How can you use Kanban systems to improve inventory management in your supply chain?

1 What is Kanban?

Kanban is a Japanese word that means "signboard" or "card". It refers to a system of using visual cues, such as cards, bins, or boards, to indicate the status and quantity of inventory items in a production process. The idea is to match the supply of inventory with the demand of the customer, and to avoid overproduction and underproduction. Kanban can be applied to any type of inventory, such as raw materials, work-in-progress, finished goods, or spare parts. Kanban can also be used for different types of production systems, such as pull, push, or hybrid.

2 How does Kanban work?

Kanban works by setting a limit on the number of inventory items that can be stored or processed at each stage of the production process. This limit is called the Kanban size, and it is determined by factors such as the customer demand, the lead time, the variability, and the capacity of the process. Each inventory item is associated with a Kanban card, which contains information such as the item name, the quantity, the source, and the destination. When a customer orders a product, a Kanban card is pulled from the finished goods inventory and sent to the upstream process. The upstream process then replenishes the finished goods inventory by pulling a Kanban card from the work-in-progress inventory, and so on. This way, the inventory flow is regulated by the customer demand, and the inventory levels are minimized.

3 What are the benefits of Kanban?

Kanban can bring many benefits to your plant operations, such as reducing inventory costs, improving quality, increasing efficiency, enhancing flexibility, and boosting customer satisfaction. Lowering inventory levels can save on storage space, handling, transportation, and obsolescence costs. It can also detect and correct defects faster, eliminate waste such as overproduction and overprocessing, and respond to changes in customer demand more quickly. Furthermore, it can improve the visibility and traceability of your inventory items, ensure that they meet customer specifications, improve the flow of the production process, reduce the lead time and cycle time, deliver products to the customer faster and more reliably, meet customer expectations and requirements, and increase customer loyalty and retention.

4 How to implement Kanban in your supply chain?

To implement Kanban in your supply chain, you need to analyze your current inventory situation, design your Kanban system, implement and monitor it, and review and improve it. Specifically, you need to identify the types, quantities, locations, and movements of inventory items in your supply chain, measure customer demand, lead time, variability, and capacity of production process. Additionally, you need to decide on the Kanban size, type, format, and rules for each inventory item and production stage. You should also choose the appropriate tools and methods to display and communicate Kanban signals. Furthermore, you must train staff on how to use and maintain the Kanban system and ensure they follow the rules. Finally, you need to monitor performance and effectiveness of your Kanban system, collect data on inventory levels, quality, efficiency, flexibility, customer satisfaction; review results and feedback; identify strengths and weaknesses; and implement continuous improvement actions.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?