KANBAN

Demand Scheduling for

Lean Manufacturing

Graphic Products, Inc.

P.O. Box 4030
Beaverton, OR 97076

www.GraphicProducts.com
info@graphicproducts.com
1-800-788-5572
503-646-0183 (fax)
 Introduction to the Kanban

This guide is meant to be an introduction to kanban. The importance of

kanban in lean manufacturing will be explained, as well as the basic steps for

implementing kanban. This will lay a good foundation for you to under-

stand kanban and the reasons so many companies use this principle.

Though it is a fairly basic process, this guide is by no means meant to be a

step-by-step guide to implementing kanban. There are entire books written

on this subject that explain all of the steps in detail. One such book, that

has been valuable in developing this guide, is “KANBAN Made Simple:

Demystifying and Applying Toyota’s Legendary Manufacturing Process”,

written by John M. Gross and Kenneth R. McInnis. With the use of a

book like this, along with the workbook which accompanies it, you may be

able to implement a kanban process without needing a consultant.

However, consultant or no consultant, a good foundation of knowledge

must be laid before you can implement any company changing processes,

and this guide will help you build that foundation. Also, this guide will

introduce you to some tools that you will find helpful in implementing

kanban in your facility.

1
 Kanban - The Definition

Kanban is a Japanese word that means “signboard”. This is a term that

has become synonymous with “demand scheduling” or Just in Time (JIT)

Manufacturing. It’s roots are traced to the early days of Toyota’s innova-

tive production system of the late 1940s and early 1950s. Kanban was

developed to control production between processes and to implement Just

In Time manufacturing. The ideas of kanban became popular during the

global recession of the 1970s, when it was important for companies to

reduce waste and cut costs in order to succeed.

The premise of kanban is to create visual indicators to allow the operators

to be the ones who determine how much of a product to run and when to

stop or change over. Kanban rules also tell the operators what steps to

take when they have problems and who to go to when the problem

occurs. Operators then produce product based on actual usage, rather

than forecasted usage. They only produce new product to replace the

product consumed by its consumer(s), and they only produce product

based on visual signals sent by its customer(s).

Since the majority of the decisions in a kanban are being made by the

operators, the use of visual indicators also allow managers and supervisors

to see the schedule status of a line at a glance. The kanban schedule

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replaces the traditional daily or weekly production schedule. It replaces this Kanban also drives the manufacturing process to constantly improve,
schedule with predetermined rules that allow production operators to which is necessary in for any company to stay competitive.
schedule in the line. Kanban scheduling can be looked at an execution

tool, rather than a planning tool. It directs production on a day-to-day Inventory Reduction
basis. Kanban will generally help to reduce inventory by 25% to 75%. That is a

huge amount of savings when you consider the cost of the actual invento-
Kanban does not replace planning completely. Material planning informa- ry, plus the cost involved with holding inventory. Kanban scheduling
tion is used to create the kanban, but the kanban does replace the daily forces you to examine the parts of your process that allow inventory levels
scheduling activities necessary to operate the production process. It also to build up over time.
eliminates the need for production planners and supervisors to continu-

ously monitor schedule status. In addition to freeing up material planners, In addition, the free space in your facility can then be used for new busi-
schedulers and supervisors, it also empowers the operators to control the ness opportunities, or it may even eliminate the need for expansion plans
line. if that is in the works.

Improving Flow
Benefits of Kanban The flow of the operation will improve with kanban scheduling. Reduced

inventory space as well as the design of the kanban will create a new order
Kanban forces people to look at production processes in a different way.
in your workspace. Setting up control points, flow lanes, and hanging
Kanban scheduling results in the following benefits:
signs that provide directions for moving material will provide the guidance
1. Reduces Inventory
2. Improves Flow needed to improve the flow in your facility.
3. Prevents Overproduction
4. Places control at the operations level
5. Improves responsiveness to changes in demand Preventing Overproduction
6. Minimizes risk of having obsolete inventory
Overproduction of parts is one of the main wastes in production process-

4 5
es. By using a kanban scheduling system where you specify the produc- stop producing. The signal stops production when demand decreases, and

tion container sizes and the maximum number of containers to produce, when orders begin to increase, the inventory levels will signal the produc-

overproduction can be greatly reduced. Using the kanban structure allows tion to begin again.

control without having expensive tracking systems. The visual start and

stop signals, tells the operators exactly when to start producing and exactly Minimizing the risk of having obsolete inventory
when to stop producing - resulting in less overproduction. Since kanban keeps you from producing more inventory than necessary, it

also keeps you from letting your inventory become obsolete. Kanban is

Placing control at the operations level based on actual demand, not a forecast, so it eliminates the guess work

Kanban allows the operators to see the production schedule at a glance. and overproduction. You only build what you need! This way, if some-

This ensures that managers and supervisors do not have to be relied upon thing in your production process changes and you no longer need a prod-

for controlling the production process. Since the kanban’s design tells the uct, you do not have large quantities of inventory on hand to get rid of. It

operators exactly what to run, how much to run and what sequence to also eliminates the possibility of inventory getting “lost” in a back corner

run, it takes out the guesswork. The visual nature also immediately tells of a warehouse somewhere, only to be discovered when that product has

everyone when the process is in trouble so that someone can step in and become obsolete.

make the changes that need to be made.

