Kanban as a Lean Pull Signal: A Practical How-To Guide
In Lean production, a kanban is a signal -- typically a card, bin, or electronic signal -- that authorises the production or movement of a specific quantity of material. The word is Japanese for "sign" or "signboard." Kanban is the mechanism by which a pull system operates: rather than pushing materials through a process based on a production schedule, a pull system produces and moves materials only when a downstream process signals that it is ready to receive them.
Kanban is one of the foundational tools of the Toyota Production System, but it has been widely adopted beyond manufacturing -- in service delivery, software development (where it is applied as a workflow visualisation and work-in-progress limiting tool), logistics, and healthcare operations. Here is a practical guide to designing a kanban system.
The Problem That Kanban Solves
In a push system, each process step produces as much as it can and sends it downstream, regardless of whether the downstream step is ready to process it. This creates large queues of work-in-progress inventory between process steps -- inventory that represents cost, hides problems, and increases lead times. In a pull system, each process step produces only what the downstream step has requested. Kanban is the signal mechanism that makes this possible.
Designing a Two-Bin Kanban System
Identify the item to be controlled. Kanban is most effective for items that are consumed regularly and predictably. High-velocity, predictable-demand items are good kanban candidates. Irregular, low-volume, or highly variable-demand items are better managed by other methods.
Calculate the reorder quantity. The kanban quantity should cover demand during the replenishment lead time, plus a safety buffer. The formula is: kanban quantity = (average daily demand x replenishment lead time in days) + safety buffer. The safety buffer accounts for demand variability and replenishment variability.
Design the two-bin system. In a two-bin kanban system, each item has two containers (bins). The working bin is used until it is empty. When the working bin is empty, the empty bin triggers replenishment (the kanban signal). The reserve bin becomes the working bin while replenishment occurs. Replenishment refills the empty bin, which then becomes the reserve.
Make the signal visual and unmissable. The kanban signal should be impossible to overlook. A physical kanban card or an empty bin is visible; a note in an email is not. In a service or office environment, a visual management board (a kanban board) with columns representing process steps and cards representing work items achieves the same pull effect.
Set the work-in-progress (WIP) limit. In a kanban system, the number of kanbans in circulation limits the amount of work in progress. Reducing the number of kanbans (or the WIP limit on a kanban board) reduces work in progress and highlights process bottlenecks that were previously hidden by inventory buffers.
Review and adjust regularly. Kanban quantities and WIP limits should be reviewed regularly -- typically monthly or quarterly -- as demand patterns change. A kanban quantity that was correct when the system was designed may be too high or too low after demand shifts.
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