Kanban Systems selection design implementation and operation

This article describes the 8 types of Kanban system available and what you need to do to choose, design, implement, and operate Kanban systems, size buffer stocks (the number of Kanbans), choose containers and signalling mechanisms. It shows the need to integrate the system with your planning systems. It includes the impact on people, accounting, materials handling systems and some important do's and don'ts. This type of system belongs to a category of materials management systems called "pull" systems. (See Materials Management & Stock Control.)

Links to related training and further reading on left

Types of Kanban Systems

You may previously have thought that there was only one, or maybe two types of Kanban system! In fact there are 6 main types, (plus two significant variants), (excluding 2 bin & 3 bin systems) and here they are:

One card systems

The Pull Loop

In the above diagram:

A signal is sent back from the consuming process to supplying process (or supplier). This is a signal:

To send some more (a transfer batch), via a buffer stock.
To produce some more (a process batch), at the supplying work centre.

NB. Empty containers acting as a signal are a potential hazard as any empty container is a signal to fill it. Also occasionally containers have been known to go missing! Usually, for these reasons, the signal is separated from the container.

Input / Output Control Kanban (Two variants)

Sometimes called the ConWip (constant work in process) system, this type imposes input / output control, where the signal travels directly from the end of a line or section to the preceding section or raw material stores. In this case the supply chain is treated as one unit rather than a series of linked operations. So, as one transfer batch is completed (output) another is launched on the first operation (input), thus ensuring that work in process cannot build up. However there are some special considerations required in the operation of the system, to avoid hidden capacity problems, which are not so clearly visible when this method is used.

We have used adaptations of this system to manage workflow and capacity rather than materials in a number of environments including job shop & clerical / technical process environments.

Kanban Accumulator

In this method Kanban signals are allowed to accumulate at the supplying work centre until the production batch size is reached.

In this case buffers can be depleted or exhausted depending on the accumulation rules. Also because buffers can be exhausted, slightly higher mixes can be accommodated.

Dual Card System (2 Card System) (Two variants)

First used by Toyota, there are in fact now two types of two card system. The first method separates the replenishment (send some) signal, which is produced from the Kanban system, from the "produce" signal, which is produced by a scheduling system such as MRP. The purpose of each of the cards is as follows:

The scheduling system says which job is next.
The Kanban says make it now. (I need some.)

The second variant of this method generates the second card (after authorisation) as a result of one or more replenishment requests in a similar way to Kanban accumulators above.

These methods can deal with higher mixes. They can also deal with larger batch sizes, caused by long changeovers, where scheduling is necessary, although you should be trying to reduce batch sizes (See Previous Technique: T019 Avoiding set ups and Reducing Changeover Times). In this case the buffer is depleted, and can be exhausted. In addition a longer planning system such as MRP1 (See "Levels of Planning & Control") is also necessary to that the system is durable. Kanban systems operate at level 3 in this model.

Variable Quantity (fixed frequency) System

In some situations it is more convenient to replenish items used, by fixed frequency deliveries (or collections), rather than respond to fixed quantity replenishment requests. This method forms the basis of supplier "top up at point of use" systems, where a supplier visiting your point of use will top up stocks to a predefined maximum level. We have also used this method as the mechanism to drive "replacement systems" for maintaining stocks of critical spares items or maintaining "van stock" for on-the-road service engineers. (See Previous Techniques T015: Replacement Systems).

Also it is often better from a capacity viewpoint to use level scheduling techniques, (see Previous Best Practice B005: Level Scheduling) to smooth demand, particularly in one-to-many supply chains (see below). (Also see Principle 4, of Lean Supply Chains: 13 Principles)

POLCA System

("Quick Response Manufacturing" Rajan Suri)

This is mentioned for completeness only and is said to be prescribed for high-mix, variable-route, situations. However at this point, in our opinion, it is worth considering other simplification techniques (see "Organisational Redesign"), or as a last resort, the use of scheduling tools (See "Advanced Planning & Scheduling").

Attributes of Kanban Systems

Some champions of Kanban Systems suggest that the system is universally applicable and has no disadvantages. This is not true! There are some circumstances where they can be positively harmful. Also if they are not designed and managed correctly, disastrous! We have rescued several, and in two cases the system was responsible for accumulation of serious customer backlogs! The system does have advantages and disadvantages and some of these are:

Advantages

Low fixed stock (number of Kanbans in system)
Low lead-time
Quality problems visible
Highly stable

Disadvantages

Inflexible (transfer batch fixed, except with "Variable Quantity Systems" above)
Can cause stoppages (often viewed as an opportunity to solve a problem)
Highly stable! (But you may need to change due to changes in demand for example, or it may be an unstable environment). Pull systems do not plan. They react!

