Advantages of the Kanban System - How Kanban Improves Production and Response to Demand

The Visual Signals of the Kanban System

The Kanban System is an integral part of implementing the Just in Time (JIT) manufacturing philosophy which was designed to control inventory and reduce waste. The history of the Kanban system can be traced back to the late 1940s when Toyota made a cultural commitment to continuous improvement to drive its manufacturing processes to peak performance.

The term Kanban is a Japanese word whose English translation means signboard or visual signal. A well-timed Kanban system works exactly like a traffic signal in managing the flow of traffic and meeting the real time needs of customers by sending clears signals on when to start, slow down, and stop production. Each Kanban signal also carries valuable information about the volume and sequencing of the production. Toyota originally used cards attached to different supply containers to communicate what materials in the production line were needed, but today many variations exists, including signboards and electronic systems. The result is an efficient system where products are only replenished when they are consumed further downstream in the process.

Improvement in Production

The main advantage of the Kanban system lies in its innate ability to drive down costs and waste by improving the flow of production. Many of the scheduling advantages of the Kanban system spring from naturally from the core elements of lean and just in time manufacturing strategies. These strengths become more pronounced when the flow of production is reduced to small batches to accommodate product variations. With a Kanban system in place, managers and supervisors see the benefits of the Kanban system in:

• Better managed inventory levels. Too much inventory can result in cash flow problems by adding overhead expenses for storage, insurance, and security. On the flip side, too little inventory can damage the reputation of the business for being unreliable, resulting in lost sales and dissatisfied customers. The Kanban system combined with good inventory practices smooths out inventory levels and eliminates carrying costs.

• Smoother manufacturing flow. Because the Kanban system focuses on current conditions, production levels are calculated to take into account downtime, scrap, and changeover time of equipment to ensure that the production schedule is met.

• Overproduction elimination. As a demand pull system, Kanban is less likely to result in overproduction because of the need to create buffer inventory to address unexpected delays resulting from quality problems with suppliers or minor disruptions in the transportation network.

• Reduced risk of Inventory obsolescence. Many products have a shelf life or product lifecycle that can expire unless the product reaches the consumer in a timely manner. In these changing economic times, brand loyalty has faded and can no longer save a company that does not deliver its goods on time.

Responsiveness to Demand

Manufacturing is more than just about the mechanics of production and a series of calculations to determine changeover, lead time, and downtime for equipment to derive an ideal production schedule. Production is foremost driven by customer demand which can run in a various patterns from predictable to sporadic, from increasing to declining, and from seasonal to nonseasonal. One of the biggest advantages of the Kanban System is that it improves the responsiveness to changes in demand. In this way, the Kanban system is similar to a smart traffic light with its ability to sense when the traffic, or in this case the demand, is building up. When the pent up demand reaches a predetermined level, the system sends the appropriate signal – the traffic light changes to green or, in the factory, production is sped up.

Empowerment

Another advantage of the Kanban system is that it places control in the hands of the operators who are in the best position to oversee production. People on the front lines have the most knowledge about the daily operations and have a pulse on the real-time flow of the work. Also, shifting accountability for monitoring the daily runs frees up the time of supervisors to focus on long term planning needs. Empowerment is an effective managerial tool because it reinforces education and training; increases mutual respect among employees, generates enthusiasm and dedication to a common goal; lowers absenteeism, and increases productivity. Another by-product of empowerment is conquering resistance to change because employees participate directly in the decision making process.

Quality Control and Self-Discipline

A final advantage of the Kanban system is found in the fabric of its purpose to promote an environment devoted to quality improvement. Because the Kanban system uses small lot sizes at various points in the production, quality control issues can be more easily pinpointed at the source. Also, the Kanban system eliminates excess inventory which tends to mask quality problems by remaining undetected for longer periods of time. Thus, the need for buffer inventory to resolve quality problems is reduced, and this system becomes self-perpetulating as inventory reduction leads to further quality improvment results.

A Final Tally of the Advantages of the Kanban System

In adding up the advantages of the Kanban system, managers should recognize that the system’s strengths lie in creating a more orderly and highly visual accountability system. The visual signals not only aid in improving production flow and responsiveness to customer demand but also in shifting workers’ focus on quality improvment and team work through empowerment and self-monitoring activities.

References and Image Credit

Gross, John M., and Kenneth R. McInnis. Kanban Made Simple: Demystifying and Applying Toyota’s Legendary Manufacturing Process. New York: AMACOM, 2003.

“Just-In-Time (JIT) Lecture Notes.” Future Undergraduates | Ashland University. https://personal.ashland.edu/~rjacobs/m503jit.html. (accessed May 11, 2010).

Image Credit: Traffic light for pedestrians in Tomsk, Siberia provided by Dimitry Afonin at Wikimedia Commons.