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Kanban – Motives and objectives

After the defeat in the Pacific War, the Japanese felt that Japan was a country with limited resources and must therefore avoid waste at all cost. At that time, production was not aided by a computerised control of material flow. At this point KANBAN was developed by Toyota and introduced in 1962 to ensure the flow of material to their car assembly plants with minimum use of resources. Since that time, KANBAN has proved to be an excellent tool to reduce waste of resources and to optimise material flow.

There are various reasons for getting involved with KANBAN. There are both factual and emotional criteria. These criteria can be classified when defining the objectives for its use and noting that a motive does not meet the objective. Reasons for getting involved with KANBAN include:

  • Force to rationalize
  • Simplified control for many applications
  • Dependencies are shown clearly to the supplier
  • Kanban is modern
  • Kanban reduces inventory
  • To discover weaknesses in the material flow

After the decision to use KANBAN, the objectives have to be defined (in the true sense-derived from the company’s objectives). This definition is necessary, among other things, to determine if actions to improve operations are reasonable or not. Objectives must be quantified and made measurable

  • Reduction of lead-times (e.g. to x days)
  • Inventory reduction (e.g. capital reduced by x $’s)
  • Reduction of scrap and rework (e.g. by x %)
  • Simplification of the organisation (e.g. reduce manufacturing steps by x %)
  • Increase flexibility (e.g. production within x days after customer order)

What Distinguishes KANBAN from MRP?

KANBAN distinguishes itself in important elements from the commonly used central production planning and control mechanisms (MRP), that was created in the 1900’s in a Tayloristic oriented environment. In this environment all planning and control tasks are taken on by central departments.

Centralized production control

In this case, the planning of the production is often based on sales forecasts. An important goal is to achieve high capacity utilisation. This leads to large batches and long throughput times. On top of that, planning and operation are not perfectly linked, so scheduling decisions often are in contrary to the operational reality or to the customer requirements, resulting often in bad scheduling. The operational departments (like the shop-floor) are not self-sufficient, they cannot plan and control their own activities. The complex interactions between the elements of production control lead to a massive coordination expense, which cannot be handled by centralised functions.

Push principle

With central production planning and control, the push principle is connected. This means that an order is split by the production planning department into different small orders to push them through the production process. Production activities are not started by recognising demand for the product, but by setting an independent production plan from outside based on projected sales.

Features of traditional MRP systems

  • Centralization
  • Separation of planning and activity
  • Capacity oriented
  • Feedback oriented (MES)
  • Orientation on functions with large number of interfaces
  • High complexity
  • High control effort

Impact

  • Huge work in progress (WIP)
  • Long lead-times and large lot-sizes (batches)
  • Low delivery reliability
  • Waste in production and scheduling processes
  • Lack of customer focus
  • Low flexibility

The principle of the KANBAN system is simple: The downstream operation takes only just the required part in the required amount and at the required time (just-in-time principle) from the previous operation. The objective is to simplify the communication by a unique identification that tells us what will be needed and in what quantity.

Kanban card

Figure 1:        Example of a Kanban card (created by IKS)

When material is used, and only then, the supplier receives a signal to deliver new material. This demand is indicated by a KANBAN (Japanese for “card” or leaflet), which is generally transported with the parts. After removal of the last part from the box (sometimes when the first part is taken) the KANBAN is returned to get the next delivery.

There are strict rules regarding production, especially the rule that parts should only be produced when a KANBAN creates a production signal and that only 100% good parts are allowed to be delivered. Thus, the schedule-push-oriented control of conventional methods is replaced by the demand-oriented control of KANBAN.

Variations of all types are possible, because the KANBAN should be tailored to company processes. Because of the need to adapt the method to a variety of requirements and to insure continuous improvement of the system, different KANBAN types have been created. As early as 1980, there were already several different types of Kanban in Japan:

  • Material KANBAN (SHIKAKE KANBAN) for the manufacture and supply of equipment which is returned after opening a container
  • Signal KANBAN (SHINGO KANBAN) for a material KANBAN that is returned but only after a certain amount of parts from a  container are used
  • Transport KANBAN (HIKITORI KANBAN), an signal to move certain material from one storage place to another defined storage location (at the shop-floor)
  • Restricted KANBAN (Gentei KANBAN), a material KANBAN that becomes invalid after a certain amount of production

In the meantime, there are many variations, depending on the philosophy of the user. Essential parts use patch panels, so called KANBAN boards, to support another method of the Toyota Production System – management by visualisation. The KANBAN’s are arranged on a board to get an overview of the flow of material and to quickly uncover possible problems. For sequencing due to set-up time problems, similar panels are introduced. KANBAN can also be used without a paper card, for example when the container itself can be used as KANBAN. Defined storage locations for transport containers and other types of management by visualisation make it possible to see the flow of material easily.