Where appropriate

The technique can be applied to any pair of resources, or pairs in a series of resources (including clerical operations), where one feeds the other. It is important to choose suitable pairs. However you also need to be careful to select the appropriate Kanban system for your situation. Some systems are more appropriate to particular situations. In particular the mix, variability, and numbers of resources in the supply chain network (e.g. one-to-many, many-to-many, many-to-one) are key. Also there needs to be a method of handling small orders or prototypes (not difficult if thought about at the start). (See Previous Readers Question Q019: When is Kanban not Appropriate? Do I need extra equipment?). There are also some prerequisites which you need to consider such as having a planning process which is integrated with the Kanban system. (See " Participative Sales & Operations Planning"). If this is not done the system will eventually fail!

Note:

Just because your end product or service is not suitable, it is possible that some aspect or segment of your business may be suitable. It is quite possible and sensible to segment control systems to suit the needs of different parts of a business. The skill is in selecting suitable segmentation strategies. But we have seen a number of examples of the "one size fits all" philosophy being positively damaging!

Kanban systems are one type of control system out of many, which may be appropriate for you. How to choose control systems is discussed in the training course: "SSC02 Material Control Process Selection". You can also use our expert system to determine which you need, by completing our confidential free questionnaire in " What Control Systems do I need?". (This service is not available to consultants.)

Kanban System Design

Kanbans and Capacity

If the Kanban system is incorrectly designed it can significantly reduce output, by causing the system to stop unnecessarily even though there is still unsatisfied customer demand! (See the question at the end of the article on "Lean Manufacturing".) This can be avoided in a number of ways.

Kanban systems if overloaded will simply not be able to service replenishment requests.

Supply Chain Design

Before attempting Kanban implementation in anything but the simplest situation the supply chain must be defined. Unless a fixed method comprising of stable relationships between supplying resources and consuming resources can be defined, there is no basis for a replenishment system based on Kanban. The first mistake made by early Business Process Reengineering (BPR) / cellular manufacturing exercises was to assume that the successive operations had to be physically relocated. They do not! Indeed in some circumstances it is counterproductive, and certainly an expensive exercise which is hard to justify and difficult, if not impossible, to implement in some circumstances. (See Previous Readers Question Q019: When is Kanban not appropriate? Do I need extra equipment?). However in a FMCG manufacturing plant implementation, a sophisticated overhead moving gantry system was replaced with work trolleys, a classic case of removing complexity. This was made possible by aligning the processes first so that materials movement was reduced. I.e. The need for transport & thereby the need for sophisticated materials handing was removed.

The process of designing the supply chain follows the principles of BPR (see " Organisational Redesign"), but it is generally not a simple task.

Positioning of buffers

Buffers can either be:

Held at the supplying workstation
Held centrally
Held at the consuming work station

Economies of scale, numbers of supplying and receiving work centres, or simply available space, may need to be considered here.

Buffer sizing (Number of Kanbans in the system)

There are two schools of thought on Kanban buffer design:

To over-specify the buffers and remove Kanbans one at a time (in operation) to identify system constraints which need to be overcome.
To design the buffers to accommodate known constraints, and the observed statistical variation in supply and / or demand caused by variables whilst working on them.

We subscribe to the latter approach having seen significant operational difficulties arising out of the former. One example was a new production line with only limited inter-operation space. Unfortunately the process capability was initially very poor resulting in large queues of work waiting for rework. The resultant chaos was an island of machines surrounded by a sea of WIP. Also if you remove one Kanban too many you can stop output unnecessarily.

In another case we were implementing a Kanban system in a bicycle manufacturing company. We trained the shop floor supervisors in the technique one afternoon. The following day a supervisor came up to us and said "We have implemented that Kanban System you told us about yesterday, but there is a problem. Will you come to help us?" Amazed and intrigued by this statement we went to the section where the cycle frames were being welded. Each welding booth was in line for successive welding operations, with a chalk-mark square on the floor between each booth, which if empty was intended to signify that another frame was required by the downstream operation. The WIP present the previous week had gone and everyone was working very hard. "So what is the problem" I asked? "Well", replied the supervisor, "when the first operator puts the frame in the empty square the second operator burns his hand when he picks it up." This was a sobering lesson in correct buffer sizing. The solution in this case was to have two frames in the square, to allow each to cool before the next operation.

