Kanban is a pull system of continuous supply of parts to the production line. The simple efficiency of the system ensures that workers have what they need, where they need it, when they need it.
The word Kan means "visual" in Japanese and the word "ban" means "card.” Kanban refers to "visual cards.” Visual cards trigger action.
Here's how Kanban works:
Let's say one of the components needed to make widgets is a 42" stem-bolt and it arrives on pallets. There are 100 stem-bolts on a pallet. When the pallet is empty, the person assembling the widgets takes a card that was attached to the pallet and sends it to the stem-bolt manufacturing area. Another pallet of stem-bolts is then manufactured and sent to the widget assembler.
A new pallet of stem-bolts is not made until a card is received. This is Kanban, in its simplest form.
A more realistic example would probably involve at least two pallets. The widget assembler would start working from the second pallet while new stem-bolts were being made to refill the first pallet.
If this was a high volume widget manufacturing facility, each widget assembly station might empty a pallet of stem-bolts in just a few minutes, and there could be 15 or 20 widget assembly stations. Thus there would be a continual flow of cards going back to the stem-bolt manufacturing area that would cause a continual flow of pallets of stem-bolts to be sent to the widget assembly stations.
Kanban is Pull (Demand)
Kanban is a "pull" type of production system. The number of stem-bolts that are made depends on the customer demand. In other words the number of cards received by the stem-bolt manufacturing area.
Systems other than cards may be used. For example, the empty pallets may be returned to the stem-bolt manufacturing area. Each empty pallet received indicates a need to manufacture 100 more stem-bolts. For other types of components, bins, boxes or cages might be used instead of pallets. Or components might be stored on shelves in the widget assembly area. When a shelf became empty that signals that more components need to be manufactured and the shelf refilled.
In Kanban the method of handling the components is flexible, and depends on the needs of the manufacturing process.
An Alternative Kanban Model
Kanban operates similarly to a supermarket. A small stock of every component needed to make a widget would be stored in a specific location with a fixed space allocation for each component. The widget assemblers come to the "supermarket" and select the components they need. As each component is removed from the shelf, a message is sent to a "regional warehouse" or component manufacturing facility, requesting that the component be replaced. The "supermarket" might then receive a daily shipment of replacement components, exactly replacing those that were used.
This "supermarket" model is different from the first Kanban example in that it would be used when components are manufactured in facilities that are distant from the widget assembly plant. Instead of moving around small quantities of components, larger quantities are shipped once a day to the centralized warehouse.
Kanban - Responsive to Customers
Kanban results in a production system that is highly responsive to customers. In the above example, the production of widgets will vary depending on customer demand. And as the widget demand varies, so will the internal demand for widget components. Instead of trying to anticipate the future (predicting the future is difficult), Kanban reacts to the needs.
Kanban does not necessarily replace all existing material flow systems within a facility. Other systems such as Materials Requirement Planning (MRP) and Reorder Point (ROP) may remain in operation. Kanban is most beneficial when high volume/low value components are involved. For low volume and high value components, other materials management system may be a better option.
JIT - Just in Time / Continual Improvement
Kanban is directly associated with Just-In-Time (JIT) delivery. However, Kanban is not another name for just-in-time delivery. It is a part of a larger JIT system. There is more to managing a JIT system than just Kanban and there is more to Kanban than just inventory management.
For example, Kanban also involves industrial re-engineering. This means that production areas might be changed from locating machines by function, to creating "cells" of equipment and employees. The cells allow related products to be manufactured in a continuous flow.
Kanban involves employees as team members who are responsible for specific work activities. Teams and individuals are encouraged participate in continuously improving the Kanban processes and the overall production process.