The Kan-ban system

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What is Kan-ban ?

"Kanban" is an inventory scheduling system originally developed by the Japanese but now used worldwide. The main objective of kanban is to reduce inventory costs. This is achieved by moving inventory only as and when needed. The system is used in many manufacturing and service companies. This includes car manufacturers, supermarkets, fast food chains, retail chains and pharmacies. Kanban places an increased emphasis on quality production, low variability and tight schedules. Companies following kanban have developed it to suit their own production processes. Employees are trained to familiarize them to the specifics of the kanban process as used within their organization.

Kanban is a signaling system to trigger action. As its name suggests, kanban historically uses cards to signal the need for an item. However, other devices such as plastic markers (kanban squares), balls (often golf balls), an empty part transport trolley, or simply a floor location can also be used to trigger the movement, production, or supply of a unit in a factory.

The need to maintain a high rate of improvements led Toyota to devise the kanban system. Kanban became an effective tool to support the running of the production system as a whole. In addition, it proved to be an excellent way for promoting improvements because reducing the number of kanban in circulation highlighted problem areas.

What Kanban Is Not

A Kanban system does not tell you how to get your work done. It will not ask you to change the value-add steps in your process or tell you how to add value to work in process (WIP). It does not tell you how to hand off the WIP between various steps, how those steps interact, what those steps should be, or what order the steps should be performed in.

"Kanban is about the notion that 'your system is truly different' and 'we will not impose a process upon you.'" - David Anderson.

Kan-Ban Systems

The Kanban System was developed (more than 20 years ago), by Mr. Taiichi Ohno, a vice president of Toyota, to achieve objectives that include [4]:

  • reducing costs by eliminating waste/scrap
  • try to create work sites that can respond to changes quickly
  • facilitate the methods of achieving and assuring quality control
  • design work sites according to human dignity, mutual trust and support, and allowing workers to reach their maximum potential.

"Kanban" uses the rate of demand to control the rate of production, passing demand from the end customer up through the chain of customer-store processes. In 1953, Toyota applied this logic in their main plant machine shop

Why Kanban?

Dramatic changes away from high product throughput and high capacity loads towards the new idea of lower production times and work-in-progress have lead to the idea of incorporating Kan-ban Systems in manufacturing industries (most notably in automotive industries).

These systems are most commonly used to implement the pull-type control in production systems with aims at reducing costs by minimizing the W.I.P. inventory.

This allows an organization the ability to adapt to changes in demand, and therefore production more quickly.

A pull-type production line is a sequence of production stages performing various process steps on parts where each stage consists of several workstations in tandem. The flow of parts through the overall facility is controlled by a combined push/pull control policy, which is established by the Kan-bans.

A push-type policy is used for producing parts within each individual production stage.

However, parts are pulled between the production stages in accordance with the rate at which parts are being consumed by the downstream stages.

Function of Kan-Ban

"Kanban" is a system used for inventory scheduling in companies that follow Just-in Time (JIT) or lean production methods. Kanban means "card" in Japanese, and the system uses a card or some other signal to indicate the time has come to move inventory from one area of the production process to another. This process of moving inventory through the plant only when it is needed in the different areas is called the "pull" system. A good example of the pull system is the movement of inventory in a supermarket. When customers buy products from the shelves, the managers make note of the material in stock; empty shelves serve as triggers to "pull " in stock from the warehouses or materials suppliers. Thus products or materials are moved only when needed.

Kanban, by contrast, is part of an approach of receiving the "pull" from the demand. Therefore, the supply or production is determined according to the actual demand of the customers. In contexts where supply time is lengthy and demand is difficult to forecast, the best one can do is to respond quickly to observed demand. This is exactly what a kanban system can help: It is used as a demand signal that immediately propagates through the supply chain. This can be used to ensure that intermediate stocks held in the supply chain are better managed, usually smaller. Where the supply response cannot be quick enough to meet actual demand fluctuations, causing significant lost sales, then stock building may be deemed as appropriate which can be achieved by issuing more kanban. Taiichi Ohno states that to be effective kanban must follow strict rules of use (Toyota, for example, has six simple rules, below) and that close monitoring of these rules is a never-ending task to ensure that the kanban does what is required.

