CI Tools

How does the kanban system work?

When you define value from the customer point of view, know your value stream, and start reducing the eight types of waste, you are creating flow.  The work, whatever it is, products, documents, tasks, food, or other, will flow better.   A kanban system can help to minimize overproduction and inventory.  It is a pull system, which means producing the right item, at the right time, in the right quantity.  

The rules for an effective kanban system are below.

  • Customer (downstream) processes withdraw items in the precise amounts specified by the Kanban. 
  • Supplier (upstream) produces items in the precise amounts and sequences specified by the Kanban.
  • No items are made or moved without a Kanban.  Nothing is produced or replenished without previous consumption.
  • A Kanban should accompany each item, every time.
  • Defects and incorrect amounts are never sent to the next downstream process.
  • The number of Kanban is reduced carefully to lower inventories and to reveal problems.

There are two types of kanban, production, and withdrawal.  Production kanban indicates the kind and quantity of products that the supplier must produce.  You will produce the number of items on the card when you receive the kanban card.  The withdrawal kanban specifies the kind and quantity of products that the customer needs.

Let’s use a hamburger place to show how kanban works. 

  1. The server asks the customer what he wants.  His order is the customer demand, what item he wants and how many. 
  2. The server will record the order, this is the production kanban card.  The kanban can be a traditional notepad paper or a computerized system on which the server writes the order and the cooks see it on a screen back in the kitchen.
  3. Whatever is the case, it will be the sign for the cook to start preparing the food.  The cook will produce exactly what the customer request, one hamburger with cheese, bacon, and salad.
  4. To produce this item the cook will withdraw a hamburger patty, two strips of bacon, a portion of salad, and one bun.  Each of these items is already prepared in labeled bins with their own withdrawal cards. When the cook finished one bin, he put the withdrawal card or the bin in the assigned location.
  5. The person in charge of stock replenishment will walk by, take the empty bin, and replenish the empty space on the shelf with a new full bin.
  6. Once the food is prepared, the cook rings the bell and move the plate to the delivery window along with the order ticket.
  7. The order ticket from the computerized system or the notepad used before is the server sign to take the plate to the customer. 

In this example, we have the external customer, the client who comes to eat at the restaurant.  They determine how many hamburgers, and how much bacon and salad are used every day.  The server and the replenishment person are both suppliers, at different levels. 

The information flow from the customer, to the server, to the cook, to the replenishment person.  This last one will have his own kanban to know when to order to external suppliers.  The material flow from the replenishment person back to the customer.

The beauty of this system is that when it is well done you control inventory, avoid paying more for expediting items, save labor time counting inventory, improve space utilization, keep your employees focus on doing their work with minimum stress and your customers receive what they want when they want it.  In the next post, I will share some real-life examples of kanban.

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.