A further popular misconception is that you only have to calculate the number of Kanbans at the outset of implementing your system. This is false! Kanban populations must be regularly reviewed and adjusted in all but the most stable situations.

Buffers and Bottlenecks

Bottlenecks have a significant effect on Kanban system design. In particular the position of the bottleneck in the supply chain is important to buffer size calculations.

Buffer Size Calculations

The buffer sizing calculation is governed by provisions for:

1. Variables still remaining in the system such as:

Demand changes

Lead-time (see below)

Breakdowns

Preventative maintenance

Absenteeism

Quality problems (rework etc.)

And the risk of changes occurring at the same time, or in quick succession.

2. The mix

Higher mixes, if buffers are to be maintained, require higher buffers (to last while the item is not being supplied). The calculation is dependent on batch sizes, set up times, and the mix, but can be minimised by employing the techniques described in " Organisational Redesign", and selecting the appropriate Kanban system, or the use of a combination of Kanban systems.

3. Transport time

This is the time from production of a batch at the supplying resource to the arrival at the consuming resource.

You cannot operate "Just in Time" if your supplier is in Japan, and you are in the UK, or in Northern India if your factory is in the South in the monsoon season. This consideration on a smaller scale applies to all movements, but in particular applies to inter-site movement and other difficult transport situations.

4. Container fill-time

Small is beautiful as far as containers are concerned in Kanban systems. However it still may take some time to fill a container before supplying the consuming resource, for which time there needs to be a buffer.

5. Signal time

Slow signals require bigger buffers. However "electronic Kanbans" provided by some ERP software providers are rarely required except for inter-site transfers and even then they are hard to justify over fax, email, or other methods.

6. Automated materials handling systems

When calculating automated materials handling storage capacities & traffic rates managed by Kanban systems, further considerations are necessary, which we will not go into further here.

Supplied as part of our training course M01 Designing, Implementing and Operating Kanban Systems is a Microsoft Excel® Kanban calculator template, which you can use to help you to calculate the number of Kanbans required.

Container sizes (transfer batch sizes)

This is largely a question of convenience. Again, small is beautiful for containers in Kanban systems. However there is a trade off between small containers and traffic generated by the number of containers.

Prioritisation

It may be necessary to prioritise the work of the supplying resource(s), since they may receive replenishment signals from more than one consuming resource simultaneously. Prioritisation is possible using a Traffic Light (RAG) system. (See Previous Technique T036: Traffic Light (RAG) systems)

Signalling mechanisms

Almost every signalling mechanism devised by mankind has been used to signal a replenishment request. Ones we have used include: Coloured lamps, cards, "lego", "sticklebricks", faxes, electronic automated materials handling equipment, empty containers, chalk squares on the floor, in trays, magnetic blocks, coloured labels on a rack, rings on a peg, voice, EDI, kitting trolleys, work trolleys, kitting trays, potato hoppers, re-usable packaging, shipping containers and articulated trailers.

The considerations in this decision include distance, speed, volume and complexity of the signals.

Sanity checking

When the design is mathematically complete it needs to be sanity checked. This can be done in varying degrees of sophistication from simply asking what could go wrong in this situation, through to sophisticated computer simulations, (which we have been generally able to avoid).

Implementation

Ring Fencing

It is possible to implement Kanban in a part of your process (first) perhaps as a pilot scheme. In which case you will need to buffer your Kanban system upstream & downstream from the (as yet) volatile remainder of your environment.

Priming the System

It is no good implementing from an unbalanced state. It is unlikely to recover. The system must be primed. On the other hand you may be overstocked, and need to segregate or drain out surplus stock. There are serious capacity considerations here! If your system is to retain its credibility it cannot be allowed to fail. So take the time to get the correct buffers in position.

People

Culture

Further information on culture and culture change can be found at "Focused Improvement Systems", "Culture Development Methods,", and Malpractice M004: "Creating the wrong culture".