Toyota's six rules

  • Do not send defective products to the subsequent process
  • The subsequent process comes to withdraw only what is needed
  • Produce only the exact quantity withdrawn by the subsequent process
  • Equalize production
  • Kanban is a means to fine tuning
  • Stabilize and rationalize the process

Push System

Consider a bakery supplying to supermarkets. The first assumption is that the company is not following the kanban system and has negotiated a deal with the supermarkets that it will supply 100 units of baked goods per week irrespective of demand. Therefore this company has to maintain sufficient inventory in terms of raw materials and finished goods to supply the markets. In this case the company has to produce at a constant rate. If there are problems at any point in the production process, it is not easy to detect it during the production.This system is an illustration of the "push" system. The company first produces goods and then "pushes" it to the market. So the inventory flow is the same; each production unit gets inventory pushed into it whether it is needed or not.

Pull System

On the other hand, if the bakery has adopted the kanban system, then it will refill the stock only as and when the "pull" has been generated. In other words according to customer demand. So when the demand is less, production is less and vice versa. Now if there is some contaminant while making the baked goods, because the inventory throughout the production process moves only as and when needed, it is more easily detected and fixed. Say the dough in a particular batch is faulty; when the company is using kanban it is operating with smaller units at any given time so the faulty dough causes minimum loss. If the company was not using kanban the dough would have affected all the 100 units being produced, causing a greater loss.

Types of Kan-bans

The two most common types of Kan-bans used today are:

  1. Withdrawal (Conveyance) Kan-ban
  2. Production Kan-ban

Withdrawal (Conveyance) Kan-ban

The main function of a withdrawal Kan-ban is to pass the authorization for the movement of parts from one stage to another.

Once it gets the parts from the preceding process and moves them to the next process, remaining with the parts until the last part has been consumed by the next process.

The withdrawal Kanban then travels back to the preceding process to get parts thus creating the cycle.

A withdrawal Kanban usually carries the following information:

  • part number
  • part name
  • lot size
  • routing process
  • name of the next process o location of the next process
  • name of the preceding process o location of the preceding process o container type
  • container capacity
  • number of containers released

The withdrawal Kan-ban layout can be designed many ways in order to display this information.

A Withdrawal Kanban - specifies the kind and quantity of product which a manufacturing process should withdraw from a preceding process. The withdrawal Kanban illustrated (right) shows that the preceding process which makes this part is forging, and the person carrying this Kanban from the subsequent process must go to position B-2 of the forging department to withdraw drive pinions. Each box of drive pinions contains 20 units and the shape of the box is `B'. This Kanban is the 4th of 8 issued. The item back number is an abbreviation of the item.

Sample Below

Product Kanban is the most straightforward form of Kanban. It can take a number of forms but essentially does the same job. Production or materials ordering upstream is only carried out when a downstream operation signals it is needed i.e. a component is used downstream and it is simply replaced. The signal may be a painted square on the ground (when the square is empty of components then that is the signal to produce upstream), a card (when a component is used a card is passed upstream) or even so-called fax-ban or e-ban. Whatever the signal the effect is the same when a set number of components are used (1 - 10,000 depending on the component) then and only then will upstream operations receive the authority to begin production or order a specified number of that component to fill the requirement.

Production Kanban

The primary function of the production Kan-ban is to release an order to the preceding stage to build the lot size indicated on the card.

The production Kan-ban card should have the following information

  • materials required as inputs at the preceding stage
  • parts required as inputs at the preceding stage
  • information stated on withdrawals Kan-ban

The first two pieces of information are not required on the withdrawal Kan-ban as it's only used for communicating the authorization of movement of parts between work stations.