Placing control at the operations level reduces waste in the company since Implementing Kanban
operators can control their own production process. You more fully use There are seven basic steps that are necessary to implement kanban sched-

that human resource, and free up other resources for other things. uling for a process. This guide will provide you with a basic understand-

ing of the process and what it entails, but you will need to consult other

Improving responsiveness to changes in demand material or a kanban consulting expert for a detailed description to guide

Because kanban creates visual signals for maximum and minimum inven- you through the implementation process. Our goal, here, is to introduce

tory levels it is an immediate indicator of when to produce and when to you to the process so you know what to expect and can study how it will

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benefit your company. Š The number of parts produced
Š Changeover times
Š Downtime
The seven steps to implementing kanban. Š Scrap Levels
1. Conduct data collection Number of parts produced by the process
2. Calculate the kanban size
3. Design the kanban You must identify the parts to be produced by the target process. Break
4. Train everyone the production down into individual part numbers, and do not combine
5. Start the kanban
6. Audit the kanban part numbers just because parts are similar. You should also determine
7. Improve the kanban
what your production scheduling interval will be. You must decide
These steps allow you to determine your current status, where you want to
whether you will produce with monthly, weekly, or daily production
go, and how you want to get there.
requirements. When you answer this question, it will tell you the interval

replenishment cycle and all of your calculations will later be scaled to that
Step 1: Collecting Data
level.
The first step is to collect the data that is necessary to help you make deci-

sions based on the facts, rather than forecasts. This data will allow you to
Changeover times
calculate kanban quantities that support customer demand. You start the
Determine your current changeover time. Changeover time is the time
process by documenting your current state. Before you can implement the
from the last good production part of the previous production run to the
kanban, you must see where you are with inventory and operating parame-
first good, completed part in the new production run.
ters “right now”. You have to be honest and look at your organization as

it is at that moment, not as you wish it to be. Once the data is collected,
Downtime
you can analyze it to summarize and understand your “current state”.
There are two kinds of downtime - planned downtime and unplanned

downtime. Examples of planned downtime are scheduled breaks, lunches,

The following is a list of the data you need to collect regarding your cur-
maintenance or upkeep. Examples of unplanned downtime include break-
rent state in the production process:
downs or lack of raw material. It is the total time that the process is

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scheduled to be producing parts, but isn’t. This unplanned downtime is long it will take you to produce your adjusted production requirements.
what you need to calculate in preparation to size the kanban.

After you determine the replenishment interval, move on to calculating

Scrap Levels the buffers. Buffers should be looked at as the amount of inventory
System scrap is the process scrap rate plus the scrap rate of downstream needed to prevent the item from delaying customer deliveries. The key is
processes. You must determine the system scrap rates for each product to hold enough inventory to protect the customer without holding too
that will be produced by this target process. This rate will allow you to cal- much inventory. In calculating the buffer, look at your customer delivery
culate the adjusted production requirements for each product. requirements, lead times (both internally and for the supplier) and your

comfort level.
Once you have collected all of the above data, you can organize the data

into a format for analysis. There are many tools and workbooks that will The final calculation in sizing your kanban is to determine the number of
help you do just this. Review the data to make sure everything is correct, kanban containers to use. This calculation includes a buffer for safety
consistent and realistic. Look for errors and make sure all units of meas- stock and accounts for any process cure, drying or normalization periods.
urement are the same. After the data collected, organized and analyzed, This step is easy once you’ve collected all of your other data. It all comes
you are ready to size your kanban. down to a simple equation for each part:

(Buffer Quantity + Replenishment Interval) x Adjusted Production quantity

Step 2: Calculate the kanban size Container Capacity
You will calculate the kanban container size based on your current condi-
Repeat this equation for each part of the process.
tions, not on future plans or desires. The initial calculations use the pro-

duction requirements, process productivity rate, planned downtime,

This equation determines the number of containers of each product you
changeover times, and system scrap rates to calculate the replenishment
will require to effectively operate the kanban and keep your customer(s)
interval. The replenishment interval is the smallest batch size your
supplied. These quantities become scheduling signals and indicate the
process can run and still keep the customer supplied. This tells you how

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maximum amount of inventory held. When the containers are full, you production schedule. They also should be simple and make sense to your

stop production. These calculations will form the basis of your kanban operation. You must spell out exactly who will perform what task, when

design. to get help, who to go to for help, and what the helpers will do when con-

tacted. To make your rules easy to understand, use pictures and diagrams

Step 3: Design the kanban where you can.

