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In Operations Management, it is a term used to describe a visual reorder system.

Kanbans are simple to use and can be utilized to greatly improve your
Operations while reducing your inventory. In addition, Kanbans can help improve
your throughput while eliminating inventory shortages.

There are many applications of Kanbans. For the purpose of this article, I will use
a couple of examples and how they can be applied to small businesses. One
method of Kanbans is called the Two-bin system. With a two-bin system, your
production team draws inventory from one bin while the other bin contains
enough inventory to cover production until the first bin can be refilled.

For example, if you manufacture portable grills, your employees may have one
part of the operation where they screw handles onto the grill top. In order for the
employees to operate smoothly, they should have a container with the handles.

Rather than having large amounts of handle inventory clogging up the floor, the
employees would have one bin containing X number of days or hours supply.
When the employees would run out of handles in the first bin there would be a
purchase card at the bottom of the bin. This card would go to the purchasing
department to alert them to order more handles. While the team waits for the new
order to arrive, they use the second bin, which should contain enough handles
for the production team during the order lead time.

It's important to note that the card at the bottom of the first bin could go to the
purchasing department to place an order or another section of the company that
stores the handles. You could also utilize a one-bin system, where the handle
container (or shelf) would have a visual line or color to indicate when to reorder.
In this instance, the handles below the reorder line would be enough to cover the
production team until a new order would arrive.

The second method of Kanban that I will discuss is a card replenishment system.
With the card replenishment system, when a product or material is used up, a
card attached to that material is placed in a container. The card attached to the
material will have the amount and the specific type of material written down.

At the end of the day, the purchasing department retrieves the container with the
cards and makes orders according to what was used up in that given day.
With this example, the card indicates that the material has been used up. The
card should be located at the point where there is only enough inventory to cover
the company during the purchasing lead time. For example, if you manufacture
flashlights your light-bulbs may be stored in a warehouse. Let's say you use light
bulbs at a rate of 1000/week and it takes 3 weeks to receive new light bulbs. You
would want a safety inventory of 3000 light bulbs. Once your employees used up
the last box before the safety inventory, they would bring the attached Kanban
card to the purchasing department. This card is a trigger for the purchasing
department to order new light bulbs. In the meantime, the employees will have
the last box plus the safety stock of 3000 light bulbs.

There is a lot of literature and examples of Kanban usage. The concept is simple
but its uses are widespread. Learn more about Kanbans and apply them to your
operation to gain productivity and efficiency.

What is KANBAN: Definition


The word "Kanban" is of Japanese origin and literally translates to "signal
card," referring to the reorder slip used to procure more supplies. When an
assembly item or stocked item begins to run low, an employee takes the
item's reorder card to a manager, who produces or buys the needed amount.
The refreshed supplies arrive before the first supply has run out, and
production or sales continue without hindrance. While reorder slips used to be
the norm for requesting more of an item, today computerized cards or empty
packaging containers perform the same task.
Kanban is a PULL system. It pulls inventory as it is needed. ERP/MRP is a
PUSH system. It pushes inventory into a warehouse for Safety Stock to deal
with fluctuations in demand from changing forecasts.
What is KANBAN: Features
Kanban is considered a "lean production" technique, or one that eliminates
labor and inventory waste. One of the ways Kanban reduces waste is through
the "pull production" model that regulates item production based on consumer
supply and demand. Instead of estimating the number of a specific item the
market will want and producing based on that amount, Kanban produces
items in direct relation to the number requested by the market.
What is KANBAN: Critical Points
Of course, in your "What is Kanban"
quest, education and training is necessary along with a few pilot program trials
for employees to experience the pull system and teamwork. Visual systems
are a necessity. Employees can see rather than guess/forecast the needs of
the customer. With smaller inventories processes go uninterrupted.
The use of an instructional card, visible record and signboard 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.

Under Kanban, facilities stock inventory based almost entirely on orders


paced by customers. Forecasts are not used like in ERP/MRP, only actual
customer orders.

Products are pulled through production purely by customer demand." This is


a paradigm shift from the push system which puts inventory into a warehouse
based on forecasts. Visual markers are used to help personnel monitor
inventories more clearly. All production personnel can see can see exactly
how many customer orders have been placed and when al orders have been
filled.