A Production Kanban - specifies the kind and quantity of product which the preceding process must produce. The one illustrated (right) shows that the machining process SB-8 must produce the crankshaft for the car type SX50BC-150. The crankshaft produced should be placed at store F26-18. The production-ordering Kanban is often called an in-process Kanban or simply a production Kanban.

Flow of Kan-ban-Controlled Production Lines

A kan-ban system consists of a tandem network of work stations, N, distributed amongst S production stages.

Each production stage consists of one or more workstations and each has an unlimited local buffer for storing unfinished parts.

In a production stage i, there are Ki kan-bans and Ni work stations.

In order for a part to enter into production stage i, it must first acquire a free kan-ban (withdrawal kanban), Ki .

Once the part has entered the work station, it receives a new production kan-ban which remains attached to the part while until all work steps associated with the kan-ban card have been completed.

Once the part has completed the stage, the production kan-ban is removed once a withdrawal kan-ban becomes available.

The part is then moved to the output buffer where is awaits a new kan-ban to move pull it along to the next production stage (i + 1).

The kan-ban that was associated with the finished part is removed as soon as the part has been withdrawn by the next stage downstream.

The newly unattached kan-ban is then returned to the input buffer where it serves as a pull signal for the upstream stage (i - 1).

The kan-ban system produces only one type of part and performs under the assumption that an unlimited supply and demand of raw materials and finished products exists.

As a result of this assumption, no input buffer is necessary for the initial stage while no output buffer is required at the final stage.

For a kan-ban system to operate at its maximum efficiency, it is best to use pre-determined lot sizes for the production of all parts.

This allows you to minimize the setup and production costs as much as possible in this type of system.

When and How Kanbans are effective

Kanbans help simplify planning and to fine-tune production to meet changing customer demand of up to + or - 10%. The system requires planned monthly and weekly production schedules. Kanbans simplify day to day flexibility, and changes to the production schedule need only to be given to the final assembly process and will then automatically work their way back up the line. Kanban systems can be tightened by removing cards or by reducing the number of parts on a pallet. The effect will be to speed the flow through the process and hence reduce lead times. However it also makes the system more vulnerable to breakdowns and other causes of dislocation. By identifying the areas within the line that are causing disruption, efforts can be made to improve them. Thus the overall efficiency of the line is raised by tackling the key points.

Other types of Kanban also used are Supplier Kanbans - to withdraw goods from external suppliers, and two types of Signal Kanban, which are inserted near the bottom of a stack of items. These automatically initiate production of batch produced items when the stock reaches a pre-set re-order level.

Cumulative Flow Chart in Kanban: Real Usage Example

You can see in the chart that we had a bottleneck in the beginning of December. It was caused by a quite complex user story. In theory a single user story should not affect cycle time significantly and should not create bottlenecks, but if you violate some rules it might be the case.

Kanban Rules

  1. A Kanban signal is only issued when the component it represents is used.
  2. No Kanban no part (i.e. components are only made or issued when a Kanban exists).
  3. Only good components are issued.
  4. No over production
  5. Components are only manufactured in the order the Kanban cards are received (unless emergency Kanban's are in use).
  6. Components are only manufactured / issued in the number specified by the Kanban.
  7. The number of Kanban cards should be reduced over time and the problems that are encountered by doing this should be tackled as they are exposed.

Calculating the number of cards

The number of Kanbans required can be calculated as follows.

Number of Kanbans = (Demand in period x Order Cycle time x Safety stock) ÷ Batch size (or container quantity)

Kan-Ban Preconditions

Kan-ban is a essentially a tool that can be used to manage a work place effectively.

As a result of its importance in the work place, six rules (or preconditions) have been developed to govern the operation of a kan-ban system.

They are as follows :

  1. no withdrawal of parts without a kan-ban
  2. the subsequent process comes to withdraw only what is needed
  3. do not send the defective part to the subsequent process
  4. the preceding process should produce only the exact quantity of parts withdrawn by the subsequent process (ensures minimum inventory)
  5. smoothing of production
  6. fine tuning of production using kan-ban

These rules are quite self-explanatory. For more information, refer to the reference indicated.