Once you calculate the quantities needed to support the production

requirements, you can design the kanban. The design will show you how

to implement the kanban in your facility. In order to create your design,

you will need to do the following:

Š Select the signaling mechanism for the kanban

Š Develop the rules for operation of the kanban
Š Create a visual management plan for the kanban Spell out the rules so there is no question as to the correct procedure

Setting up the scheduling signal means that you develop a signal that Once you have developed a signal mechanism and the rules, you need to

tells the production operators when to produce parts, change over, and determine how you will communicate the information. In order to com-

stop production. The signal can be cards, signs, objects on a fixed board, municate the information, you must create a visual management plan -

etc. The only requirement of your signal is that it is easy to understand which includes putting up signs, posting the rules, marking or taping

and easy to maintain. Your signals will indicate an emergency level (red), floors, posting job aids, etc. Here are a few hints to keep in mind:

the signal to schedule production (yellow), and the normal level (green). Š Make sure each signal explains only one course of action
Š Do not duplicate signals
Š Make signals easy to manage
See “Kanban Visual Signals” (p.16) to learn about more options for kan-
ban visual signals.
The visual management plan, will visually explain to (and constantly

remind) everyone how to operate the kanban. The goal of your visual
The rules you develop will drive the operation. The rules must be very
management system should be to constantly answer the questions that
detailed and give enough guidance to allow the operators to control the
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arise on a daily basis. It should tell someone where to get the materials One other key to keeping your visual management plan easy to use is to
they need, where to move things to, what color of container contains make sure your forms and signs are easy to update. They should look
what part, whether there more containers of the part located elsewhere professional and consistent so they are easy to follow, but always allow for
and if there is a color scheme. There are any number of questions that updates because you should constantly be striving for improvement.
will pop-up in any given day. Your visual management plan should do the

best job possible at answering those questions. Step 4: Train everyone

Train everyone on how the system will work and let them know what their

role is. Do this before you ever begin to schedule the kanban. A good

way to introduce everyone to the kanban is with a simple presentation.

Also give them “what-if ” scenarios to help them understand their roles in

the process. Keep in mind that not everyone needs to be a kanban expert.

Just train them well to carry-out their piece of the puzzle.

Large, simple signs bring consistency to your visual management plan

Keep in mind that you cannot over-communicate. Use signs, colors,

arrows, lines - anything to create order. You should always keep the col-

ors consistent, using a planned color scheme. It is a good idea to avoid

red because it is typically associated with safety or quality, and yellow Don’t underestimate the value of visual aids when you create a training
presentation to introduce the kanban.
which is generally associated with safety. Make sure you use large print on

your signs so they are easy to read, and avoid too many words on your

sign. Most people will just glance at a sign, not stop to read it.
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Step 5: Start the kanban to meet the expected demand. If you do not adjust the kanban at the

Once everyone is trained, make sure all of the visual management pieces beginning to fit with the forecasted demand, then you will continually have

are in place. Have the signals set up, control points marked, and the rules to intervene to adjust the quantities, rendering the kanban useless.

completed and in place before you begin the kanban. This will help you

avoid confusion.
Step 7: Improve the kanban
Anticipate problems, because every new process will show its faults, but Once the kanban is running smoothly, look for ways to improve it. Once

take action to correct those problems when you first implement the kan- you see it in action, you may be able to reduce inventory quantities. Look

ban. This stage is when you will develop a scheduling transition plan. at the kanban and identify quantities that were oversized and pull the con-

You’ll have to determine the exact point for the change and the amount of tainers that are not needed.

inventory required to make the change.

Step 6: Audit the kanban

After the kanban begins, you must then audit the kanban. This is the step

that most often gets overlooked and results in a failed start-up. When you

design the kanban, make sure you identify the person or team who will

audit it. This person will watch how the scheduling signals are handled

and whether the customer is staying supplied. A great way to reduce the kanban size is to reduce scrap. Make your goals known!

