lose sales. If that’s happening, more Kanban has to go into the system. In other words, inventories must be built up.

Taiichi Ohno soon saw that very strict rules must be applied to the Kanban System to be effective. He stipulated that:

  • Each process indicates a Kanban that will be matched by the following processes.
  • Kanban indicates both sequence and quantity.
  • Without a Kanban, there is no reason to produce or transport any items.
  • When goods pass from one process to the next, they must have a Kanban.
  • No goods may be passed on if there are any defects to speak of. Thus, Kanban also becomes a quality control system.
  • The fewer Kanban there are, the more efficient and demand-sensitive any process will be.

The Kanban System: From Cards to Computers

Back in the 40s Kanban cards were the best way to signal inventory depletion and the need for a top-up. They got the message across simply and efficiently. But only imagine the rigmarole involved in tracking all those cards! That Toyota found a way to do so effectively is a testament to its dedication to efficiency. Today, of course, everything is a lot easier, but some companies still use Kanban cards in a way that’s very similar to that which Toyota applied.

Still, with electronic messages capable of being transferred in a flash, and with centralized systems being able to track exactly how they are moving through the production system, IT streamlines the demand-driven production process still further.

The “Three Bin” Kanban System Goes Digital

Let’s use a simple example to show a Kanban System at work. There are three bins for Kanban cards. One is on the factory floor, another is with the store or warehouse where materials are kept, and a final bin is with the supplier. Red cards indicate the need for supply, so the production staff uses up all their red cards. Now, they need more materials and further instructions on what to produce to meet demand, so they send the empty bin to the store.

The store replenishes the production bin with Kanban cards and provides the materials to match. Now it needs more inventory from the supplier, so the store sends a Kanban card to the supplier who promptly comes up with more raw materials or spare parts which are returned together with the Kanban card. Notice that there’s only one empty bin at any given time.

This all sounds great, but if you’ve ever written important information on bits of paper, you’ll spot the opportunity for setbacks if not disasters. You could have made an error when you wrote down the information, or the piece of paper may go missing somewhere along the line. When you’re dealing with large-scale production, a missing Kanban card could cause a major hiccup.

Let’s say you passed a piece of paper on to someone else. What did they do with it next? You have no way of knowing for sure unless you physically go and check. Enter electronic Kanban or E-Kanban systems. No more missing cards. No need to wonder whether your message was acted on. You can even see just how long it took every time. Plus, the time it would have taken to manually transfer Kanban cards from one role player to another gets all but eliminated. Essentially, you have an easy-to-follow digital process map.

Bombardier Aerospace and the Ford Motor Company are just two of today’s big firms that have found electronic Kanban systems to be the most efficient option.

Tallyfy And Electronic Kanban

Whatever your instruction, order, or request, handling it through Tallyfy is almost sure to produce satisfying results. And if it doesn’t, investigating the reasons becomes as easy as visiting your workflow interface. Where was that bottleneck? Why did it happen? How can it be rectified? The work of hours, days, or even months becomes the work of a few minutes. You might even pick up the problem before it becomes an issue. After all, you have real-time monitoring, and the responsible personnel can always sound the call for help as easily as you created the Kanban in the first place.

If you’d like to discover how an electronic Kanban System can cut your inventory holding costs and get you on track to profit-boosting efficiency, simply state your need. We’ll create a customized presentation that shows you just how electronic Kanban works in the context of your business. Can you resist just taking a look? Surely not!

Photos by Daveness_98

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About the author - Amit Kothari

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