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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