When a problem is discovered by the auditor, corrective action needs to be After you’ve made this adjustment, only reduce the quantities based on

taken immediately to maintain the integrity of the kanban design. The improvements made to the production process. Constant improvement is

auditor must also look at the future to make sure the kanban will be able a keystone to competitive success. You can improve the process by reduc-
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ing scrap, downtime and changeovers. When you do make more adjust- tainer travels with the production item. After the production item is used,

ments due to an improvement, don’t just guess the quantities. Use the the card, through whatever system is set up, travels back to the production

same calculations you used in sizing the original kanban (but with the new area and is placed ina cardholder rack where the operators can visually see

numbers) to determine the amount by which you can reduce the kanban when it is time to produce more of that item.

quantities.
2 - Look-see

Look-see uses floor markings or signs that tell you at a glance when to
Kanban Visual Signals replenish an item. If your containers go directly to the customer when
As mentioned earlier, there area numerous ways for you to set up your they are full, and the empty containers come back to you from the cus-
kanban visual signals. You may use one of the common types of visual tomer, then you can tell by the number of empty containers when it is
signals or come up with something specific to your facility that no one else time to produce. The use of color gives the visual signal at a glance.
has ever done. There are not necessarily any rules for what your visual Yellow means it’s time to replenish and red means you are in the danger
signals can or cannot be, they just have to work for you. The following zone. With this method, you can use containers, warehouse racks, or flow
are examples of some of the most common types of visual signals. lanes - whatever is most convenient to your operation.

1 - Kanban Cards

Kanban cards are most commonly thought of when discussing kanban

because it is the method that Toyota used when it introduced it’s kanban

scheduling system. A card does have it’s disadvantages, however, and

many people do not like this method.

Floor markings are helpful in a “look-see” kanban.

Basically, a card which identifies the part number and amount in the con-

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3 - Kanban boards scheduling at a glance.

Kanban boards are a variation of kanban cards. The board simply uses 4 - Two-card systems

magnets, plastic chips, colored washers, etc. attached to the board as a sig- Two card systems work well in situations where product rotation is impor-

nal. Each object represents a container or production item. It works like tant. This is a mix of the kanban board and kanban racks. It uses two

the kanban cards, but instead of chasing cards around a building, you are kanban cards to signal the product location and age and it typically used

moving objects around a board.. for large items where flow racks are not utilized.

The board will have three 5 - Faxbans (now emails)

main areas. You move Faxbans are a variation of the kanban card system. It used to be done by

the magnets to the area Fax, but now more often it’s email. The faxes or emails are used to order

on the board that coin- a replenishment of products when a plant is large or there are offsite

cides with the container it warehouses or vendors.

represents. When a con-

tainer is produced, the 6 - Electronic kanban

magnet is moved to the Electronic kanban is the “high-tech” version of the faxban. The electron-

“work in process” sec- ic kanban automatically transmits requirements or allows suppliers to

tion. When the container access the customer’s inventory status and ship replacement material. This
A kanban board is easy to use and
is taken to a workcenter, the has many advantages. method is not as visual as a kanban board or other look-see methods,

magnet should be moved to the “awaiting production” section. Finally, however it does have its place. Do not confuse this with your current

the “completed work in process” section is divided into red, yellow, and forecasting system. Even though this may seem similar to the method

green sections. The red gets filled with magnets first and green is last. your company uses now, it still needs to be based on demand, not a fore-

When you are in the red section, that means you must produce more cast.

because you are in the danger zone. This is a very simple method of
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 thing simple to begin with and go from there. It is probably not a good

7 - Warehouse racks idea to select a finished goods kanban as your first kanban project.

Racks are an effective storage method when paired with another system, Dealing with external variables of the customer/supplier relationship can

like a companion tracking system. The racks provide a neat, space friendly be tricky, so use a simple, internal process to learn the ropes.

storage area, and the tracking system provides easy visual management of

that Also, remember that a project of this undertaking should always be done

storage in a team. You need other people on board to get something like this

area. done. Choose your team wisely, educate them on the process, make sure

everyone is on the same page, and get them involved. Make sure the team

involves a cross-section of the company. Operators, material handlers,

supervisors, managers and schedulers all can have a positive effect on the
Warehouse racks are a good way to manage larger items as long as it process. Last, set deadlines for each step of the kanban.
is paired with a second visual tracking system.

Summary If you pay attention to details and keep the simple rules in mind, you will
There are, of course other methods, other combinations and other visual ensure success of your kanban. The steps that have been laid out for you
signals that may be useful to you in setting up a kanban. A kanban can be provide the foundation you will need. The only thing stopping you now, is
very simple, yet very useful. The biggest obstacle in implementing a kan- you. The best way to understand a kanban is to actually implement one,
ban tends to be fear. Fear of losing control or running out of material, as so use your team, use your resources, and go for it!
well as uneasiness about the ability of the operators, are common obsta-

cles that need to be overcome.

The first time you create a kanban will be a little unsettling, so it is a good

idea to select a target in your organization to try it on first. Choose some-

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