The elimination of waste is achieved indirectly when KANBAN limits the material stock and is adjusted to the actual demand. So we have an instrument to identify possibilities for inventory reduction and to improve the material flow.

If a problem occurs, search for the cause. You are then able to temporarily increase inventory by increasing the number of KANBAN’s then eliminate the cause of the problem and reduce inventory again. As a consequence, you are able to create a continuous improvement of the flow of material.

There are a lot of causes for problems in manufacturing such as:

  • long set-up times,
  • quality problems and scrap,
  • unbalanced production speed,
  • high processing effort,
  • low capacity,
  • confusing sequence,
  • etc.

It makes sense to consider how economical it is to fix a problem. It has been shown that often identified problems are eliminated with amazingly simple measures.

If no action is taken, production is managing and controlling itself by the KANBAN loops. Because of these key elements, KANBAN has been successfully proven even in times of cost-intensive enterprise resource management systems.

 

Prerequisites

There are different aspects to the prerequisites for the use of KANBAN. They arise from different objectives. Most people agree that it is very suitable for mass production. On the applicability for CTO (Configured To Order), there are already varying views But even in small batch productions, it is also used efficiently, if you are willing to take actions to improve material flow.

The new KANBAN processes create automatically new requirements for the environment. The fulfilment of these requirements can become a target of the KANBAN usage or support for the achievement of objectives.

Of course,

  • flexible production equipment,
  • up-times,
  • fault free deliveries,
  • acceptance of idling among staff and equipment,
  • discipline,
  • root cause analysis of errors and rapid removal
  • visual management
  • pragmatism

support the successful use of KANBAN.

In addition, internal arrangements are useful between the individual production steps and external suppliers, even if the arrangement can be reduced to one statement that within a specified period the product has to be placed on a defined space with 100% quantity and perfect quality.

Introduction of Kanban

If there has been no experience with KANBAN available within a company, it is advisable to start with a pilot project. This should be related to a production area that is (more or less) independent, has a very stable manufacturing load, and has at least three production steps and a low number of suppliers.

The following steps are required:

  1. Check the lot sizes
  2. Check the container and transport equipment
  3. Determination the inventory level (WIP) between workstations
  4. Creation of the model

The ideal lot size is “one”. In reality, higher lot sizes are normal business. The lot size determination by Andler formula delivers almost always a value that is significantly higher than the actual economic lot size. It does not take into account that there are several different parts that determine the sequence of set-up processes and this requires a buffer for each product variation. So you only achieve a sub-optimum with the use of Andler’s method, but not the optimum for the entire order cycle. There are methodologies that consider the expected range of parts.

The simplest solution for the introduction of Kanban is to take over the existing lot sizes and reduce step by step. The same applies to the transport container and the buffer stocks.

To estimate the necessary safety stock, the lead-time has to be determined. This lead-time must be extended by the reaction time and possible transport time. This transport time should take into account the actual duration of the transport and not the classical transition time between jobs from the work list, which includes the stock at the floor.

To ensure optimum security of supply, the second step is to determine the demand that occurs during the replenishment lead-time. This requirement corresponds to the bridging of the lead-time requested inventory, plus additional inventory to cover unforeseen events and problems. The necessary inventory, the number of KANBAN, is based finally on the lot size and the safety stock.

There are other methods for determining the required inventory, e.g.

Inventory = demand [pcs. / hr] * (Purchase interval [hrs. / lot] + transport time [hr] + production time [hr / lot]) * safety factor,

while the safety factor for a good configuration tends towards one.

The goal is usually to reduce this inventory. This can be achieved by reducing the number of KANBAN during exploitation of the process. Accordingly, you should estimate the accuracy of these parameters.

To determine the number of Kanban there is a simple formula:

Number = Inventory / Quantity per container

Once the KANBAN system has been defined, the actual implementation follows, which is described briefly here.

