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The Top Reasons to Use Kanban for Your Business’ Inventory Management

August 15, 2019
Volodymyr Rudyi

Keeping your business inventory managed is crucial, which is something we probably don’t need to tell you. There are dozens of different ways to handle this task, but one of the most prized for those using lean manufacturing systems is the Kanban system. This inventory scheduled system ensures a company stocks only the most necessary components for their distribution or production processes.

When lean manufacturing is in use, materials are pulled throughout the distribution and production processes. However, the Kanban system is put in place, so a business or organization knows when they need to replenish and reorder required stock.

How the Kanban Inventory Management System Started

The Kanban inventory management process has been in place for many decades. An industrial engineer at Toyota in the 1940s named Taichi Ohno took the time to start thinking about how supermarkets handle their inventory. He realized that restocking items only when they were needed, made manufacturing more efficient. Based on that discovery, Ohno developed Kanban, which has been used ever since to help teams in all sorts of industries manage their workload.

Kanban is a process that promotes the flow of products through the manufacturing process to eliminate inventory and labor waste. One of the essential parts in Kanban is the “just in time” idea where you only order what is needed in the amounts required at the time, it is necessary. In the 1950s, the Toyota Production System was implemented, which uses Kanban, and it was rolled out to their primary machine shop.

Most of the time, you will see Kanban associated with lean manufacturing. This is a manufacturing method where waste is reduced or eliminated as much as possible. Since Kanban looks at bringing in supplies only when needed, the two things work well together. Nowadays, Kanban is used in all sorts of situations, from marketing to software development and hiring, but it can also be used in effective inventory systems.

Why Kanban Inventory Management Might Be for You

Before Toyota brought in the Kanban system, manufacturing worked on a push system instead of a pull system. Customer demand and supplies were forecasted, and materials would be purchased based on those forecasts. This led to many companies who were overly stocked on inventory and dealing with extremely extended lead times.

With a pull production system, inventory is controlled by the actual orders that come into a business. The just in time method works to balance demand with actual inventory to level the rate of production to what is being sold or consumed. This method helps prevent or decrease overproduction, extra inventory, and overprocessing. Just in time is a model for manufacturing, while Kanban is one of the best tools that can be used to achieve what you want.

This inventory management system has support for the entirety of the production system while allowing room for improvement at the business. The use of cards, bins, and visual signals facilitates communication during production as well as with buyers, suppliers, and consumers. The cues are changed and sent out to teams, suppliers, or departments to ensure replenishment occurs when needed.

How a Kanban System is Designed

If you are in the process of designing a Kanban system for your business, it’s crucial to consider the Kanban tools that are best going to work for you. You will then want to tailor the system, so it is ideal for the workplace in which it is implemented. Some of the potential tools include the following:

  • Kanban Cards – These are traditionally used to manage large inventory items and can be passed through the line to show that production needs to occur or components need to be purchased. On a Kanban card, there will be specific information about every stage of production along with what materials and supplies are needed to handle each of the processes to come.
  • Kanban Bins – Where cards are used for large items, bins are often used for smaller items such as nuts and bolts used during manufacturing. As an example, one step in production might have a two-in system. That means workers are going to take materials from the first bin until it is empty before moving to the second bin. In the meantime, the first bin will be sent back and refilled. By the time a worker empties the second bin, the first one will be back and full again for use.
  • Kanban Boards – When you are looking at a Kanban board, it is usually going to have three different columns. One is going to be “to do” or “requested” while the second might be “in process,” and the last will be “done.” An order can be written down onto a card and then it may be moved between columns as things occur. This means anyone can look at the work in process and see what is happening or track orders as they go through the business process.
  • Electronic Kanban – There is also an electronic version of the Kanban system, which many businesses find the best option. As technology changes, facilities can move from physical bins, cards, and boards to a system that is entirely electronic using barcodes to keep track of inventory.

Using a Kanban System Effectively

If you happen to be implementing a Kanban system to a facility that is large with complex processes, this might facilitate the need for a combination of tools to handle all the moving parts. While things can get complicated quite quickly, the six rules developed by Toyota can help ensure the Kanban system remains effective and efficient.