Other types of Kanbans

We also found three other types of kan-bans that exist for special circumstances only.

They are discussed briefly as follows:

  1. Express kan-ban - used when shortages of parts occur
  2. Emergency kan-ban - used to replace defective parts and other uncertainties such as machine failures or changes in production volumes
  3. Through kan-ban - used when adjacent work centers are located close to each other. It combines production and withdrawal kan-bans for both stages onto one, through, kan-ban.


Traditionally in factories the need for parts in one area was signaled by using a "card," hence the name "kanban." Today, even though the system is still called kanban, many facilities do not use cards but instead use flags, signal lights, or designated areas becoming empty as indicators that the inventory is needed. Usually the cards or the signals serve as indicators that one unit of inventory is needed by that part of the production. Thus inventory movement at any given time throughout the production facility is in small unit sizes.


The containers or the unit size of the inventory that is moved each time usually supplies only a few hours of production. Therefore, if supplies are inferior or a machine malfunctions, only a limited amount of faulty items are produced and problems are identified faster when they occur.

Buildup of inventory is a serious issue in companies. Inventory has various costs associated with it including storage costs, wastage costs, spoilage, theft and loss of demand. When companies follow constant rates of production irrespective of the "pull," they are following a "push" system. An example would be manufacturing clocks and then hiring sales people to market and sell the clocks. The inventory of clocks in this case would be a liability. By using kanban, companies reduce the buildup of inventory and thus reduce costs.


Kanban requires a very tight schedule of operation. Because the inventory at hand is low the margin for error is also low. The process of production must operate with minimum variability because defects impact the entire system. If the required inventory is not moved as and when needed, the lead times are affected and the entire production line is affected. Kanban places a lot of emphasis on meeting schedules, reducing setup costs, reducing lead times in production and economic handling of materials. Kanban as a process is adopted differently according to each industry and organization. Kanban is highly specialized according to the individual organization, therefore there are no standard education and training manuals. Though the concepts of kanban remain similar across industries, each organization develops its own method of training its employees in this process.


There are many advantages to using the JIT philosophy.

Among the basic advantages of JIT are reduced finished goods and WIP inventory levels, shorter product flow times, and increased worker productivity allowing for lower production costs, and greater production customer responsiveness.

JIT objectives are met by using pull-based production planning and control systems.

The best known form of pull-control is our kan-ban control.

Kan-ban is a simple-to-operate control system, which offers the opportunity to delegate routine material transactions on the shop floor.

A number of attractive qualities contribute to the growing popularity of kan-ban control.

Kanban is simple (mechanically) and relatively inexpensive to implement and operate.

Simply determining the quantity and location of kan-bans controls the amount of inventory.

It is a distributed control system, where complex system behaviour is controlled by simple local rules.

Visual controls provide a direct form of communication and make clear what must be done by managers, supervisors, and operators.

Perhaps the most attractive aspect of kanban, and the one that often makes it difficult to implement, is its 'requirement for, and facilitation of, environmental improvement.'

The reduction of WIP and visual control makes problems more noticeable.

This supports the saying that in order to eliminate waste, you must find it first.

The tighter coupling between processes creates a dependence, which is lacking in many push environments and forces awareness to problems.

Despite many sources of attractiveness, kan-ban control is not without its drawbacks.

Kan-ban is often cited as being applicable only in certain environments.

Issues of kanbans appropriateness in a particular production system revolve around general operating characteristics as well as environmental conditions.

The general operating characteristics required can be summarized as the repetitive manufacturing of discrete units in large volumes which can be held relatively steady over a period of time.

It is stated that kan-ban is difficult, or impossible to use when there are:

  1. job orders with short production runs, or
  2. significant set-ups, or
  3. scrap loss, or
  4. large, unpredictable fluctuations in demand.

Even in spite of these problems, kanban will be the system many companies will and should use in the near future.

Even in trying to establish an effective kan-ban, one must consider availability of relevant system information.