The first step is the training of employees and the assignment of a person responsible for the operation of the system (“KANBAN Navigator”). The objective of this training is not only the mastery of a KANBAN running organisation, but also the active involvement of employees in decision-making and continuous improvement.

This also asks management to give more responsibilities to their employees. The ideal manager in this model has advisory and not instructional function.

Then the interfaces have to be created with other areas as well as existing information systems.

The next step is the design of the layouts. This includes driveways, parking spaces and shelving, the procurement of equipment such as containers, holders for attaching the KANBAN card and the design of the KANBAN cards.

When everything is prepared, the old system must be halted and the existing parts have to be repacked. Then the control with KANBAN can start. This includes the elimination of the weaknesses in the material flow which have been identified by KANBAN. This includes the elimination of weaknesses in the material flow that have been identified by KANBAN.

Challenges

KANBAN when correctly applied affects changes in human behaviour and in processes.

The information flow changes dramatically compared to conventional processes for production control. It is no longer necessary to know in detail when the supplier will provide the components because a very continuous supply of material is established. But it is interesting to know when the customer needs the parts that you have to deliver. Thus, the awareness is that all activities are focused on the customer. Without an integrated data collection, the management has no overview how reliable the individual supplier works, unless the support of a sophisticated Management by Visualisation shows it.

Work orders with resource allocation and scheduled dates are omitted or have a minor role. This property supports the required re-thinking. No longer is the output of the workplace the focus of activities, but only the coverage of the demand. Therefore, the focus is shifted from the storage of the finished product to the raw material.

At the beginning of the introduction, it is normal to have certain problems with set-up times that are too long, with disorders that hinder the flow of materials or by other problems that are not anticipated in this phase. This phase requires increased activities and the risks can be reduced through careful planning. Ingrained with all the danger that the benefits of Kanban are not optimally because you have reached a sufficient as stable state.

For the run-in and run-out of products, details should be observed carefully. With a high in-house production, a long lead-time of the KANBAN be carefully planned, too. On the other hand at the run-out of a product, there is a risk that in all stages of production a rest inventory exists in the amount of the KANBANs that are no longer needed. Also for such situations the required actions need to be defined.

It makes sense to set-up a monitor and controlling functionality that includes the team of employees that is responsible for the KANBAN system. This team controls (among other things) whether the KANBAN rules are observed (e.g. as production is only based on a KANBAN signal), storing the transportation containers at defined sites etc. They also have the task to identify weaknesses and to eliminate their causes, to monitor inventories, lead-times and shortages, correct them if necessary, and to initiate and support continuous improvement activities.

For these tasks, an appropriate information system has to be developed. Modern KANBAN information systems (like IKS) have integrated these features already.

The production of small quantities of a product is possible, but requires the use of separate organisational aids, for example, the limited KANBAN, which is only in use until a defined quantity is reached.

Changes to the product or the manufacturing methods require additional support and a separate monitoring of the KANBAN loops. Again, this work can be simplified by a KANBAN information system.

The integration of existing information systems, such as shop floor data collection, inventory management, quality control, technical controlling and similar process based on data acquisition systems can get critical without KANBAN information systems because data collection is reduced.

Similarly, KPIs are not available if you do not introduce data collection systems that are linked to the KANBAN system.

 

IT support via Kanban information systems

Through the use of autonomous control loops, the KANBAN system generally does not require the use of IT systems. Such a KANBAN system is also called “manual KANBAN. In simple KANBAN environments the effort for maintaining the KANBAN loops is low and the entire system can be managed easily. With a rising number of KANBAN loops and variations sometimes a complexity is reached, where the entire system becomes unmanageable, difficult to maintain manually and lack of transparency.

In practice, the following reasons suggest IT support

Management of the KANBAN system

A basic function of KANBAN system software is the quick and easy access to the KANBAN master data (e.g. part list, production unites, storage locations, container types etc.) as well as easy maintenance of information. Using this data, the physical KANBAN loops and the flow of material are represented in the system.

The quick and easy printing of the KANBAN cards and a clear reporting reduce the manual activities dramatically.

Monitoring of current material availability and KANBAN orders

KANBAN maintenance needs a quick and complete overview of the entire actual KANBAN situation (eg. material inventory).

