Implementing a Successful Kanban System for Manufacturing and Inventory Management

Kanban is a method that gradually helps improve whatever you do. Almost any business function - including manufacturing - can benefit from applying Kanban to bring about significant benefits.

A Kanban system refers to a manufacturing system used to manage the supply of components by means of instruction cards that are shared along the production line. It is historically a pull production control system (PPCS), which today is used for a wider set of circumstances. A PPCS is managed from the floor by pulling in materials as and when the requirements arise. There are many types of Kanban systems used today. The selection of a Kanban system is usually done on the basis of the type of inventory or item being pulled through the productive process.

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Toyota management studied grocery stores in the 1940s to come up with the Kanban system that is currently used in factories.

Kanban is a Japanese Manufacturing System in which the supply of components is regulated through the use of an instruction card sent along the production line.

Kanban System in Manufacturing

Kanban systems help communicate the need to replenish or produce a component or item. This system is widely used in many production processes and manufacturing units that are implementing continuous improvement and lean manufacturing practices for planning production and procurement. Kanban systems are very common in auto manufacturing plants as there are a large number of components that need to be processed that need to be provided on a just-in-time basis.

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The main types of Kanban systems are:

Kanban stock squares

Kanban stock squares/markers are used in applications where inventory or stock items (such as boxes, pallets, etc.) are stored directly on the factory floor, the parts are large in size, or need to be used only at a certain stage of production. Such systems can also be integrated with a FIFO system and can also be used when there is no safety stock level required.

Kanban inventory containers

Kanban item/component containers are generally used for small components and items used in production line processes and batch production. These containers are used to store a specific quantity of items that usually is enough to achieve completion of a batch of activities.

Electronic Kanban Systems

Electronic Kanban signals are used in applications which use electronic signal and production management software. A few examples are liquids & grains and automated inventory systems.

Kanban in Lean Manufacturing

Kanban is considered a “lean production” technique, or one that eliminates labor and inventory waste. As discussed above, PPCS is one of the ways that is used to reduce waste by managing the production and supply of an item according to the demand of the item. What this means is that items are produced according to the number requested (demand) by the market — instead of the usual practice of forecasting and guesstimating the numbers that might be needed. To educate and train employees in Kanban, it is necessary to have a few pilot program trials. The use of instructional cards, visible records and signboards are used. The status of production and inventory are clearly displayed using very simple visual communication methods. As a result, processes are streamlined and problems resolved quickly.

Kanban is based on actual customer orders, unlike forecasts used in ERP/MRP systems and the facilities where Kanban is implemented, stock inventory is based almost entirely on orders placed by customers. In short, the products are “pulled through production purely by customer demand.” Visual markers help personnel monitor inventories and they can see exactly how many customer orders have been placed, when they are placed.

When Kanban is properly implemented, facilities never run out of materials, thus proving very cost effective.

Benefits of Kanban in the Manufacturing World

Kanban is used in lean manufacturing because the goal is to eliminate waste, making the factory floor cut down on any unused materials and any excess inventory. Kanban systems in general provide a lot of benefits such as minimal waste, reduced storage needs and overproduction, flexible production, minimized costs tied up in WIP or Work in Progress.

Some common benefits realized by factory, warehouse, shipping, and logistics managers:

Kanban in Operations Management

Kanban not only greatly improves Operations by reducing inventory, but also helps improve throughput by eliminating inventory shortages. In the two-bin Kanban system, the production teams draw inventory from one bin while the other bin contains enough inventory to cover production until the first bin can be refilled.

For example, let us say you manufacture flashlights. You would need to store the light-bulbs in a warehouse. If the number of bulbs required per week is 1000, and if it takes you 2 weeks to order and get the next lot of bulbs; as per operations management principles, you would need to have a safety (backup/ emergency) inventory (stock) of 2000 bulbs at any given point of time. Additionally, your employees must be proactive enough to raise an inventory card to the purchasing department to order for a new stock of bulbs as they use the last box of bulbs in the main inventory. While the next stock is awaited, the 2000 bulbs from the warehouse will be used to meet the requirements.

Common Types of Kanban Cards in the manufacturing industry

Listed below are the Six Most Common Types of Kanban Cards that you ought to have for your manufacturing facility:

1. Withdrawal or Conveyance Kanban Cards

2. Supplier Kanban Cards

3. Emergency Kanban Cards

4. Express Kanban Cards

5. Production Kanban Cards

6. Through Kanban Cards

Essential Metrics of Kanban System in the Manufacturing Industry

In today’s manufacturing industry, administrators and line of business directors are always overwhelmed with data, making it hard to filter out all the accessible metrics to make sense of what business issues should be tended to. This has made many organizations to depend all the more intensely on their BI programming applications to track the Key Performance Indicators (or KPIs) of their associations. KPIs are monetary and non-budgetary measures that help leaders pinpoint the qualities and shortcomings of their organizations and show whether they are in accordance with their business goals.

Following are a few KPIs of Kanban Systems that are commonly used in Manufacturing.

Lead Time - A lead time is the latency between initiation and execution of a process. For example, the lead time between the placement of an order and delivery of the item such as a car can be anywhere between 2 weeks to 6 months.

Cycle Time - Cycle time refers to the time it takes for delivering a given product from the time the work was prioritized and initiated.

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Digité provides Artificial Intelligence driven project delivery management solutions based on Agile, Kanban & SAFe® — Scaled Agile Framework.

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