  • Incorrect amounts and defective items are removed and do not move forward to the next process.
  • All items going through productions are required to be in a bin along with a card or must be tracked using an electronic Kanban system.
  • When processes go through supplies, requests are sent through Kanban and make their way to the business suppliers.
  • Every process is tasked with creating the exact quantity of items need for the incoming order requests.
  • Without a request, no items can be moved or produced at all.
  • Kanban requests are limited to uncover inefficiencies and reduce excess inventory.

The Four Core Principles of Kanban Methodology

Knowing what the four core principles of Kanban are and utilizing them in your organization will help the employees, workplace, and managers follow best practices which can lead to success.

  • Visualize Work – Creating a visual model of the workflow using a value stream map is one of the best things you can do. Using poster board, whiteboard, or another material, you can map out how materials flow from one process to the next. This gives you an oversight of how the process of manufacturing works, and you can easily see places where improvement can be made.
  • Limit Work in Progress(WIP) – Any work in progress counts as inventory and having too much of it can cause a lack of space, time, and money for your business. There can be constraints set for different teams, individuals, and departments to prevent lots of excess work in progress at any one time. While it can take some time to decide on the limit for work in progress, experimentation can get you there, and it will you use Kanban effectively.
  • Focus on the Flow – When it comes to creating an effective Kanban system, you have to have a foundation that involves optimizing and streamlining the workflow. When you look at the value stream mapping you did, you can see areas where there are more frequent stoppages and bottlenecks, so you know where materials are stuck for longer than average periods. Working with your team, you can decide what changes should be made, plop them on the map, and implement them over time.
  • Continuous Improvement – As much as you might wish for it to, you can’t implement Kanban and expect to be done with everything. As with other lean manufacturing tools, this is something that has to be evaluated regularly to create improvement continuously. Decide whether you want to check in weekly or daily or at some other period to determine how well the system is running and see what input your employees have. You can make changes as needed to improve the system over time.

The Top Benefits of Incorporating a Kanban Inventory System

Kanban is one of the most logical options for monitoring your level of inventory and meeting customer demand for a successful business. However, that doesn’t mean there is nothing you need to account for when you put a system into place. Having an idea of the benefits of this system will give you a good idea if implementing it is right for you.

  • Reduction of Inventory Costs and Levels – If you don’t have a ton of extra inventory, you are going to have more space to in which to work. That isn’t all that Kanban can provide, in any case. When you stock up only on the materials that you need, you also save money. There’s no reason to dip into business funds to purchase a bunch of products or parts that are going to sit there and may never be used.
  • Need Determined by Customer Demand – With Kanban, you can find out what items are selling much easier since those are the things that you will be restocking as you run low on them. If you find that a certain part very rarely needs to be ordered, that means that there probably isn’t a significant demand for it. There’s no need to dig into data or information to find that out. You already have it by using Kanban.
  • Managers Receive Progress Reports – When using Kanban software, there are many analytics that can show you exactly how long it takes to produce a product and how much of it is being used at one time. Inventory software using Kanban will allow you to run many different reports so managers can plan, improve, and organize their workflows.
  • Removes Need for Storage in Production Area – When you are using Kanban inventory storage methods, parts only end up on the production line when they are going to be used. That means you have extra space near the production line so the workers can more easily assemble the products your customers want.
  • Reduction of Obsolete Inventory – If a business makes too much inventory, it is often going to end up sitting in a stockroom somewhere for who knows how long until it is discarded, sold, or given away. When stock isn’t used because it is not moving quickly, it can also make it hard to determine if any units are damaged. This isn’t something you want to find out six months later when there’s little you can do about it.
  • Overproduction is Prevented – If you only pull components as you need them driven by customer demand, that also means that extra products aren’t going to be made that need to sit somewhere until they are purchased. Kanban makes it less likely that you will end up with extra products that are not selling.

Part of Lean Inventory – Kanban is excellent for lean manufacturing and can create a lean inventory situation to go with it. When the two are used in tandem, there is no extra inventory hanging around, which means defective and obsolete items aren’t just sitting on shelves wasting your space.

Using Kanban is easy, and with the proliferation of technology, any business can take advantage of it. Kanban inventory software solutions make the process much more automated. You can still use the two-bin system on the production line while incorporating software that connects to RFID tags and barcodes in the bins as well as setting up a database online that tracks and restocks products without any human help. If it’s something you are considering, it could make your manufacturing environment much more efficient!

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