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A system of continuous supply of components, parts and supplies, such that workers have what they need, where they need it, when they need it.The word Kan means "card" in Japanese and the word "ban" means "signal". So Kanban refers to "signal cards".

Working of Kanban

Let's say one of the components needed to make widgets is a 42" stem-bolt and it arrives on pallets. There are 100 stem-bolts on a pallet. When the pallet is empty, the person assembling the widgets takes a card that was attached to the pallet and sends it to the stem-bolt manufacturing area. Another pallet of stem-bolts is then manufactured and sent to the widget assembler.

A new pallet of stem-bolts is not made until a card is received.This is Kanban, in it's simplest form.A more realistic example would probably involve at least two pallets. The widget assembler would start working from the second pallet while new stem-bolts were being made to refill the first pallet.

If this was a high volume widget manufacturing facility, each widget assembly station might empty a pallet of stem-bolts in just a few minutes, and there could be 15 or 20 widget assembly stations. Thus there would be a continual flow of cards going back to the stem-bolt manufacturing area that would cause a continual flow of pallets of stem-bolts to be sent to the widget assembly stations.

Kanban is Pull (Demand)

This is called a "pull" type of production system. The number of stem-bolts that are made depends on the customer demand--in other words the number of cards received by the stem-bolt manufacturing area.

Systems other than cards may be used. For example, the empty pallets may be returned to the stem-bolt manufacturing area. Each empty pallet received indicates a need to manufacture 100 more stem-bolts. For other types of components, bins, boxes or cages might be used instead of pallets. Or components might be stored on shelves in the widget assembly area. When a shelf became empty that signals that more components need to be manufactured and the shelf refilled.In Kanban the method of handling the components is flexible, and depends on the needs of the manufacturing process.

An Alternative Kanban Model
Kanban can also operate like a supermarket. A small stock of every component needed to make a widget would be stored in a specific location with a fixed space allocation for each component. The widget assemblers come to the "supermarket" and select the components they need. As each component is removed from the shelf, a message is sent to a "regional warehouse" or component manufacturing facility, requesting that the component be replaced. The "supermarket" might then receive a daily shipment of replacement components, exactly replacing those that were used.

If we just change the term "supermarket" to "warehouse" we have our manufacturing example.

This "supermarket" model is different from the first Kanban example in that it would be used when components are manufactured in facilities that are distant from the widget assembly plant. Instead of moving around small quantities of components, larger quantities are shipped once a day to the centralized warehouse.

Kanban - Responsive To Customers
Kanban results in a production system that is highly responsive to customers. In the above example, the production of widgets will vary depending on customer demand. And as the widget demand varies, so will the internal demand for widget components. Instead of trying to anticipate the future (predicting the future is difficult) , Kanban reacts to the needs.

Kanban does not necessarily replace all existing material flow systems within a facility. Other systems such as Materials Requirement Planning (MRP) and Reorder Point (ROP) may remain in operation. Kanban is most beneficial when high volume/low value components are involved. For low volume and high value components, other materials management system may be a better option.

JIT - Just In Time / Continual Improvement

Kanban is directly associated with Just-In-Time (JIT) delivery. However, Kanban is not another name for just-in-time delivery. It is a part of a larger JIT system. There is more to managing a JIT system than just Kanban and there is more to Kanban than just inventory management.

For example, Kanban also involves industrial re-engineering. This means that production areas might be changed from locating machines by function, to creating "cells" of equipment and employees. The cells allow related products to be manufactured in a continuous flow.

Kanban involves employees as team members who are responsible for specific work activities. Teams and individuals are encouraged participate in continuously improving the Kanban processes and the overall production process.

Kanban is not a system indented to be used by itself. It is an intregal part of Kaizen and 5S.

Kanban Scheduling Systems
Kanban scheduling systems operate like supermarkets.  A small stock of every item  sits in a dedicated location with a fixed space allocation. Customers come to the store and visually select items. An electronic signal  goes to the supermarket's regional warehouse detailing which items have sold. The warehouse prepares a (usually) daily replenishment  of the exact items sold.

In modern supermarkets Kanban signals come from checkout scanners. They travel electronically (usually once a day) to the warehouse. Smaller stores still use visual systems. Here, a clerk walks the aisles daily. From empty spaces he deduces what sold and orders replacements.
    Another variation is the bread truck. Here drivers follow a fixed route from store to store. They have a supply of bakery items in their truck. At each stop, they examine the stock and replenish what has been sold.

Kanban scheduling in manufacturing works in the same way. The essential elements of a system are:

  • Stockpoint(s)
  • A Withdrawal Signal
  • Immediate Feedback
  • Frequent Replenishment

Benifits of Kanban

Kanban provides a number of benefits i.e.

Reduce inventory and product obsolescence.
Since component parts are not delivered until just before they are needed, there is a reduced need for storage space. Should a product or component design be upgraded, that upgrade can be included in the final product ASAP. There is no inventory of products or components that become obsolete.

This fits well with the Kaizen system on continual improvement. Product designs can be upgraded in small increments on a continual basis, and those upgrades are immediately incorporated into the product with no waste from obsolete components or parts.

Reduces waste and scrap.
With Kanban, products and components are only manufactured when they are needed. This eliminates overproduction. Raw materials are not delivered until they are needed, reducing waste and cutting storage costs.

Provides flexibility in production.
If there is asudden drop in demand for a product, Kanban ensures you are not stuck with excess inventory. This gives you the flexibility to rapidly respond to a changing demand.
Kanban also provides flexibility in how your production lines are used. Production areas are not locked in by their supply chain. They can quickly be switched to different products as demand for various products changes. Yes, there are still limits imposed by the types of machines and equipment, and employee skills, however the supply of raw materials and components is eliminated as a bottleneck.

Increases Output

The flow of Kanban (cards, bins, pallets, etc.) will stop if there is a production problem. This makes problems visible quickly, allowing them to be corrected ASAP.Kanban reduces wait times by making supplies more accessible and breaking down administrative barriers. This results in an increase in production using the same resources.

Reduces Total Cost

The Kanban system reduces your total costs by:

  • Preventing Over Production
  • Developing Flexible Work Stations
  • Reducing Waste and Scrap
  • Minimizing Wait Times and Logistics Costs
  • Reducing Stock Levels and Overhead Costs
  • Saving Resources by Streamlining Production
  • Reducing Inventory Costs

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