Taking The Mystique Out Of Kanban Systems

Taking The Mystique Out Of Kanban Systems

What is the definition of “Kanban”?
Kanban is a Japanese term meaning “signal”.  The term is widely used today, worldwide, to denote a form of replenishment signal used to transmit information generally regarding the movement or production of products.

A Kanban System can signal the authorization to move material or product from the supplying location to the consuming location.   They can also be used to signal the authorization to produce additional product.

What are the main benefits of a Kanban system?
One big benefit of a kanban system is that it puts limits on inventory build up.
A kanban acts as a limit.   When the kanban is full, no additional product can be made, or moved, into that location.   Putting limits on inventory has some very big benefits: less cash is tied up, less space, less handling, less handling damage, etc.  Reductions of work-in-process (WIP) inventory have the additional benefits of reducing your products’ lead-time (think of items in WIP as standing in line, waiting their turn for processing.  The longer the line, i.e. the more WIP, the longer they’ll have to wait.)

Reducing inventory can, and typically does, have a dramatic positive impact on quality (for a complete explanation, see Total Quality Lean).  Less inventory reduces the amount of scrap or rework required when a defect is discovered.  And, since less inventory means shorter lead times, a kanban control system shortens the time between creation of a defect and it’s discovery, thereby improving the chances of correctly diagnosing its cause.

For repetitive items, a kanban system can also reduce the reliance on forecasts.  However, in this person’s opinion, one of the most powerful aspects of kanbans is the ease that they provide for forcing continuous improvement, at the grass roots shop floor level of the organization.

Inventory reduction exposes problems and forces solutions to those problems.   A kanban system provides a simple visible mechanism for shop-floor people to translate top-level management objectives into concrete actions, e.g. “Cut the size of the kanban between operation 1 and operation 2 by 70% in the next 6 weeks”.

kanban Picture1

In the illustration above, Operator #1 is authorized to complete his/her operation and put the unit on the conveyor only if there is an open space.   Operator # 2 takes the units off the conveyor and performs their operation.

The kanban limit is four units.

Note that with this simple control mechanism, a limit has been set on:
1)   Inventory:   There cannot be any more than four units in the kanban
2)   Space:   If each unit takes up one square foot of space, the maximum space tied up is 4 sq. ft.
3)   Lead time:   If we assume that both operations can process one unit per hour, the longest that any unit will wait in queue is four hours, and,
4)   Potential Defects:   If we are utilizing sequential inspection techniques, if operation 1 should slip out of control and produce defective units, the number of defects in process will be limited to four.

Note also that the kanban mechanism provides a simple, powerful, mechanism to force continuous improvement.  Think of the kanban quantity as a buffer that allows (hides) problems to exist.

How do you force those problems to be exposed?  Reduce the kanban quantity!  If everything is running well at a kanban size of four, cut it to three.

Is kanban the same as “Pull”?
Pull can be used to define a philosophy: “Make or move an item only when needed”, or a formal “pull system” which will typically utilize kanbans as the signaling device.   In a pull environment, each operation required to produce a product is considered to be the customer of the preceding operation. The kanban, or pull signal, is treated like the customer order.  In a pull system environment, items are not processed without a “customer order”, i.e. a pull signal.  Items are therefore made and /or moved “just in time”.

Is a Kanban System the same as a Lean Manufacturing System?
No. “Lean” defines an operating philosophy.  While there are a whole set of techniques and related disciplines, the general concept of “Lean Manufacturing” is that of continuous product flow, without interruption, through the entire value stream.   Inventory is seen as an equivalent to cycle time (the more inventory, the longer any one item must wait for “its turn”).  An underlying philosophy is that the reduction of cycle times and inventories will force waste to be exposed, and create the urgency for its elimination (as depicted in the classical “water & rocks” analogy).

Waste is re-defined as “anything that does not add value from the customer’s perspective”.

A kanban system, on the other hand, defines a powerful technique that is often used in lean enterprises.   A Kanban is basically a signaling device, used to control when and how much of an item is made or moved.

Can you provide some real world examples of kanban systems?
A military component supplier client of ours replaced a sophisticated MRP system and greatly simplified both planning and shop floor control by installing a simple multiple slide rack.  Each slide was color coded and labeled as to the model of subassembly that it held.  Lines on the slides indicated both the replenishment trigger and the maximum quantity allowed.  The upstream operations were instructed to keep the number of units on each slide within this min-max range.