An electronic KANBAN support system can visualise the status of the containers (eg. full, empty, in transport etc.) with selection filters (so called “KANBAN monitoring”). This ensures a high transparency of the “Work in Process” (WIP). If this transparency is not available, often a higher safety stock is used as required.

Improvement of information flow

An IT supported KANBAN system will help to reduce lead-times. KANBAN signals are sent directly to internal and external suppliers (for example by sending a copy of the KANBAN card when a KANBAN is scanned to EMPTY). Great potential is gained by the use of Internet technologies to provide KANBAN information “online and in real-time”.

Decision making by visualisation of KANBAN orders

With strong decentralisation the risk to lose complete overview increases. For example, a production planner is getting only a sub-optimum by optimising the capacity utilisation, because this approach may not be in the holistic interest of customer orders, especially on bottleneck machines.

Here, an electronic KANBAN board (“e-KANBAN Board”) that visualises the order book becomes an important support tool.

The visualisation of priorities, for example the sequence of KANBAN orders, supports the manufacturing staff and helps to decide order of jobs. Especially with the dynamic KANBAN scheduling of production lines, individual machines etc. electronic KANBAN boards offer significant advantages against manual KANBAN boards.

Tracking the KANBAN sizing in case of demand fluctuations

In case of fluctuating demand, it is sometimes necessary to adjust the number of KANBAN’s. In manual systems, this is often done by a higher safety stock that is defined for demand peaks. This is contrary to the principle of avoiding waste. An
e-KANBAN system offers several ways to support the quick and easy adjustment of the KANBAN levels. The system should also support the run-in and run-out of KANBAN cards in the overall process to reduce time consuming manual activities as far as possible.

Early warning system for critical inventory levels and late deliveries

The objective to reduce the inventory levels increases the risk of material shortages in case of any problems. To prevent such situations, an early warning system is needed to visualise the critical situations immediately and implement the required action or change priorities. Inventory shortages and late deliveries can be detected in such a simple way.

Analysis of KANBAN performance

The analysis of logistics performance and inventory levels is very important to identify problems, weaknesses, trends and especially potential for improvements.

An e-KANBAN system detects deviations in the process quickly (eg. failure of lead-times, consistent high inventory levels, etc.) and helps analyse the performance of the complete KANBAN system.

Control of supplier agreements

When sizing the KANBAN system, the lead-time is very important. It is one parameter in the calculation of the number of KANBAN cards. So the number of KANBAN’s is dependent on the lead-time. In order to ensure the quality of the delivery agreements, the lead-time has to be measured.

This should be possible in 2 ways: The quality of lead-time over a longer historical period, as well as the lead-time regarding current deliveries. This will allow a supplier evaluation under the aspect of a supplier delivery performance.

Integration into existing system environments

The integration into existing ERP / MRP systems plays an important role in the use of KANBAN software modules. The defined process should avoid data redundancy and support material transactions from the electronic KANBAN  system into the ERP / MRP system. This is useful, for example, to book received KANBAN’s to supplier framework contracts or actualise inventory data into the host system.

 

Integrated Kanban System (IKS)

For many years, a software system that meets all these requirements has been offered by manufactus GmbH, based in Starnberg (Germany).

The Integrated Kanban System – IKS implements so-called “electronic KANBAN processes” and is a software system especially designed to support KANBAN environments. IKS can be used stand-alone or integrated into an existing IT infrastructure.

e-Kanban Basic Process

Figure 2:        e-Kanban Basic Process

IKS is based on tracking the KANBAN movements via barcode reader or RFID. Based on the scanning process, important information in the KANBAN system can be visualised and analysed by different software modules.

The customer can use the KANBAN principle in all possible areas.

IKS supports KANBAN processes to external suppliers (“Supplier KANBAN”), other business locations (“Inter-company KANBAN”), production facilities (“Production KANBAN”), central supply areas such as (raw) material warehouses (“Transport KANBAN “) or finished goods warehouses (“finished goods KANBAN”).

 

Kanban types

Figure 3:        Types of Kanban that are supported by IKS

Based on the modular design of the IKS system, customers are able to design their KANBAN system in a very flexible way.

Kanban Modules

Figure 4:        IKS Modules and Packages

IKS is used by companies in a variety of industries, but they all have one thing in common:

 

They all use KANBAN to control their flow of material!

 

customer-list

Figure 5:        Some manufactus customers

manufactus GmbH in cooperation with Mr. Helmuth Gienke

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