In this chapter, we will discuss the concept of Kanban. Kanban is Japanese term associated with the notion of a white card, or a card that you can see and touch. But in reality, it’s any form of a signal that can be used to pull materials into the value stream. It could be anything. Colored golf balls, bins or containers, empty spaces on the floor, lights or sounds. A great advantage of using Kanban and pull is avoiding overproduction, by only making what’s needed when it’s needed. Making sure we have only enough material in the system to meet all requirements to pull things through helps us reduce inventory beyond the absolute minimum levels. Minimizing inventory and work in progress also means better product quality, because we’ll have less inventory moving through the system that could encounter problems that need to be fixed. However, there are disadvantages as well. Whenever we have major disruptions in delivery of materials, it can cause a Kanban system to break down. The notion of Kanban pulls works like this. We have a customer, which could be the end customer or a downstream operation. The Kanban stream begins with the supplier who provides the material flow to production. From production there’s a product flow to the customer. When the customer requires a product, a Kanban pull signal is sent to production from the customer. Then a Kanban pull signal is sent from production to the supplier.
When we use the standard amount or unit of material, we create a Kanban pull. This could be a physical ticket, or a container, or a signal that’s going upstream. This authorizes the feeder operation production to produce another unit and ship it down to the customer. When we consume the raw materials in turn, we would have a Kanban pull that goes upstream to our supplier. This process simply repeats again and again over time to continually refill that standard unit in response to Kanban pull signals between us and our customers or between us and our suppliers. There are many examples of how Kanban pull can work. For example, in a manufacturing organization, I once used this technique to manage pallets. Pallets were used for shipping. And because of intermittent demand requirements from our customers, we often ran out of returnable packaging. Because it was impossible to plan how many pallets we would need, we simply created a standardized footprint in the parking lot. And we authorized our pallet supplier to come by every two business days, take an inventory with a checklist, and then come back two days later to fill the empty spots.
By doing this every two days, we never had more than the footprint would allow and we had enough on hand to handle any spike in demand from our customer. In the service sector, maybe we would be doing claims processing. And in the claims area we would have bins from which we’re pulling the claims ready to process. As the bins become empty, they could flow upstream to the mail room where they can refill the bins with more claims to process. This in turn could trigger a pull from the mail holding area to bring in more unopened mail to be processed to refresh the inventory of claims to be processed. There are many great opportunities in the application of Kanban and pull. It reduces inventory, work in process, and cycle time required to support our customers. It can also reduce turnaround time for a given customer demand. It also reduces machine downtime because we won’t run out of things we need to keep everything productive. At the same time, we can improve visibility of quality issues. That said, there are also issues and challenges associated with the application of Kanban and poll. We need steady flow along a fixed path. Large variations in volume or product mix can disrupt the flow and undermine the performance of the Kanban system. It may not work so well when there are vast differences that separate our assembly plans and our suppliers from one another. Another obstacle could be unexpected demand in the market, which makes it very difficult for the Kanban system to respond quickly to meet that market demand.
There are many applications of the physical Kanban signals, we could use containers or physical cards. For example, I worked with our suppliers to use standard containers for raw materials to supply my automotive supplier plant that was making parts for the auto industry. The returnable container would have a standard amount of material, and when consumed, we would return that container and that would trigger replenishment. The same concept can be used with a physical Kanban card as well. There are some issues with cards, particularly when we’re not co-located with our suppliers and our customers. If there are long physical distances between the point of use and supply, we have to move the cards physically, or scan them, or somehow fax them. And if we lose cards, that can be a real headache. A modern intervention that’s working extremely well is what’s called an e-Kanban system. So in an assembly plant or a production facility, as we consume a standard amount, we could barcode scan or use an RFID scan to say we’ve gone empty. This signal transmits automatically to our supplier department or outside supplier. The authorization to make and ship another unit of inventory. The newer approach using e-Kanban system is a great adaptation that integrates technology with Kanban cards to overcome the challenge of distance.