Kanban is based on the Lean Manufacturing principle of "pull" – or demand-based
replenishment and goods creation. For most organizations, this means driving production
and replenishment based on customer demand and exceptions from the forecast. Instead
of using a forecast to drive all production and supplier orders, the forecast is
used to identify major spikes or declines in usage that are typically caused by
product introductions and phase-outs, promotions and new customer wins. In a pull
system, consumption information from the manufacturer is sent to the supplier (or
supplying work station) to replenish material that has been consumed, replacing
the inventory as it is used.
Kanban.com Supply Chain uses this pull system for raw material and purchased
components replenishment.
Kanban helps reduce inventory by ensuring that only the material you use is re-ordered,
making sure that you have enough of the right material and none of the wrong material
on-hand. Because Kanban is a simple visual system, everyone in the plant can identify
potential stock-outs before they happen so fewer stock-outs occur.
Once a Kanban system is set-up, material replenishment follows a consistent, repeatable
process. As material is consumed, Kanban cards are sent to the upstream supplying
location and once the material is produced, both the material and the Kanban card
are sent to the downstream customer. Electronic Kanban operates in much the same
way, except, when material is consumed, a Kanban barcode label is scanned. Suppliers
can then acknowledge orders and later send advanced shipping notices and print out
Kanban labels using an online portal. Once the shipment arrives at the customer,
the label can be scanned to receive the material into stock and the process is ready
to begin again.
In either manual or electronic Kanban, manufacturers will still review their forecast
regularly to identify major spikes or drops in demand. As these spikes are identified,
Kanban cards can either be added or dropped from the system to ensure that inventory
levels remain in sync with the new expected ordering pattern.
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