Huge inventories are not cost effective. They are a large investment. Space is
also costly. With Kanban you stock inventory only when customers demand
products. For many Western facilities, maintaining small inventories may
appear somewhat problematic. Large inventories are thought to keep a facility
from running out of materials. With Kanban, PROPERLY IMPLEMENTED,
materials are always available to meet a facilities production demands.

What is KANBAN: Benefits


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

Lowers overhead costs


Standardizes production goals
Increases efficiency
Reduces obsolete inventory
Gives work area personnel more control
Improves flow
Prevents over production
Provides managers progress reports
Improves responsiveness to changes in demand
Improves teamwork
Kanban can reduce inventories by 75% in some industries
Since station operators continually pull the supplies they need from the
proceeding station, production goals in Kanban are naturally established by
customer demand. The production goal for each station operator is to always
keep pace with Kanbans continual pull. Inventory is always moving fluidly.
These goods immediately enter the process after they land on the loading
dock. The suppliers are pre-certified by Quality Assurance, so that they
can be moved to the production process in a Ship-to-Use program,
instead of a ship to the warehouse.
Vendor Scheduling Implementation Within "What is
KANBAN": Theres always a better way to do
anything
You ask how suppliers live with shipping smaller quantities; to simplify
purchasing, create vendor/supplier scheduling. Let purchasing set up the
contract, negotiate prices and total quantities, and hand off the scheduling of
releases to production planning to work directly with the supplier. In this way,
purchasing does purchasing work, and production planning works with
suppliers to feed the production line. Production planning now does not have
to wait for purchasing to give them dates or quantities that will be shipped.
They have this control.
What is KANBAN: Understanding the Kanban Card
The earliest form of Kanban is a simple card-based system known as
a Kanban card. Production and warehousing use this system to track
inventory and control production. These cards can be used for special
instructions.
How does this Kanban card work?
To initiate production, Kanban cards are always issued to the first operator in
a process. Each card issued visually communicates important details about
the order and authorizes its production. In the single-stage process the first
station operator attaches the issued card to the production units container.
The card remains attached to the unit throughout production. This provides all
subsequent stations operators the physical authorization to produce a unit and
help them so they are filling an actual customer order. Once the production
unit and its associated Kanban card arrive at the end of the process, the card
is removed and returned to the hanging file. Empty slots on the hanging file in
a central location gives all work area personnel access to the current
production status. The Kanban Card system is very visual, as mentioned
before in these LEAN articles.

Yes, there is a software based Kanban card. These systems rely on bar codes
and electronic databases to track production and inventory. In this electronic
system, managers can keep track of production from their offices or at any
other location where computer access is available.

Within the enterprise resource planning (ERP) system, they set up an


electronic version of Kanban. It is a visual signal to indicate when it is time to
bring in more materials for production or distribution. As materials are pulled
from the warehouse or buffer stock, a replenishment cue was generated and
sent to suppliers to pull materials from them.

The warehouse floor can be easily and economically marked too indicate the
proper locations for palletized or other large container storage (5S type
storage).Floor marking make this inventory easy to locate. Queues should be
restocked immediately since each queue is programmed to always have the
right replacement stock to meet customer orders. When orders and quantities
increase, these queues may need a small buffer stock to create flexibility with
increasing demand.

Implementation: a cross functional team should be formed to manage the


implementation. They have to monitor the implementation and feedback
critical observation to the overall team leader
Key points:
Employees treat other employees as their own customer
Each employee strives to give their internal customer excellent products and
services
Better communication
Higher quality
Lower production costs
Team members will work to combine related actions into single events so less
time and energy is wasted
Mentioned in the last article is Value Stream Mapping (VSM). VSM is used to
fine inefficiencies in the production line. This offers the customer the greatest
possible value. VSM finds bottlenecks which can be eliminated to increase
throughput and value to your customers. VSM looks at man-hours, time and
costs. Using the theme, there is always a better way to do anything, you
improve these hours, times and costs to bring value to your customer and to
you. Also mentioned was root cause analysis which enables you to find the
root cause of any problems uncovered and to eliminate them by writing a
Standard Operating Procedure (S.O.P.) to permanently eliminate this
problem.
As with all LEAN initiatives, you have to sustain and control this KANBAN
system, so you do not fall back to informal systems. Discipline is very
important to control KANBAN operations as well.

In the next and last LEAN series article, we will combine LEAN with Six
Sigma. Yes, it can be done. Common sense, you bet!