Another client, a dog-food bag producer, painted kanban “squares” on the shop floor.  These kanban spaces were sized large enough to hold only a specific number of pallets of product.   Once the kanban field was filled, the upstream operation would either: 1) switch to a product that went to another downstream kanban that still had space, 2) slowed down to match the usage rate of their customer (the next operation), or 3) shut down.  Note that the space limit determined WHEN the upstream operation could produce a product.   The line-up (schedule) determined WHICH item was to be made.

Shelf space was used as a kanban control system in several electronic client sites.  Once again, the space, designated on the shelf, provided the necessary replenishment information.

Mechanical assembly clients have often used tote bins as their kanban signals.  Each bin had the information attached as to the product and quantity, source location, and user location.  As bins were emptied, they would be cycled back to the producing department for refill.  Note: The total number of empty kanban bins waiting for refilling was closely controlled.   When the upper limit was being approached, that was a signal to request additional production help, or to plan overtime.

Some client sites encompassed large volumes of floor space and even multiple separate facilities. Several such sites utilized inexpensive video camera / monitor systems.  The camera was located so as to show the user kanbans.  The video monitor was stationed at the supplying department.  Note: At one site, the monitors provided the fork truck drivers all the information that they required to keep multiple lines operating, with minimal inventory, and no external scheduling.  One site utilized white boards along with the camera showing the available kanban space.   The using department would post the next several items that they intended to produce.  An empty kanban space signaled the upstream operation to produce something.  The whiteboard specified what that “something” should be.

One client used kanban lights.  A color-coded light bulb, the “move” kanban signal, was put on a pole and elevated to a height where it was easily visible at the producing operation.   When the light went on, it was time for the producing department to wheel over another cart of components to the assembly department.  They would drop off the full cart (kanban) and wheel the empty cart back to the producing area.  The empty cart was the signal, the kanban, that authorized the producers to make more parts.  Note: The last operation in the producing department placed his/her finished subassemblies directly on the cart i.e. No cart = No production.  Also note that there is no double handling.   Parts are placed on the cart as produced.   The parts were taken off the cart by the 1st operation at the assembly department and put directly into an assembly.

At another client’s site, Kanban cards were created for purchased items.   Each card designated the item and quantity that needed to be purchased.  Component parts were bagged or boxed in reasonable quantities based on A,B,C classification and usage rates.   When a container was “broken into” the kanban card was placed into a purchasing rack.  Several times per day the buyers would remove the cards and place the appropriate replenishment orders.  The system then evolved through several more productive iterations.  The kanban cards became direct communication with the suppliers that were on VMI (vendor managed inventory).  Other kanban cards were modified so as to contain all appropriate information.  They were then simply faxed to the supplier by the warehouse people.

More recently, the Internet and simple web-cameras are creating another, more direct, means to communicate kanban information directly to the suppliers.  They can literally watch your inventory triggers, real time, from their own site!

Another example of a kanban system for a Vendor Managed Inventory item utilized simple painted lines on the sides of the item’s pallet rack location.  The lines represented the kanban level, or lowest level of inventory, that would trigger replenishment.  For example, when stock of a specific cardboard box fell below the line, the supplier would see the signal during her daily delivery, and drop off the needed boxes the next day.

In many assembly operations, the workbench space has kanban locations (kanban squares) marked on the work surface between operations.  When the kanbans are full, the preceding operation stops producing until a kanban space is once again available.

Does a lean conversion always include a kanban system?
No.   Lean is a philosophy.  The objective is to convert a traditionally operating company to a lean enterprise.  The kanban system is a very powerful technique that is often used in lean enterprises.  Kanban, however, may be inappropriate in some environments.

In what circumstances might a kanban system be inappropriate?
A kanban system doesn’t work very well in environments where the product routings vary significantly.  For example, we had a client in which most work centers could be fed by a large number of “source” departments.  Without a reasonably stable process routing, it becomes very difficult to signal the “feeding” department.  In this circumstance, we found it better to simply use the standard scheduling algorithms, MRP, and to force continuous improvement by systematically cutting internal lead times and lot sizes and enforcing “on-time to the schedule date” at every operation.  Utilizing the Lean philosophy in an MRP environment is explained and graphically illustrated in our article ”ERP/MRP and Lean”

Also, generally speaking, a kanban system does not work well in a job shop, design-to-order environment, or in “one-of-a-kind” production environments.

What kinds of kanban systems are American companies using?
The discussion above outlines examples of many of the commonly used kanban systems.   Kanban design, however, is limited only by your creativity.  We’ve seen “intranet kanbans” (a signal sent via the corporate intranet), mechanical “flags” hosted into the air when parts were required, audio signals (horns, beepers, telephone), fax sheets (some call them “faxbans”), colored balls rolled down a chute, electronic boards, cards, etc.

