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What is Kanban?

Kanban is a term used to describe a concept of scheduling in just-in-time and Lean production. The kanban system states what to produce, when to produce it, and how much needs to be produced using a system of cards, software, or a combination of both to manage the triggers resupply and delivery. Kanban literally means “signboard”.What is kanban


Following World War II, Toyota started reviewing American supermarkets and how they managed their supply chains and restocking efforts for potential use in factory applications. Toyota was drawn to the idea that customers get what they need at just the right time. The kanban system was first developed in 1953 when Toyota applied the logic of using the rate of customer demand to control the rate of production. The demand was then passed up through and into the entire store processes.

How it Works

The success of a kanban system is based on the inherent design of a “pull” from demand. Resupply of product is not required until product levels reach a point where minimum quantities have been set.

A benefit to this type of supply is that it nearly always prevents stockouts by triggering resupply at each stage of the production process and at each level of production, no matter how many steps exist within the entire supply chain. The demand signal which can be a simple as a card, is used to trigger new production, restocking, or even special “non-standard” work to take place to support the overall process.

The Kanban Cards

Kanban cards are used to signal the movement of materials within a manufacturing or production environment or to move materials from supplier to factory.

The Kanban card is, in effect, a message that signals depletion of product, parts or inventory that when received will trigger the replenishment of that product, part or inventory. Consumption drives demand for more. Demand for more is signaled by Kanban card. Kanban cards thus, in effect, help to create a demand-driven system. It is widely espoused by proponents of Lean production and manufacturing that demand-driven systems lead to faster turnarounds in production and lower inventory levels, helping companies implementing such systems to be more competitive.

Kanban cards, in keeping with the principles of Kanban, should simply convey the need for more materials. A red card lying in an empty parts cart would easily convey to whomever it would concern that more parts are needed.

In the last few years, Electronic Kanban systems, which send Kanban signals electronically, have become more widespread. While this is leading to a reduction in the use of Kanban cards in aggregate, it is common in modern Lean production facilities to still find widespread usage of Kanban cards. In Oracle ERP, KANBAN is used for signalling demand to vendors through email notifications. When stock of a particular component is depleted by quantity assigned on Kanban card, A “Kanban trigger” is created which may be manual or automatic, a purchase order is released with predefined quantity for the vendor defined on the card, and the vendor is expected to dispatch material within lead time. This system is also available in enterprise resource planning software such as SAP ERP.

Toyota’s six rules

  • Do not send defective products to the subsequent process
  • The subsequent process comes to withdraw only what is needed
  • Produce only the exact quantity withdrawn by the subsequent process
  • Level the production
  • Kanban is a means to fine tuning
  • Stabilize and rationalize the process

Three-bin system

A simple example of the kanban system implementation might be a “three-bin system” for the supplied parts (where there is no in-house manufacturing) — one bin on the factory floor (demand point), one bin in the factory store, and one bin at the suppliers’ store. The bins usually have a removable card that contains the product details and other relevant information — the kanban card.

When the bin on the factory floor becomes empty, i.e., there is demand for parts, the empty bin and kanban cards are returned to the factory store. The factory store then replaces the bin on the factory floor with a full bin, which also contains a kanban card. The factory store then contacts the supplier’s store and returns the now-empty bin with its kanban card. The supplier’s inbound product bin with its kanban card is then delivered into the factory store completing the final step to the system. Thus the process will never run out of product and could be described as a loop, providing the exact amount required, with only one spare so there will never be an oversupply. This ‘spare’ bin allows for the uncertainty in supply, use and transport that are inherent in the system. The secret to a good kanban system is to calculate how many kanban cards are required for each product. Most factories using kanban use the coloured board system (Heijunka Box). This consists of a board created especially for holding the kanban cards.

Electronic kanban systems

Main article: Electronic kanban

Many manufacturers have implemented electronic kanban systems. Electronic kanban systems, or E-Kanban systems, help to eliminate common problems such as manual entry errors and lost cards. E-Kanban systems can be integrated into enterprise resource planning (ERP) systems. Integrating E-Kanban systems into ERP systems allows for real-time demand signaling across the supply chain and improved visibility. Data pulled from E-Kanban systems can be used to optimize inventory levels by better tracking supplier lead and replenishment times.