In today’s fast-paced business environment, it’s crucial for companies to have efficient systems in place for managing their inventory. One such system that has proven to be effective is the Kanban system.
Kanban is a method of inventory management that originated in Japan and is based on the principles of just-in-time (JIT) production. The goal of Kanban is to minimize waste, reduce inventory costs, and increase efficiency.
By implementing a Kanban system, companies can improve their inventory management, leading to increased productivity, reduced lead times, and improved customer satisfaction.
In this blog, we will discuss how to implement a Kanban system for inventory management.
Table of Contents
What is Kanban System?
The Kanban system is a method of inventory management that is based on the principles of just-in-time (JIT) production. JIT is a manufacturing philosophy that aims to minimize waste and reduce inventory costs by only producing what is needed, when it is needed.
The Kanban system was developed by Taiichi Ohno, an industrial engineer at Toyota, in the 1950s as a way to improve the efficiency of the company’s production process.
The word “Kanban” means “signboard” or “billboard” in Japanese, and that is exactly what the system is – a visual signal that triggers the production or movement of a product. Kanban uses a pull system, where inventory is replenished as it is used, rather than being pushed through the production process based on a predetermined schedule. This allows for a more efficient use of resources, as it reduces the amount of inventory that is held in stock, and it helps to prevent overproduction.
Kanban is often used in manufacturing environments, but it can also be applied to other areas of business, such as inventory management and service delivery.
The system uses cards or digital signals to represent the inventory items and their current levels, and it is typically visualized on a board or digital Kanban software. The Kanban system is designed to be flexible and adaptable, allowing for adjustments to be made as needed to improve efficiency and reduce waste.
Setting up a Kanban system
#1 Identifying inventory items and creating cards for each item
The first step in setting up a Kanban system is to identify the inventory items that will be managed using the system. This typically includes raw materials, work-in-progress items, and finished goods.
Once the inventory items have been identified, create a card for each item. These cards will be used to represent the inventory items and their current levels on the Kanban board or digital Kanban software.
#2 Determining the inventory levels for each item
After creating the cards, the next step is to determine the inventory levels for each item. This includes determining the minimum and maximum inventory levels for each item, as well as the target inventory level.
The minimum inventory level is the lowest level at which an item should be maintained, while the maximum inventory level is the highest level at which an item should be maintained. The target inventory level is the ideal level at which the item should be maintained.
#3 Setting up the Kanban board or digital Kanban software
The final step in setting up the Kanban system is to set up the Kanban board or digital Kanban software. The Kanban board is typically a physical board where the cards are placed and moved as inventory levels change.
Alternatively, a digital Kanban software can also be used to manage the inventory items. The Kanban board or software should be set up so that it is easily visible and accessible to all relevant parties, and it should be easy to update and move the cards as inventory levels change.
It’s important to note that Kanban system is a continuous improvement system, so it’s important to keep track of the inventory levels and adjust the system as needed.
Managing the Kanban system
#1 Using pull systems to replenish inventory
One of the key principles of the Kanban system is to use pull systems to replenish inventory. This means that inventory is replenished as it is used, rather than being pushed through the production process based on a predetermined schedule.
The pull system is triggered by a visual signal, such as the movement of a card on the Kanban board or a digital signal, indicating that an item needs to be replenished. This ensures that inventory is replenished only when it is needed, reducing waste and inventory costs.
#2 Tracking inventory levels and adjusting as needed
Once the Kanban system is set up, it’s important to track the inventory levels and adjust the system as needed.
This includes monitoring the inventory levels of each item, as well as the overall inventory levels, and making adjustments as needed.
This may include adjusting the target inventory levels, or implementing new policies or procedures to improve the efficiency of the system.
#3 Identifying and addressing bottlenecks in the system
Another important aspect of managing the Kanban system is to identify and address bottlenecks in the system.
A bottleneck is a point in the process where the flow of inventory is restricted. This can occur in any stage of the process, from production to delivery. By identifying bottlenecks and addressing them, the efficiency of the system can be improved and waste can be reduced. This may include implementing new policies or procedures, or making changes to the physical layout of the facility.
It’s important to note that the Kanban system is a continuous improvement system, so it’s important to continually monitor the inventory levels and make adjustments as needed.
It’s also important to involve all relevant parties in the process, such as production, procurement and logistics teams.
Measuring the success of the Kanban system
#1 Key performance indicators (KPIs) to track
To measure the success of the Kanban system, it’s important to track key performance indicators (KPIs). These may include inventory turnover, lead time, on-time delivery, and customer satisfaction. These KPIs will provide a measurable way to track the performance of the system and identify areas for improvement.
#2 Analyzing data to identify areas for improvement
After tracking the KPIs, it’s important to analyze the data to identify areas for improvement.
This may include identifying trends or patterns in the data, such as high inventory levels for certain items or frequent stockouts of others. By analyzing the data, it’s possible to identify the root causes of problems and make adjustments as needed.
#3 Continuous improvement and making adjustments as needed
The Kanban system is a continuous improvement system, so it’s important to make adjustments as needed to improve efficiency and reduce waste.
This may include implementing new policies or procedures, or making changes to the physical layout of the facility. It’s also important to involve all relevant parties in the process, such as production, procurement, and logistics teams.
It’s important to note that the success of the Kanban system relies on continuous monitoring, measuring, analyzing and improving the system. This will help to ensure that the system is able to adapt to changes in demand and production, leading to a more efficient use of resources and improved customer satisfaction.
Summary
In summary, the Kanban system is a powerful method of inventory management that has been proven to be effective in reducing waste, reducing inventory costs, and increasing efficiency. By implementing a Kanban system, companies can improve their inventory management, leading to increased productivity, reduced lead times, and improved customer satisfaction.
Some of the key benefits of using Kanban for inventory management include:
- Reducing waste by only producing what is needed, when it is needed
- Reducing inventory costs by minimizing stockouts and overproduction
- Improving efficiency by using pull systems to replenish inventory
- Improving customer satisfaction by ensuring that inventory is available when it is needed
We encourage companies to consider implementing a Kanban system for their inventory management. By doing so, they can see firsthand the benefits that this system can provide and take their inventory management to the next level.