Why is a kanban system preferred over more traditional planning/signaling mechanisms?
Kanbans are generally highly visible, therefore, any breach of the rules is also quite obvious.   For example, let’s say our kanban control is the allowable number of pallet spaces in front of an operation.  A painted, or taped outline might be placed on the floor limiting the authorized space such that it can hold only 10 pallets.  It is extremely easy for anyone in management to see if there are pallets in the area that exceed the allowable space.   Needless to say, a kanban system environment lends itself well to the management philosophy of MBWA (Management By Walking Around).

Another powerful reason for a kanban system is the ease of forcing continuous improvement.  Let’s continue with our pallet kanban example.  Suppose that we have asked the kanban team, composed of members from the “supplier” department and the “customer” department, as well as a couple key support people, to commit to an inventory reduction goal.

The group has agreed to a goal curve to reduce the kanban size, i.e. the number of pallet spaces, from 10 spaces to 5 spaces at the rate of one pallet space per week.  The kanban system thus provides a powerful mechanism to push top-level corporate goals right down to the shop floor people who will have to live with them.

In our example, every week, the size of the kanban is reduced.   And with each reduction, new challenges are exposed. As the team resolves these issues, inventory is reduced, which also cuts lead-time.   Often, the resolution to these problems involves simplifying things, with the corresponding reduction of cost and complexity.

How Can Kanban Controls Help Optimize the Entire Facility?
When kanban controls are combined with kanban size (inventory) reduction goals, processes become linked, as if in an assembly line.  This circumstance is more thoroughly explained in the article “How to Optimize Your Entire Plant”.

How can you use a kanban control system in an industry that makes a wide variety of products?
There are two general categories of kanbans:–“Product specific” kanbans provide information as to what to make or move, as well as when and how many to make or move.

kanban Picture 2

In the example above, an empty container (the colored boxes) authorizes the make or move of a specific product.

“Generic kanbans” only provide the when and how many information.   An independent schedule, often called a “line-up” is used to provide the information as to what to make.   Because items are produced in sequence, this type of system is also referred to as a “sequential pull” system.   The automobile assembly line is a good example of sequential pull.

One client of ours produced a wide variety of electric motors.  Using sequential pull, kanbans pulled product from casting and machining, all the way through subassembly and final assembly lines, in sequence, based on the sequential build schedule.   Essentially ‘custom’ motors were produced with assembly line efficiency and lot size of one in eighteen hours or less!

A kanban system can thus be used in environments that produce a wide variety of products while still providing the power and benefits described herein.

Kanban Picture 3

Below is an example of a generic kanban at a steel mill.

The kanban limit was set by the number of available coil cradles.   The “What Coil to run next” question is answered by a sequenced list, the “Line-Up”.

Kanban Picture 4

Note that the white cradles established the kanban operating limit during normal operating conditions.   The yellow cradles were authorized for use only during a planned inventory build in preparation for a scheduled outage, e.g. taking the feeding piece of equipment down for planned maintenance.

Kanban Picture 5

Marking off, and then removing, the amount of allowable coil cradles was one mechanism used to reduce inventory, lead times, space, and handling damage.  It was a driving force used to assure the continuous improvement process.
The use of kanbans in the metal producing industry is explained in more detail in our article ”Running Steel Lean”

This simple, but powerful, kanban mechanism forced the resolution of numerous underlying problems.  The result was an order of magnitude improvement in product quality, 60% reduction in lead times, record levels of on-time delivery performance, and a $5,000,000 / month improvement in profitability.

What is the opportunity within your company?  To find out, give us a call.

The Hands-On Group

NOTE: Our affiliate, Throughput Solutions, has created an excellent video illustrating the workings of a basic two-bin system. To view this first-rate demo, Click below.
All the best, on your Lean journey.

2-Bin Demonstration Video

Play VideoOption 1.
“Online Streaming Video” (Very Large File ~10 Megabytes)
Just Click HERE to Begin Watching Right Now Online.
Note: This is probably not a good choice if you have a slow internet connection.

Play VideoOption 2.
“Download & Save” (File Size ~3 Megabytes)
Right Click HERE and select “Save Target As” to download the 2-Bin video as a “Windows Media File” and save it to your computer. Once downloaded you can watch this video offline at your convienience.
Note: Best option if you have a slow internet connection.

For more information regarding Kanban Control Systems, or Lean Manufacturing, e-mail or call:

Jack B. Harrison
Senior Partner
The Hands-On Group

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