CI Tools

What is a Kanban and how it can help you to control inventory?

“In a period of low economic growth, overproduction is a crime.”

Taiichi Ohno

The goal of lean is to deliver to the customer the highest quality, at the shortest lead time, at the lowest possible cost, by continuously eliminating waste.  Many companies have multiple problems that affect the flow, and the common solution is to build inventory.  There are three types of inventory.

Materials

Materials shortage happens very often when cash is limited.  Your employees know that, and their reaction is to hide some to ensure that they have available when they needed.  Did you ever see somebody keeping a private stash of office supplies in their desk drawer or hiding ingredients in the bottom of the fridge?  When you take inventory, you will not see those items, and there is a chance that you will end up buying something that you don’t need.  Another chance is that perishable items got spoiled and end up in the trash.

Work in process inventory

Did you ever see a kitchen where cooks prepare too many of several items in advance to ensure that they will not run out during rush hour?  Or a receptionist that printed too many dated questionnaires?  Understanding how much work is needed for the day is a tough exercise, but it is a needed one.  In a restaurant, for example, knowing the demand will allow you to go from making big batches of food to small batches delivered to the cooks just-in-time.  The food on the customer plate will be fresh, and wastage will be minimal.

Finished product 

When you think of finished product inventory, most probably you think of a warehouse full of boxes.  But there are many other examples that perhaps you see daily.  For example, a bakery that has a full display of all types of cakes, brownies, and other pastries.  Those pastries baked in the morning will not taste fresh in the afternoon, and some of them maybe will end up in the trash.     

What is Kanban?

Inventory is money, the more you have around, the more money you have tied up to your operation.  The worst part is that inventory does not mean that you are better prepared to respond faster to your customers.   

A kanban is a visual tool that authorizes to produce or withdraw inventory.  It synchronizes and gives instructions to internal and external suppliers and customers. It helps to prevent outages of materials and to provide the right amount, in the right place at the right time.  

Kanban is a visual control tool that organizes behavior by signaling when it is time to move items.  Each Kanban card signifies one product, paperwork, material, or task along with all information related to it.  There are many different designs of cards, physical and digital, you can choose the most convenient for you or design your own.  They can be as simple as a piece of paper with basic information or as complicated as barcodes, scanners, and computer applications.  The kanban card should communicate at least the following.

  • What? item description, part number
  • Who needs to replenish?  internal or external supplier
  • Who needs the item?  internal or external customer
  • Where it goes? storage location, location of use
  • How many items? lot size, minimum, maximum

Cards are not the only form of kanban, below you can see other forms.

  • Open floor space marked with a square or a silhouette to indicate that someone withdraw the items and needs replenishment
  • A colored line on a conveyor or storage rack  
  • An empty parts bin
  • A divider or color card between items or boxes.

Some of the kanban benefits are prevention of excessive inventory, prevention of stockouts, and forces stock rotation which is important for perishable items.  Other benefits that stem from these are improvements in cash flow and reduction in expediting expenses and space requirements. 

Kanban is becoming a very used tool in different industries besides manufacturing. Some examples are in technology, hospitals, and even for personal use. In my next publication I will describe how kanban works.

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