Kanban systems are one of the simplest systems to operate but they do require a change of mindset on behalf of the operator. Namely it is no longer acceptable to produce unwanted inventory or to leave the work at your workplace rather than where it is needed next. These simple rules are actually really difficult to implement. But once understood and in particular when the benefits of pull systems over push systems are understood, they can become a way of life. Ignoring the human aspects of Kanban systems operation will doom your implementation to failure!

The operator previously was used to operating in a sea of work in process and as such, he or she believed there was plenty of work about. The initial view of the workplace following implementation is that it is empty. This can be very disconcerting to the operator, who now thinks that there is no work about and is anticipating that redundancy notices will shortly appear!

To overcome these problems education of all operators by something like our " M22 Kanban & Lean Enterprise Simulation Game" is essential and this must be a simulation to which your operators can readily relate. We feel the most powerful method of conveying this message is by allowing operators to discover for themselves the benefits of Pull systems in an environment which is relevant to their own, (mimicking your products and processes).

Incentives

Individual "piecework" type incentive systems are bad news for Kanban operation since they encourage activity rather than useful activity. These individual incentives can only be removed if the culture is sufficiently developed to overcome the issues that arise by removing them. (See Organisational Redesign, and Culture Development Methods.

Productivity measures

If you measure productivity by measuring activity you are heading for some difficulties since unneeded activity leads to unwanted stock and work in process. Again our Kanban & Lean Enterprise Simulation Game graphically demonstrates that "working smarter" is much more important. (See Previous Malpractice M006: "Hitting The Numbers".)

Accounting for value-added in short lead-time, low Work in Process (WIP) systems

It is a legal requirement to value stock at either its current value or net realisable value (if obsolescent). If WIP however is small and manufacturing lead-times are short, WIP accounting and WIP tracking can be reduced. Perhaps one of our most difficult and recurring implementation problems has been to persuade accountants to simplify their methods of productivity measurement and inventory valuation, so that shop floor data capture could be reduced!

If you collect "profit" in stock "added value", you will make a "loss" in your first Kanban year, because WIP is usually dramatically reduced. Our view is that you only make a profit when you sell something. Until then it is a liability! However you can usually persuade your accountant to accept this loss by telling them how much cash will be released, and including them in the Kanban & Lean Enterprise Simulation Game.

Operating Kanban Systems

The general health of a Kanban system can be measured using "eyeball control". If there is an accumulation of unfulfilled Kanban signals, or no unfulfilled Kanban signals, you are heading for a crisis. Both of these situations indicate a supply chain problem. However the system can only operate within its design capacity. A forward looking planning system is still required.

Common misunderstandings are that:

It is often (wrongly) assumed that implementing control systems is a one-off exercise. It is not!
Kanban systems are complete within themselves. They are not!

Measures of Performance (MOPs)

Like all systems the Kanban system should be measured. Because stock is fixed (the number of Kanbans in the system), the main measurement is due date compliance, (see Previous Best Practice B045: "OTIF Measuring On-time Delivery"). However other measures will indicate the health of your system before it collapses, such as unfulfilled or filled Kanbans. Also it is critical to measure performance at the correct level. (See Focused Improvement Systems.)

Levels of Planning and Control

Significant complexity arises out of:

Confusing the roles of different levels of planning and control
Confusing planning with control
Choosing an inappropriate planning and / or control system

Systems such as MRP1, plan the materials. The Kanban system is one type of system from a choice of many, which controls the materials plan (and can control the capacity plan). (See Materials Management & Stock Control).

Kanban Interaction with Planning Systems

The Kanban system must be synchronised with the planning system, and the roles of the planning and Kanban systems defined, such that if they do conflict, the correct one is used (& the processes realigned). (See Materials Management & Stock Control)

Periodic Strategic Reviews

Finally, fluctuating or exceptional demand will kill your Kanban system stone dead unless you can see it coming. (See "Managing Demand"). So you need to document your design parameters so that you recognise when your environment has subsequently exceeded the design, to trigger a strategic review. Participative Sales & Operations Planning should be designed to trigger this review.

The second big mistake of early BPR exercises was to assume that they were permanent. They are not! Things change! We have seen Kanban systems die because they could not respond to change!

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Whilst great care has been taken to provide relevant, accurate, practical, advice based on our considerable process design and development experience, this will almost certainly require interpretation into the context of your unique business. Please be careful in doing so and if in doubt seek expert advice. We would welcome your feedback!

SM Thacker & Associates

Independent Best Practice Training & Consultancy

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